UPDATE 2-Falling shares, Ambani feud could scupper MTN deal

(Adds statements from Reliance Industries and Reliance Communications)

By Rina Chandran

MUMBAI, July 3 (Reuters) - India's Reliance Communications Ltd (RLCM.BO) has only days to reach an agreement for a tie-up with South Africa's MTN Group, but falling shares and a face-off between the Ambani brothers could scuttle a deal.

Reliance Communications, controlled by Anil Ambani, is currently in exclusive talks with MTN to create a global 10 telecom company but this agreement ends on July 8.

However, in mid-June Reliance Industries (RELI.BO), run by older brother Mukesh Ambani, claimed first right of refusal on India's No. 2 mobile operator, based on a deal signed when their late father's business was being split between the brothers.

The bitter rivalry between India's two richest men has shown no sign of letting up.

In an e-mail statement on Thursday Reliance Industries said it had invoked a dispute resolution agreement to settle the differences and invited Reliance Communications to participate, but this was immediately dismissed by a Reliance Communications spokesman.

"RIL has invoked the provisions of dispute resolution contained in the Non-Competition Agreement dated January 12, 2006, and has invited RCOM to participate in the process of mutual conciliation prior to the commencement of formal arbitration," India's most valuable listed company said.

"This is only a sign of RIL's increasing desperation and frustration," a Reliance Communications spokesman said.