<img class="gwt-Image" src="/photo/47687718.cms" /><br /> Anil Ambani-led Reliance Communication (<keyword id="6368075" type="CITY" weightage="20" keywordseo="RCom">RCom</keyword>) and <keyword id="2902530" type="UNKNOWN" weightage="20" keywordseo="Russian-conglomerate-Sistema">Russian conglomerate Sistema</keyword> on Tuesday announced that they have entered into exclusive discussions for a potential merger of their Indian telecom businesses via a stock swap. This information was revealed in an Economic Times report.<br />
<br />
Investopedia defines that stock swap is “the exchange of one asset for another. A stock swap occurs when shareholders' ownership of the target company's shares are exchanged for shares of the acquiring company as part of a merger or acquisition. During a stock swap, each company's shares must be accurately valued in order to determine a fair swap ratio.”<br />
<br /> Analysts believe that the possible merger with <keyword id="6368074" type="COMPANY" weightage="20" keywordseo="Sistema">Sistema</keyword> Shyam TeleServices (SSTL) can help the debt-ridden <keyword id="46907" type="CITY" weightage="20" keywordseo="Reliance-communications">Reliance Communications</keyword> get access to spectrum, as per financial daily.<br />
<br />
"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," as per a statement issued by RCom.<br />
<br />
This announcement is of extreme importance for RCom shareholders. Sudip Bandyopadhyay, president, Destimoney Securities, told ET Now, “RCom's spectrum licence will expire sometime in 2017, whereas the Sistema's licence in India, which they have paid for partially and acquired one-one and a half years back, is there for 20 years."<br />
(Image: The Economic Times)<br />



