BSES, the power arm of the Reliance group, has sold its telecom business to group company Reliance Infocomm for Rs 25 crore (Rs 250 million). The deal was inked last week.

The BSES Telecom division, which at one point had even planned an ADR issue to fund a major expansion, was into offering Internet services through broadband, dial-up and leased lines.

The fledgling telecom business has 5,000 customers. But since it has last the mile linkage to around 2,000 buildings in BSES' area of electricity distribution, the company is sitting on a potential customer base of about 36,000.

The Internet service was launched under the brand name Powersurfer.net, all of which will now go to Reliance Infocomm.

 "BSES decided to exit telecom as it did not consider it a core activity. The company will now focus on its main business of power," sources close to the development said. They did not share any more details.

In the mid-nineties, the power company had set up a wholly-owned subsidiary BSES Telecom. Earlier this year, after the Reliance group acquired management control of the power company, BSES Telecom was merged with the parent.

The idea behind venturing into telecom was to capitalise on its strength as a power distributor in large parts of Mumbai. This enabled it to provide last mile linkage.

During the boom in information, communication and entertainment stocks, there were plans to list BSES Telecom on the bourses as well. This plan was dropped after the market lost the appetite for such stocks.

Further, after BSES became a subsidiary of the Reliance group it made no sense to pursue this option further as the group had a huge exposure in the telecom sector through Reliance Infocomm. The sale will result in Reliance Infocomm inheriting the customer base of BSES.

The other major domestic power company Tata Power too has invested in an optic fibre network in the city.

Tata Power has invested Rs 110 crore (Rs 1.10 billion) in the business and there has been talk of transferring this business to group telecom companies like Videsh Sanchar Nigam or Tata Teleservices.