NEW DELHI/JOHANNESBURG: In the midst of a bitter battle between the Ambani siblings, the much touted deal between RCOM and South African telecom giant MTN collapsed, a day after RIL, headed by Mukesh Ambani, initiated the arbitration process against younger brother Anil's group firm.

Spokespersons of both RIL and RCOM declined to comment on the arbitration issue.
"The two sides were unable to conclude the transaction due to certain regulatory issues," RCOM said in a statement three days before the expiry of the extended agreement between MTN and ADA group firm for exclusive talks.

Meanwhile sources in the know said MTN has possibly started looking at Bharti Airtel, a Chinese company and a Russian entity for negotiations, but no confirmation could be obtained from the concerned corporate.

The high voltage drama once again saw an eruption of the war between the two brothers despite the family settlement that was arrived at June 18, 2005 resulting in culmination of negotiations between RCOM and MTN that could have created a 70 billion US dollars entity. So much so, Samajwadi Party leader Amar Singh termed as "disgusting" RIL's opposition to the MTN deal and sought the Prime Minister's intervention to bring about a rapprochement between the warring brothers.

While RCOM has been charging the elder Ambani's flagship company RIL of "sabotaging" the negotiation that could have created one of the biggest telecom entities that could generate annual profits of 10 billion dollars, RIL has been steadfast on its claim and had warned of legal action in case its rights were violated by either RCOM or MTN.

In almost identical statements late tonight, both RCOM and MTN said that two sides have mutually agreed for lapse of the 45-day exclusivity agreement that was extended on July 8 for a further two weeks to July 21.

MTN announced withdrawal of the agreement "owing to certain legal and regulatory issues," and said that the parties were unable to conclude a transaction.
"Accordingly it has been mutually decided to allow the exclusivity agreement to lapse and caution is no longer required to be exercised by shareholders when dealing in MTN securities," the South African company said.

Referring to announcements made on May 26 for exclusive agreement and July 9 for its extension, RCOM said in its statement "owing to certain legal and regulatory issues, the parties are unable to conclude a transaction. Accordingly it has been mutually decided to allow the exclusivity agreement to lapse." RCOM spokesperson, however, did not take any query on the impact of the fight with RIL on the deal or the fate of the arbitration process that has virtually become infructuous after the collapse of the deal.

It is the second time in the last two months that MTN's negotiations with Indian telecom majors have collapsed, the first being the failure of talks with Bharti Airtel on May 24.
Ever since the extension of the exclusivity agreement with RCOM on July 8, the South African press has been speculating that MTN could restart the talks with Bharti Airtel but there have been no comments from the Indian entity on this.

Sources said that MTN possibly would not enter into an exclusivity agreement with any particular entity immediately and would explore its options with the interested parties across the globe.
A day before the collapse of the deal RCOM had said that RIL's arbitration move was "legally and factually unwarranted" and that Mukesh-led group was "successfully destroying" India's image in foreign eyes and it had mollified designs to derail the discussions between ADA group firm and MTN.

RIL had written to MTN and RCOM asserting its first right of refusal and subsequently had invited the ADA group firm for conciliation talks after invoking the arbitration clause under its Non Competition Agreement in January 2006. RCOM officials had not reached for conciliation talks on July 7 as proposed by RIL and had instead made a counter offer to meet and clarify any doubts and said there was neither a dispute not there was a need for arbitration.

RIL subsequently started the arbitration process on July 17 by nominating its arbitrator and said "RCOM has refused to participate in the conciliation meeting under the alternate dispute resolution provision contained in the Non-competition Agreement."