Anil Ambani has new tricks up his sleeves to save his telecom business

<p>On September 16th 2014 Vladimir Yevtushenkov, the president and principal shareholder of AFK Sistema, was accused of money-laundering and placed under house arrest by a Moscow court. It is unlikely that the arrest is part of a co-ordinated strategy to revise the relationship between the state and business. <span style="font-size: 15px; line-height: 1.5em;">Rather, the affair marks an opportunistic attack by a faction within the elite seeking to take control of AFK Sistema's assets.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;"><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/5419a2456da811fc1a0cbb19-1200-667/ap812886359941.jpg" border="0" alt="putin Yevtushenkov"><p class="source"><span>AP / RIA-Novosti, Alexei Druzhinin</span></p><p class="caption">Then-Russian Prime Minister Vladimir Putin, left, and Russian tycoon Vladimir Yevtushenkov, owner of Sistema Holding, during their meeting in Moscow in on Tuesday, May 5, 2009.</p></img></div><p></p></div></div> </span></p>
<p><span style="font-size: 15px; line-height: 1.5em;">The arrest has shaken confidence in Russia's business community, which had assumed that loyalty to the Kremlin would protect it from the depredations of law enforcement. The arrest is a worrying sign for businesses, and illustrates that members of the Russian elite are prepared to risk significant damage to investor confidence in order to achieve their aims.</span></p>
<p>On September 25th the court rejected an appeal from Mr Yevtushenkov's lawyers that the terms of his arrest be amended to allow him to go to his office, under bail of Rb300m (US$7.7m). The court also ruled that Mr Yevtushenkov should remain under house arrest until at least November 16th. AFK Sistema is a conglomerate with holdings ranging from oil to telecommunications, including MTS, the leading telecoms firm in Russia, which has over 100m mobile subscribers in Commonwealth of Independent States (CIS) countries.</p>
<p>Mr Yevtushenkov is charged with money-laundering in connection with AFK Sistema's purchase in 2005 and 2009 of shares in the oil company Bashneft, the dominant oil producer in the Volga republic of Bashkortostan. AFK Sistema currently holds 85% of the voting shares in Bashneft.</p>
<h2>Business confidence shaken</h2>
<p>The reaction to Mr Yevtushenkov's arrest among the Russian business elite has been sharply negative. Aleksandr Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, Russia's leading business lobby, immediately sent a letter to Vladimir Putin, the president, defending Mr Yevtushenkov. German Gref, the head of Sberbank, Russia's largest bank, and a former minister of economic development, stressed the negative impact on the business climate.</p>
<p><div class="KonaFilter image-container display-table float_right"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/537d25c9ecad04842cb0a786-1200-800/shutterstock_187376780.jpg" border="0" alt="moscow skyline"><p class="source"><span>Shutterstock.com</span></p></img></div><p></p></div></div>Aleksei Kudrin, who was minister of finance at the time the deals went through, claims that every aspect of those deals was vetted at all levels of government, and announced that he found Mr Yevtushenkov's arrest incomprehensible. Anatoly Chubais, the president of Rosnano, the Russian nanotechnology company, and a former minister of privatisation, warned that the actions had inflicted serious damage on the Russian business climate and "come just at a time when Russia is teetering on the brink of recession and stagnation."</p>
<p>The affair is seen by many, including reportedly Dmitry Medvedev, the prime minister, as a violation of the informal agreement between government and business reached after the nationalisation of Yukos, once the country's largest oil company.</p>
<p>Under this agreement, big business undertook not to intervene in politics (as Mikhail Khodorkovsky, the owner of Yukos had done), while the government would attend to the interests of business and refrain from re-examining the privatisations of the 1990s. Mr Yevtushenkov has always adhered strictly to those principles and was seen as entirely loyal to the Kremlin.</p>
<p>The impact of the affair on financial markets has been dramatic. At the news of Mr Yevtushenkov's arrest, AFK Sistema's shares fell by 36% on the Moscow Stock Exchange. They remain more than 30% below their pre-crisis level. Bashneft's shares fell by more than 20% on September 16th. In London, the market valuation of AFK Sistema's Global Depositary Receipts fell by 39% on the same date.</p>
<p><span style="font-size: 15px; line-height: 1.5em;">MTS shares also fell by 8% when Mr Yevtushenkov was first arrested. The market disturbance was not limited to AFK Sistema shares-the Moscow Stock Exchange index fell by 2.5% on September 16th. On receipt of the news that the court had refused on September 25th to lift the house arrest, AFK Sistema shares fell by a further 8.8% and Bashneft shares by 4.5%.</span></p>
