Reliance Communications is eyeing Sistema Shyam Teleservices

In a major development, Anil Ambani-owned Reliance Communications is planning to takeover Sistema Shyam Teleservices (SSTL) in an all-stock deal reportedly which could give the Russian-owned telco's shareholders less stake in the merged entity.

However, Reliance Communications and SSTL, majority owned by Russia's Sistema JSFC, do not want to comment on the possible takeover.

"Due diligence is currently on, and there is an effort to tie up details in the next two to three months," a person directly involved in the talks told the Economic Times.

"The second phase of the deal, if it happens, may see Sistema (JSFC) infuse more funds to raise its stake in the new entity, which can be used for capex or pare debt," he said.

However, another person familiar with the developments said there's no certainty about the deal. "Talks are going on. The top leadership of both the companies have met, but there are a lot of variables at play," he said, adding "any deal will need legal clearances, in addition to a nod from the DoT (Department of Telecommunications)."

According to Sistema, the company had held talks with other telecom operators in India, including Reliance Communications, for business expansion.

Sistema JSFC holds nearly 57 % in Sistema Shyam, which offers telecom services under the MTS brand using CDMA technology in nine of India's 22 service areas to nearly nine million subscribers. Other shareholders include the Russian government with over 17 % and Shyam Group, the Indian promoters of SSTL, holding 24 %. Minority shareholders own the rest.

Sistema entered India in 2007. In 2008, the joint venture was awarded licences and spectrum to offer telecom services in all of India's 22 circles using CDMA technology. Sistema gradually raised its stake in the joint venture.

(Image: Indiatimes)