Anil Ambani-owned Reliance Communications (RCom) is in talks to buy Russian firm Sistema’s Indian arm to create the fourth largest private telecom firm.
“RCom and AFK Sistema have entered into exclusive discussions on a potential merger between the Indian telecom business of Sistema Shyam TeleServices Ltd (SSTL) and RCom through a stock swap,” RCom said in a stock exchange filing.
The discussions are indicative and non-binding in nature, and remain subject to due diligence, definitive documentation and approvals, as may be necessary. “There is no certainty that any transaction will result,” it said.
Sistema’s owner Vladimir Yevtushenkov had in May said he had held talks with Reliance Communications about a possible joint venture in India. For debt-burdened Reliance Communications, the deal would give access to Sistema’s airwaves in nine circles, or zones, without a significant payout as most of its airwaves were bought in competitive auctions.
Sistema Shyam is one of the market’s smallest players with nearly 10 million customers and less than a one per cent market share. Yevtushenkov owns around 62 per cent in the Russian parent. Sistema and Russia’s government together own nearly 74 per cent in the unlisted Sistema Shyam joint venture, while India’s Shyam Group has a 24 per cent stake.
The rest is owned by individual Indian investors. The unit scaled back operations in 2013 when it had to buy new telecommunication permits after its earlier permits were cancelled by a court order linked to a broader licensing scandal.
Sistema Shyam operates in nine telecom circles — Delhi, Kolkata, Rajasthan, Gujarat, Karnataka, Tamil Nadu, Uttar Pradesh (West), Kerala and West Bengal. Its licence in Rajasthan service area will come up for renewal in 2017-18. The company did not participate in March spectrum auction to buy additional spectrum for future growth.
This made SSTL heavily dependent on its competitors to chalk out growth path that too if government issues favourable spectrum sharing and trading guidelines. RCom in March auction won CDMA spectrum across 11 service area which include Gujarat, Kolkata, West Bengal and UP West as common service area of operations with SSTL.