FIPB rejects Flag Telecom's proposal to set up arm

Sources in the know said Flag Telecom Singapore, a 100%-owned subsidiary of RCom, plans to acquire a company and set up a subsidiary in India

The Foreign Investment Promotion Board (FIPB) has rejected a proposal of Flag Telecom Singapore, a wholly-owned unit of Reliance Communications (RCom), to set up a telecom subsidiary in India.

FIPB discussed this on June 10 and decided on rejection. No reason was given.

Sources in the know said Flag Telecom Singapore Pvt Ltd, a 100 per cent-owned subsidiary of RCom, plans to acquire a company and set up a subsidiary in India. The total payout for this will be in the region of $120 million, in two tranches. As the new subsidiary to be set up had not been formally incorporated, FIPB turned down the proposal, it was reported.

“Once the incorporation is completed, Flag is likely to move the FIPB again for clearance,” the source added. RCom officials were not available for a comment.

Reliance Group had acquired Flag Telecom in 2003 for $211 million. In 2004, Flag Telecom shareholders approved the amalgamation with Reliance Gateway. The company, along with other firms Yipes Holdings and Vanco Group, were merged with Reliance Globalcomm. Reliance Globalcomm has now been rebranded as Global Cloud Xchange (GCX).

The Anil-Ambani led Reliance Group had earlier tried to list the company in Singapore and later planned to sell some stake in it.

However, it has shelved all these plans, as the company has been doing well under the leadership of Bill Barney.

In a recent earnings calls with sector analysts after announcement of its quarterly financial results, the GCX leadership team has emphasised that the performance of the global undersea cable business, as well as the Indian enterprise and IDC businesses — which together constitute the re-christened Global Cloud Xchange — have been doing increasingly well, and the company has no plans to hive off a stake, for now.

Further, after RCom's planned merger of its wireless business with Sistema Shyam Teleservices and Aircel, RCom will function as a standalone, high-growth leader in the enterprise, IDC, and undersea cable business globally.