<p><span style="font-size: 15px; line-height: 1.5em;"><div class="KonaFilter image-container display-table"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/5419a5646da811f42f0cbb17-1042-509/screen shot 2014-09-17 at 11.13.43 am.png" border="0" alt="Sistema"><p class="source"><span><a href="http://www.sistema.com">www.sistema.com</a></span></p><p class="caption">Sistema, website pictured, has denied all charges of wrongdoing over the oil production deal.</p></img></div><p></p></div></div><br /></span></p>
<h2>Two interpretations</h2>
<p>The prosecutor in the investigation alleges that Ural Rakhimov, the son of the former president of Bashkortostan, Murtaz Rakhimov, used his position as minister of privatisation of the republic to sell off, at a knock-down price, the assets of a number of state-owned companies, including Bashneft, to private companies that were in fact controlled by himself. These were then transferred to AFK Sistema for a total of around US$2.6bn, in return for kick-backs to Ural Rakhimov.</p>
<p>The net income of Bashneft in 2012 alone was US$1.7 bn. There is, however, an alternative version of the history of the sale of Bashneft. In 2003 the authorities in Moscow, concerned at how Bashneft was being managed by the Rakhimov family, started to put pressure on Ural Rakhimov to sell Bashneft to a respectable company. Ural Rakhimov resisted, and it took several years for Moscow to get its own way. Finally, in 2009, a suitable company was found. That company, by agreement between all interested parties going right up to Mr Medvedev, then president, was AFK Sistema.</p>
<p>Reflecting the murkiness and complexity of Russian politics, these two versions are not entirely mutually exclusive. It is therefore important to take a cautious approach to the interpretation that sees the arrest of Mr Yevtushenkov as an integral part of a strategic push by Mr Putin to regain control of all the "commanding heights" of the Russian economy.</p>
<p><div class="KonaFilter image-container display-table float_right"><div><div class="image"><img src="https://static-ssl.businessinsider.com/image/535e640aeab8eaea14d4a346-1200-858/ap735935199373.jpg" border="0" alt="Vladimir Putin Igor Sechin"><p class="source"><span>AP</span></p><p class="caption">Putin with Igor Sechin (right)</p></img></div><p></p></div></div>A more plausible explanation is that Igor Sechin, the powerful head of state-owned oil company Rosneft, is seeking to expand his company's oil assets by acquiring Bashneft, possibly to offset the increased costs imposed by US and EU sanctions. Under this scenario, Mr Sechin, the deputy prime minister with responsibility for the oil industry at the time of the negotiations over Bashneft's sale, was unhappy with the deal with AFK Sistema.</p>
<p>As a result, there have been repeated attempts since then to bring Bashneft under Rosneft's control. This interpretation can be folded into a broader theory that the Yevtushenkov affair represents a further episode in the running battle between the siloviki-the "strong men" in the Russian elite-and the liberal (at least in economic terms) technocrats. Significantly, all the prominent figures who have spoken out publicly against the treatment of Mr Yevtushenkov belong to the latter group.</p>
<p>The Ukraine crisis and international sanctions have empowered the siloviki faction in the Kremlin. This has put the liberal technocrats within the elite on the defensive, and the siloviki may simply be taking their chance to extend their power and influence.</p>
<h2>Disregarding collateral damage</h2>
<p>It is possible that members of the siloviki faction have an eye on AFK Sistema assets other than Bashneft. AFK Sistema has been hit hard by the arrest. It would be hit even harder if, as is widely expected, Rosneft does eventually take control of Bashneft. Bashneft is a very profitable company, and loss of Bashneft income would put AFK Sistema in difficulties in terms of debt-service, and could force it to sell off some of its subsidiaries, possibly even MTS.</p>
<p>Whether or not other parts of the Sistema empire are divided up, the affair illustrates that powerful members of the Russian elite, possibly including Mr Putin himself, are prepared to risk significant damage to investor confidence to achieve their aims.</p>
<p>This does not bode well for the future of the Russian economy, given the already very poor perception of the business environment.</p>
<p>Click <a href="http://www.store.eiu.com">here</a> to subscribe to The Economist</p>
<p><img class="nc_pixel" src="https://pixel.newscred.com/px.gif?key=YXJ0aWNsZT03ZDg0NDVmZjdhMmI2MTAyMWJjMTNmMWIxZTVhMjkyZSZub25jZT0xNWYxZDIyNS00MmFmLTQ0MTEtOGFiMS0zZjE3ZDkxNTIzNmYmcHVibGlzaGVyPTczMGViODZhYjU5ZjBkNDE5MjZhYzY1YjAxZjgzZTJm" border="0" alt="" width="1" height="1" /></p>

