The Anil Dhirubhai Ambani Group promoted Reliance Communications [Get Quote] has offered a deal under which the promoters led by Anil Ambani will pick up 51 per cent in South African telecom company MTN group through a cash and share swap.

Sources close to the negotiations said the deal requires more scrutiny by MTN, as a result of which the July 8 deadline for the 45-day "exclusivity pact" MTN offered RCom might be extended by three or four weeks. Under the exclusivity pact MTN was obliged not to talk to competing companies.

MTN shareholders, which comprise the family of the former Lebanese prime minister Najib Mikati and Newshelf664, a holding company of the management and employees, will get cash and shares in RCom and the aim is to make it an MTN majority controlled company. ADAG and associates, however, will hold control over both companies by virtue of becoming 51 per cent shareholders in MTN.

The structure of the deal is designed to ensure that ADAG retains its shareholding in RCom and sidestep the controversy that arose over the right of first refusal stipulation demanded by Mukesh Ambani-controlled Reliance Industries Ltd [Get Quote].

Last month, RIL had informed RCom that any deal with MTN would activate an ROFR clause that was part of the agreement in a group asset split between the Ambani brothers in January 2006.

"The question of 'right to first refusal' comes only when you sell shares and lose control. In this case you are effectively controlling RCom through another company," the source said.

The shareholding pattern also allows ADAG to skirt a requirement of the Johannesburg stock exchange, on which MTN is listed, that makes an open offer mandatory for any investor buying more than 35 per cent in the company.

South African laws, however, also permit a company to avoid an open offer if 50 per cent plus one shareholders vote in favour of waiving this need.

ADAG and associates, which hold 66 per cent in RCom, are ready to reduce their direct equity stake to a minority.

However, MTN won't be able to hold more than 74 per cent in RCom under Indian government restrictions on foreign direct investment in telecom service providers.

The MTN-Reliance Communications merger, if it gets through, will create a telecom behemoth of 115 million subscribers in 25 countries.