The board of Sify Technologies Ltd has approved the merger of its subsidiary Sify Communications into the company. Sify Communications, earlier known as SafeScrypt, was essentially an enterprises services company. 

Interestingly, according to the SEC filing, Infinity Satcom, an entity controlled by Sify Technologies CEO Raju Vegensa, is a minority stockholder of Sify Communications. According to a 2006 story in the Hindu, Sify had sold 26% stake in Sify Communications (then Safescrypt) to Infinity Satcom for $3.1 Million. 

As we had reported during the announcement of the VoIP recommendations, Sify and Sify Communications stand to benefit significantly if the Indian government accepts the recommendations, and a policy is announced: Sify Technologies Ltd has an ISP license in India, and Sify Communications has an NLD/ILD license. With the merger, a single entity will own both the licenses, and hence will not have to pay any carriage fee. Sify can offer calling cards and VoIP services, or even offer VoIP as a significant value-add over its WiMax/Broadband services. Sify’s access business has been on the decline.

Sify Share Price

The impact the announcement of the merger is not insignificant: Sify’s share price had gone to $0.42, but following the announcement, has recovered to $1.75, and is currently trading at $1.16. Interestingly, the Sify board had deferred the merger earlier this year, but decided to go ahead given the financial crisis. This also means, that Sify will not be raising funding separately for Sify Communications.

Do note that while the TRAI has been, well, announcing recommendations and discussions as if on steroids, over the past month, the government still has a number of issues related to telecom to resolve – most importantly, the 3G Auction. So it’s likely that VoIP will be taken up after the next elections, and if a different government is elected, the process may take even longer.

— Sify Consumer Business Revenue Down 7% To $7.5 M; Drops Broadband Rates To Stem Decline
— Impact Of TRAIs Internet Telephony Recommendations; Sify To Benefit
— Regulator Recommends Unrestricted Internet Telephony In India; Separate Numbers For VoIP