The Arrest Of A Russian Billionaire Does Not Bode Well For Russia's Economy 

New Delhi, Feb 14 () As the sword of Damocles hangs over Vodafone Idea, uncertainty continues to mire the Indian telecom sector which has seen fall of several telcos such as Etisalat DB, Reliance Communications, Sistema Shyam and Aircel. <p> The Supreme Court on October 24, 2019, ruled that statutory dues need to be calculated by including non-telecom revenues in AGR of telcos, leading to huge liabilities of Rs 1.47 lakh crore for telcos already hit by falling revenues due to fierce competition. </p><p> After facing the ire of the Supreme Court, the Department of Telecommunications asked telecom licence holders to clear entire AGR dues totalling Rs 1.47 lakh crore by the end of Friday. </p><p> Vodafone Idea Ltd (VIL), whose liability is estimated to be around Rs 53,038 crore including Rs 24,729 crore of spectrum dues and Rs 28,309 crore in licence fee, has already warned of shutdown if no relief is given.</p><p> In this matter, Bharti Airtel's liabilities as per last available estimates added up to nearly Rs 35,586 crore, including licence fee and spectrum usage charge dues, Tata Teleservices around Rs 10,000 crore, Telenor (which sold spectrum to Airtel) Rs 1,950 crore.</p><p> BofA Securities, in a note on Friday, noted "overhang on VIL" and questioned if India is inching towards a two-player market.</p><p> "Every incremental decision pushes India to a two-telco market," it added.</p><p> Market watchers, meanwhile, said in the event of any further consolidation in the market, the tariffs could well rise by 10-25 per cent.</p><p> Vodafone Idea Chairman Kumar Mangalam Birla has said it will shut down business if the company has to pay the entire adjusted gross revenue amount and the government does not come to its rescue.</p><p> Vodafone Group has said it will not pump in any fresh capital into Vodafone Idea.</p><p> If the Aditya Birla group subsidiary shuts shop, Vodafone India will be the second-large company after Jet Airways to go belly up under the Prime Minister Narendra Modi government.</p><p> Vodafone Idea's gross debt, excluding lease liabilities, was Rs 1,15,850 crore as on December 31, 2019, including deferred spectrum payment obligations due to the government of Rs 88,530 crore.</p><p> There were 13 telecom operators in the market when the Modi-led NDA government came to power in May 2014 but the companies started folding up due to market conditions and rising regulatory costs.</p><p> Vodafone Group CEO Nick Read last year alleged that British telecom major Vodafone on Monday alleged that regulatory outcomes in India over the past two years have been against every telecom operator, except Reliance Jio.</p><p> Vodafone Idea has claimed to have invested over 3.1 lakh crore in India which includes 1.39 lakh crore for spectrum payment. The uncertainty around Vodafone Idea has also put risk over jobs of 11,700 direct employees and around 1 lakh indirect jobs.</p><p> According to Reliance Communications Chairman Anil Ambani, there have been around 20 lakh job losses in the telecom sector.</p><p> His firm amalgamated mobile business of Russian Conglomerate Sistema-owned SSTL to mitigate the debt burden due to lower margin in the capital-intensive telecom vertical. Later, RCom failed to merge business with Aircel and now both the companies are going through an insolvency process.</p> According to official data, the telecom sector's gross revenue fell about Rs 41,000 crore in three years on account of a dip in mobile services rates between 2016-17 and 2018-19 and the adjusted gross revenue on which the government earns revenue, also declined by around Rs 46,000 crore.  PRS ANZ  MR

Vodafone Idea faces uncertain future over AGR woes

<img class="gwt-Image" src="/photo/49647181.cms" style="width: 800px; height: 600px;" /><br />
<br /> The Telecom sector is preparing for a long-awaited shake-up as highly indebted players jostle for access to costly airwaves and brace for the launch of a deep-pocketed new rival backed by <keyword id="3820" type="PERSON" weightage="80" keywordseo="Mukesh-Ambani">Mukesh Ambani</keyword>.<br />
<br />
Ambani owns oil-to-retail conglomerate Reliance Industries, which is expected to begin offering fast data services across India by early 2016.<br />
<br />
With about 980 million wireless users, India's mobile market trails only that of China. But despite impressive growth rates, many firms are struggling with balance sheets stretched by costly spectrum auctions and rock bottom tariffs, making the telecoms sector in India prime for mergers and consolidations.<br />
<br /> In the first such move in seven years, Reliance Communications (<keyword id="6368075" type="CITY" weightage="80" keywordseo="RCom">RCom</keyword>), owned by Ambani's younger brother and rival Anil, has agreed to buy Russian group Sistema's Indian mobile phone business<br />
 <br />
One thing is clear: India has too many players and too much regulation in this space. Not everybody can make a profitable business out of it on a sustainable basis," a telecoms and technology M&amp;A banker with a leading US bank told Reuters.<br />
<br />
"The dealmaking conditions were ripe for many years, but the push is now coming from Reliance's entry into the sector," he said. "There will be a few more deals happening over the next couple of years, and some (players) will fall by the wayside."<br />
 <br /> The arrival of Reliance Industries into the sector, under the brand name <keyword id="2003276" type="UNKNOWN" weightage="80" keywordseo="Jio">Jio</keyword>, will further squeeze players such as RCom and Bharti Airtel.<br />
<br />
Bankers expect smaller players to be pushed into the arms of larger rivals, bulking up to battle Reliance's Jio. <br />
<br />
Image credit: Indiatimes<br />


You Searched For "Russian conglomerate Sistema" and got 4 results

Anil Ambani has new tricks up his sleeves to save his telecom business

BI India Bureau

The Arrest Of A Russian Billionaire Does Not Bode Well For Russia's Economy

The Economist

Vodafone Idea faces uncertain future over AGR woes

PTI

Telecom firms ready themselves for deals as Reliance Industries enter the game

BI India Bureau