Indian mobile operator of Sistema financial group may become part of Reliance Communications

Published on June 15, 2015

Indian mobile operator of Sistema financial group may become part of Reliance Communications

    Negotiations to merge Indian Sistema Shyam TeleServices Ltd. ( SSTL ) with mobile operator Reliance Communications . The merger is planned to be carried out through an exchange of shares. SSTL is a subsidiary of the Russian financial group AFK Sistema . SSTL operates in nine districts of India under the MTS brand and provides CDMA communications services .

    A final decision has not yet been made. It will be known only after a financial and legal audit.

    AFK Sistema owns 56.68% of the company. Indian Shyam Group owns 24%, Rosimushchestvo - 17.14%. The rest belongs to minority shareholders.

    Otkritie FC analyst Alexander Vengranovich suggests that after the transaction control will be transferred to Reliance, while Sistema will retain a minority stake. It is worth noting that according to the results of the transaction, SSTL debts and losses will be deconsolidated.

    Reliance is the fourth largest mobile operator in India. At the end of Q1, its share amounted to 11.3% of the Indian mobile communications market. The proportion of SSTL was 0.9%. In total, there are about 863 million subscribers in this market.

    There are 11 operators in the Indian mobile communications market, and the share of the largest ( Bharti ) does not exceed 23.3%. Therefore, the merger with the Indian operator SSTL will be a new step towards overcoming market fragmentation, transfers "Interfax".

    Many experts believe that this is a reasonable step for the "System". Analyst "Uralsib" Konstantin Belov believes that the operator - versatile enough problematic, as the Indian market is too saturated and competitive, transmit "Vedomosti".

    The operator’s shareholders were waiting for him to be able to break even. Since 2007, Sistema has spent about $ 3.5 billion on its "daughter", but it is still unprofitable.

    Net loss in the first quarter of 2015 increased by 25% compared with the first quarter of last year and amounted to 3.9 billion Indian rupees ($ 61.5 million). OIBDA loss increased by 44% (to $ 20.8 million). The company's debt at the end of March was about $ 560 million.