Russia Sistema Said to Take Aim at GCX, RCom

March 27th, 2018 by · Leave a Comment

In the wake of Reliance Communications’s sale of its mobile business to Reliance Jio, it looks like the rest of Reliance’s telecoms business may also change hands. But the leading bidder for RCom and GCX isn’t a familiar one to most back here in the USA: Russia Sistema.

Apparently, Russia Sistema has bid $1.5B for the remaining assets, which include both an Indian national fiber network business and Global Cloud Exchange, which operates the company’s global subsea and internet backbone business. That bid would take into account the $300M that RCom already owns Russia Sistema from a 2015 deal for the latter’s stake in MTS India, thus making it a $1.2B net purchase price.

If the deal comes to fruition, there could be some interesting regulatory hurdles ahead. GCX was built largely on top of Flag Telecom, which Reliance bought after the dot com bubble burst and which operates a substantial chunk of the world’s global subsea cables. Having those cables directly in Russian hands might give a few regulators pause in both Europe and the US.

Given Russia Sistema’s existing interest in RCom, their presence in the bidding isn’t surprising. But I do wonder who the other bidders might be and what their thoughts on all this are. The subsea assets in particular have been ‘on the market’ for a long time, and were the subject of IPO speculation for a while a few years ago as well. A $1.5B valuation (or thereabouts) on RCom and GCX, however, no longer seems like it’s that out of tune with the list of other buyers.

On the other hand, there aren’t many buyers that would want both the global subsea/backbone of GCX and an Indian national fiber network. I can think of more buyers for GCX (GTT, Telxius, Telia) than for the combination. Even if Russia Sistema were the ultimate buyer, I wonder if they wouldn’t break it up and monetize it separately.

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Categories: Internet Backbones · Mergers and Acquisitions · Undersea cables

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