Russia’s Sistema JSFC has become the latest foreign operator to exit the troubled Indian telecom market, by selling its 10 percent stake in Reliance Communications in multiple tranches over the past few months. The Russian conglomerate has reportedly lost $ 4 billion on its investments.
Sistema JSFC is believed to have decided against the idea of buying RCom’s remaining telecom assets, comprising subsea cables, enterprise business and data centres, following the divergence of opinion with the Anil Ambani-led telco.
Sistema JSFC decided to exit RCom after the struggling telco recently got entrapped in insolvency proceedings. It decided against making ambitious investments in India’s brutally competitive and fast consolidating telecom market, having already burnt its fingers.
In October 2017, Sistema Shyam Teleservices (SSTL) was sold to Reliance Communications in return for a 10 percent stake. RCom has also since closed down its wireless business amid plunging revenue and mounting losses due to intense competition, and operates only an enterprise business, besides running data centres and sub-sea cables.
At the time of the merger of RCom-SSTL, RCom shares were hovering at Rs 80 apiece in early November 2015 but collapsed to around Rs 17 when the deal was finally completed in late October 2017.
On Wednesday, it gained over 4.8 percent over the previous close to end at Rs 15.30 apiece on the Bombay Stock Exchange. In past months, Sistema has gradually reduced its stake in RCom. It lowered its stake to 7.09 percent by letting minority shareholders swap their shares with those of RCom in March.
In April and May, it sold off a further 2.1 percent and 0.55 percent respectively in the open market, lowering its equity holding in RCom to 4.43 percent. The development was seen on the expected lines as the telecom sector in the country is witnessing a huge consolidation and stiff competition.
The entry of Reliance Jio by offering attractive discounts on calls and data has violently disrupted the entire telecom markets. The competition is expected to become stiffer in the upcoming days. – IBT