Mumbai, July 18: Anil Ambani-owned Reliance Communications (R-Com) and MTN of South Africa tonight formally called off talks to create a telecom powerhouse that might have ranked among the top 10 mobile phone service providers in the world.

Both sides today said they were calling off their talks citing “certain legal and regulatory issues”.

In a terse note issued to the stock exchange in Johannesburg, MTN said, “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 and caution is no longer required to be exercised by shareholders when dealing in MTN securities.”

The sudden development drew the curtain on 54 days of intense negotiations that disintegrated into a raucous war of words between the rival Ambani camps after Reliance Industries Ltd (RIL) decided to press a contentious right of first refusal in the event of any stake sale. The disputed clause was written into a non-compete agreement linked to the carve-up of patriarch Dhirubhai’s empire in January 2006.

An R-Com-MTN combine would have created one of the world’s 10 largest telecom companies with 115 million subscribers and a footprint in 23 countries.

People close to the development suggested that the wrangle between the Ambani brothers had scuppered the deal.

“After all, MTN is a public listed company and it wouldn’t have been fair on their part to sign a deal that later would have given rise to litigation. There was also the threat that a few MTN shareholders could move court against this deal arguing it was detrimental to their interest,” officials said.

RIL had threatened to initiate legal action against both R-Com and MTN if they went ahead with the deal.

On July 2, RIL had invited R-Com to a conciliation meeting to sort out the dispute, but officials from Anil’s camp didn’t attend the meeting.

RIL then announced that it was invoking the dispute resolution clause in the non-compete agreement signed between Mukesh and Anil Ambani’s companies.

RIL initiated the arbitration process yesterday by appointing retired Supreme Court judge B.P Jeevan Reddy as its arbitrator to settle the dispute. R-Com has consistently maintained that RIL has no locus standi. R-Com challenged the right of first refusal and was prepared to go to court on the issue.

Late tonight, rumours swirled that Bharti Airtel, which had held talks in early May to forge a combination with MTN, would reopen discussions. However, the Bharti spokesperson could not be reached for comment. A few days ago, MTN had vehemently denied that it was seeking to reopen talks with Bharti Airtel.

Meanwhile, the R-Com stock rose on the stock exchanges today as investors continued to hope that the deal would go through. The R-Com share closed 4.1 per cent higher at Rs 435.20 on the BSE.

The stock had recently hit a 52-week low of Rs 381.05 on July 3 as the war of words between the two Ambani camps escalated. Later, R-Com wrote to market regulator Sebi complaining that its shares were being hammered.

Marketmen don’t seem to agree on how the stock will behave when trading resumes on Monday. One section believes that there will be a knee-jerk reaction and that the R-Com stock can take a beating. However, observers such as KRIS director Arun Kejriwal feel that the R-Com stock can go up in much the same way that Bharti Airtel’s did after its talks with MTN broke down.