London, July 18 : Reliance Communications proposed tie-up with South Africa's telecom giant MTN could be derailed after corporate war between Ambani brothers intensified and arbitration proceedings were started against Anil Ambani's group.
Mukesh Ambani controlled Reliance Industries has said that it had started proceedings after the mobile carrier, led by his brother Anil, failed to participate in meetings to resolve a dispute concerning ownership of shares.
The brothers have barely spoken since 2002 when the death of their father led to a break-up of the family conglomerate, The Financial Times reported.
The latest development will fuel doubts that Reliance Communications and MTN will create an emerging markets mobile telecom groups.
A 45-day exclusivity period between them expired earlier this month and an extension is due to end on Monday.
The talks have been overshadowed by the dispute and whether MTN would risk striking a deal which could then be beholden to India's judicial system.
"Reliance Communications has refused to participate in the conciliation meetings under the alternate dispute resolution provisions contained in the non-competition agreement," Reliance Industries said.
Reliance Industries has unilaterally appointed a former judge of India's Supreme Court to arbitrate. It said this was the next step after Reliance Communications failed to show up at a conciliation meeting this month.
The judge will write to Reliance Communications requesting clarification about its absence at the meeting and aim to schedule arbitration between the groups.
The timing for such a meeting remains unclear. A Reliance Communications spokesman said: "Arbitration cannot be done unilaterally."
Reliance Industries would probably have to seek a court injunction to thwart a tie-up should Reliance Communications and MTN press ahead.
Anil Ambani wants to swap most of his 66 per cent in Reliance Communications for a 50-51 per cent stake in the South African company with the help of money from third parties.