The Russians Are Coming! - The Russians Are Coming!

Implications: ASistema is the largest Telecom company in Russia and together with its' construction subsidiary, Sistema Hals, (listed on the London Stock Exchange with a first 9 months turnover of $9.6 billion), is making their first ever investment outside of Russia and the CIS. With so much opportunity to make profitable real estate development investments in Russia and the CIS, the question arises as to what is Sistema thinking about going so far afield to get involved in a high risk real estate venture? This analysis will look at some of the possible answers.

Analysis: As a rather recent observer of Sistema and several of its' subsidiaries including Sistema Hals, I have been impressed by how this recently formed company has been able to make so many deals, in so many different industries, in such a short time. Upon closer examination I came to realize that at its' heart it is really just a Telecom company that has managed to acquire enough different companies in enough different industries to become a conglomerate virtually overnight.

It is interesting to note that it justified many of its' investments outside the telecom industry by talking about the possible synergy and benefits these investments would bring to its' telecom business.

All this sounds very familiar. I can recall a recent era in American business when Conglomerates were all the rage. Every new acquisition was hailed by the press as having potential synergy to the main business.

Remember ITT? Remember ITT/Sheraton Hotels? Remember ITT/Sheraton Hotels/Wonder bread?  SAME THING!

I have frequently heard that Russia is considered to be 50 years behind the US in its' business and financial activities.  It would seem this effort by Sistema to be all things to all people in all countries, is further evidence of them embarking on a program of conglomerate building that was discarded almost 50 years ago as being unworkable and unwieldy by some of America's best business minds.

My advice to GLG readers is to be careful!