Sistema Shyam Expects Russia Investment Next Quarter
By MUKESH JAGOTA and ROMIT GUHA
NEW DELHI -- Sistema Shyam Teleservices Ltd. said Monday it expects the Russian government's investment of around $600 million to come through in the January-March quarter, giving the mobile operator much-needed funds to expand its operations in India."All in-principle clearances have come [from the Russian and Indian governments]. Now only technicalities remain," Chief Executive Vsevolod Rozanov told reporters.
Sistema Shyam is 73.71% owned by Russia's Sistema JSFC, with India's Shyam Group holding about 23.79%. The Russian government planned to pick up the stake in the company by the end of 2009, but the plan was delayed as the country's economy ministry didn't approve the investment that had been included in Russia's 2009 budget.
Last December, Sistema Shyam had said it will issue 662.75 million shares, or a 19.8% stake, on a preferred basis to the Russian Federal Property Agency at 49.31 rupees and up to 228.55 million shares to its Indian founders at 10 rupees a share.
The deal will reduce Sistema's holding in the Indian company to about 54%. The share allotment to the Indian founders will, however, help Sistema Shyam keep the total foreign stake in it below the government-mandated limit of 74% for Indian telecom companies.
Since the collapse of the Soviet Union, Russia has held some deposits in rupees in India. Sistema JSFC has previously said the government is required to invest this cash in Indian projects and that the investment in Sistema Shyam would be a "financing arrangement" as it includes a pledge by Sistema to buy the shares in five years' time.
Sistema Shyam has licenses to provide services in all of India's 22 service areas but has so far started operations under the MTS brand in 13 areas. It has 8 million voice users and 400,000 broadband subscribers.
Earlier in the day, Sistema Shyam signed an agreement with Russia's Gazprombank for a $200 million loan to fund expansion. It also plans to launch an initial public offering in the second half of 2011, Mr. Rozanov said.
The company's expansion plan comes at a time when the world's fastest-growing telecom market has been plunged into turmoil following allegations of corruption.
The country's top investigative agency is scrutinizing the 2008 sale of licenses and bandwidth that critics alleged favored some companies. The telecom department is sending notices to some companies which received licenses in 2008, asking why their licenses shouldn't be cancelled. It is also sending notices to some companies which haven't met stipulated schedules of service roll outs.
A person familiar with the matter said Monday that Sistema Shyam has received a notice from the telecom department, claiming 110 million rupees ($2.43 million) as "liquidated damages" for the delay in roll out of services in 10 areas.
Chief Executive Rozanov said the company will reply to the notice within the stipulated time of 15 days. "This doesn't affect Sistema's plans in India...and at this stage, we continue to roll out our network," he said.
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