South Africa's MTN Group said it was not in talks with India's Reliance Communications, following a newspaper report on Thursday that Reliance was mulling a merger with MTN.
Shares in Reliance Comm, India's No. 2 mobile operator, rose for a second straight day on investors' hopes that it may sell a stake or consider a merger with a foreign telecoms firm that would provide it with much needed funds. Etisalat of Abu Dhabi and MTN are seen as potential partners.
Asked whether MTN was in talks with Reliance, MTN spokeswoman Nozipho January-Bardill said:"That's not true.
"If we were talking to Reliance we would have told the market," she said.
India's Economic Times newspaper on Thursday reported Reliance Comm, controlled by billionaire Anil Ambani, was considering a merger with MTN, with which the Indian firm had initiated tie-up talks in 2008 in an ultimately thwarted deal.
India's 600 million-user cellular market is the world's fastest growing, but ferocious competition and the need to spend billions of dollars on licences and network gear are squeezing operators, with consolidation expected.
Reliance Communications said on Wednesday it had received proposals from international telecoms firms to buy a strategic equity stake, after a newspaper report said Etisalat was eyeing a 25 percent stake for 180 billion rupees ($3.9 billion), implying a sharp premium.
"Both look fairly reasonable, but the one which is from Abu Dhabi looks a little bit more advanced," a person with knowledge of the matter said earlier on Thursday, declining to be identified as the information is sensitive.
However, another person familiar with the situation who also declined to be identified, said that with regard to Etisalat, it was "early days. No deal imminent."
Etisalat, which already has a startup joint venture in India, also said on Wednesday it was looking to buy a stake in an Indian operator and was in talks with several firms but declined to be specific.
Emirates Telecommunications Corp, or Etisalat, is being advised by Standard Chartered, sources said.
Shares in Reliance Comm, India's No. 2 mobile carrier, ended 6.4 percent higher on Thursday after gaining 11 percent on Wednesday, cutting its losses for the year, after being one of the worst performers in the 30-share main BSE index.
"Nobody knows whether any of the deals would happen or not, but certainly windows of opportunity are open for Anil Ambani," said Jagannadham Thunuguntla, equity head at SMC Capitals in New Delhi, referring to Reliance Comm's billionaire chairman.
"If it is actually a stake sale, that's a good move. If the incoming party pays a good premium, it would help them reduce some debt," Thunuguntla said.
MTN said in April it was in talks with the parent of Egypt's Orascom Telecom about a potential deal. Those talks have been stymied, however, due to opposition from the Algerian government over the sale of Orascom's Algerian unit, widely seen as its most attractive asset.
Anil Ambani is free to court strategic investors after last month ending a non-compete agreement with his long-estranged brother Mukesh. Two years ago, Anil Ambani's bid to merge Reliance Comm with MTN was scuppered when Mukesh asserted a right of first refusal on the Indian firm's shares.
Reliance Comm had net debt of about 199 billion rupees ($4.3 billion) at the end of March, while it paid 85.85 billion rupees for acquiring third-generation spectrum licences in a recent auction that was for more costly than expected.
The company is also one of the bidders in an ongoing auction of wireless broadband spectrum licences, in which bids for all-India coverage licences have already hit $1.8 billion.
Building the next generation networks would cost billions of dollars more.
Reliance Comm has regulatory approval for an initial public offer of its telecoms tower unit, which banking sources have said could raise up to $1 billion, but the company is yet to set a date for the share sale.
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