Nasdaq-listed Sify Technologies Ltd has announced its decision to proceed with the planned merger of Sify Communications Ltd into Sify Technologies Ltd. Sify Communications Ltd is a majority-owned subsidiary of Sify Technologies Ltd. Sify Communications holds National Long Distance (NLD) and International Long Distance (ILD) licenses. The merger of the two units was deferred in August this year due to expected change in government regulations.

“Upon reviewing the current environment and the ongoing global financial crisis, the Board decided that the benefits of merging the two companies outweigh the opportunities that may unfold from government regulation and policies in future. The efficiencies, savings and benefits as a merged entity would strengthen the company and contribute to its ability to perform despite the challenging financial environment,” M P Vijay Kumar, CFO, Sify Technologies.

But the board of the company now feels that benefits of the merger will be far greater than the expected change in government policy. The change in guidelines would allow internet service providers (ISP) like Sify to provide telephony. As Sify Communications was already granted NLD and ILD licenses in 2006 it would not have tie-up with anyone to provide this service.

The merger has been approved by the shareholders, but is still subject to the approval of the Madras High Court. Sify Technologies’ losses have been increasing as it reported a net loss of $ 5.32 mn for Q2 FY09. The company’s ARPU has been falling during the last several quarters. It has also been restructuring its consumer business and has re-launched its chain of retail outlets to smaller formats for wider distribution and reach.

This story has been provided by out content partner VCCircle