Equity Alert: Reliance Comm down 3%; co in exclusive talks with MTN

[K.Karthik Raja]

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MUMBAI--11:30AM--Shares of Reliance Communications were down 3% at
553 rupees on funding concerns after the company said it was in
exclusive
negotiations with South Africa's MTN Group regarding "potential
combination of
their businesses", dealers said.
"Support for the counter is seen at 550 rupees, and then at 546
rupees,"
said a dealer.
"Funding would definitely be a concern as Reliance Comm's cash
slows are not
as strong as Bharti's. I do not see Reliance Comm generating free cash
before
FY11," said an analyst.
Analysts, however, said the structure of the deal would be more
important.
"If Reliance Comm is looking to buy majority stake in MTN, there
is reason
to worry. However, if it is planning to become a subsidiary, as was
the
condition laid out by MTN to Bharti, then it will only be a case of
share-swap,"
another analyst said.
"However, Reliance Comm's bargaining power is lower than Bharti's
and it
seems to send out a bearish signal on its business if it is pursuing a
deal
Bharti rejected knowing it might have to become a subsidiary," he
said.
So far on NSE, 1.18 mln shares of the company have been traded.
Its May
futures were trading at a 2-point premium to the spot, with 3% rise in
open
interest.