26 March 2018
| Alan Burkitt-Gray
Russian industrial group Sistema is believed to be the leading bidder for India’s Reliance Communications and its international subsea cable business.
Reports from India say that Sistema has bid $1.2 billion for
the operation, plus $300 million that Reliance Communications
(RCom) owes the Russian group. Sistema has confirmed some
elements of the report to Capacity.
The deal is understood to include Global Cloud Exchange (GCX),
the international arm of RCom that is planning to build a new subsea network, Eagle.
Sistema confirmed to Capacity that it is considering
bidding for RCom’s telecoms business, using
earn-out payments originally agreed in 2015 when RCom acquired
an Indian mobile business part-owned by Sistema.
Sistema sold its MTS India mobile business to the group
– before RCom then sold its spectrum on to Jio. MTS
India was a joint venture between Sistema and the Shyam Group
of India, with a shareholding by the Russian government. This
Indian business was called Sistema Shyam Teleservices (SSTL).
Sistema is also the majority shareholder in a Russian mobile
company called MTS.
A Sistema spokesperson told
Capacity today: "[The] merger agreement with RCom
signed in 2015 envisages earn-out payments to SSTL if the
Indian authorities confirm that SSTL’s spectrum
can be used for deployment of 4G networks without additional
charges. Sistema is considering an option of converting these
potential payments into the shares of RCom’s
telecom business. It does not contemplate any additional cash
Capacity also contacted Bill Barney, CEO of GCX, for a
comment but has not so far received a reply. GCX is the
relatively new name for what used to be Reliance Globalcom,
which includes the former Flag Telecom, a subsea operation
founded by Nynex, an ancestor of Verizon.
According to Indian reports, the bid is for all of
RCom’s remaining telecoms business, after it
agreed to sell its mobile business, including towers and
spectrum, to rival, unrelated company Reliance Jio.
However, Russian ownership of such a key element of subsea
infrastructure may raise eyebrows in the west, given the rising
tensions between Russia and Europe.
One of the big challenges of RCom and GCX is that, following
the sale of the mobile business, it is having to fund offices
and other facilities that were previously shared.
Global Cloud Xchange,