Russia’s Sistema ‘poised to buy’ RCom and GCX businesses

Russia’s Sistema ‘poised to buy’ RCom and GCX businesses

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 investments.”

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.

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