The Telegraph
Since 1st March, 1999
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Airport fine print in Ambani draft

Mumbai, Feb. 8: Anil Ambani’s loss could well be brother Mukesh’s gain.

A close reading of a copy of the non-competition agreement that is now under negotiation between the two sides reveals that the Anil group’s failure to grab a contract to modernise the Delhi or Mumbai airports has opened the doors for the Mukesh side which can now step into this business.

The non-competition agreement has demarcated clear areas of business for the two groups and bars them from trespassing into each other’s turf for a period of 10 years.

The areas earmarked for the Anil group are telephony and related services/infrastructure, power, financial services, media and entertainment, and airport infrastructure.

But there’s a rider in the proviso relating to airport infrastructure that could now provide the wings to Mukesh’s ambitions. It permits the Mukesh camp to make “investments in airports where the Resulting Group (the term used in the agreement to describe the Anil group) has not been a successful bidder in the privatisation process”.

Last month, the Anil group lost out in the bidding war with the contracts being awarded to GMR-Fraport for the Delhi airport and the GVK-Airports Company South Africa combine for the one in Mumbai.

The Anil group has accused the civil aviation ministry of changing the bidding terms at the last minute as part of a wider conspiracy to deny it the right to enter the sector. It has since hauled the government to court.

Reliance Industries had signed the non-compete agreement with the four demerged companies but the Anil side has since expressed strong reservations about some of the provisions. Discussions between the two sides are expected to begin shortly.

The agreement has a special clause ' Section 2.5 ' that bars the groups from trespassing as long as the non-compete obligations are in force. And Section 6 says the non-compete obligations “shall commence on the effective date and extend for a period of 10 years therefrom”.

The removal of the 10-year entry bar in the case of airport infrastructure effectively means that the Mukesh camp can almost immediately open negotiations with the successful bidders for the Delhi and Mumbai airports and come on board as a strategic investor if it so desires.

It is interesting that the waiver of the limitations imposed by Section 2.5 have only been accorded in respect of airport infrastructure. This indicates two things: first, the high level of interest that the Mukesh side has in entering the sector and, second, its remarkable prescience in insisting on a waiver of the 10-year non-compete clause.

It could not be ascertained whether this will now emerge as one of the sticking points in the discussions between the two groups.

There is growing speculation that the Mukesh camp is keen to develop the Mumbai airport. It isn’t known whether any discussions have taken place between the Mukesh faction and the GVK group. But the non-compete agreement will not fetter its soaring ambitions should it want to enter this area of business.

The Mukesh faction may, however, choose to wait till the airport contract legal battle blows over.

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