Sistema may spend $1 bn more in India in search of profit
Sistema Shyam TeleServices plans to make the investment through 2015, with $415 mn being spent this year
First Published: Tue, Apr 09 2013. 05 55 PM IST
A file photo of SSTL’s chief executive officer Vsevolod Rozanov. Sistema’s India unit now projects operating income before depreciation and amortization to become positive in about two years, Rozanov said. Photo: S. Kumar/Mint
Moscow: Russian billionaire Vladimir Evtushenkov’s AFK Sistema, which has written off about a third of its $2.8 billion investment in Indian mobile services, plans to spend as much as $1 billion more to expand in the market.
“The company’s Sistema Shyam TeleServices Ltd (SSTL) unit plans to make the investment through 2015, with $415 million being spent this year,” SSTL chief executive officer Vsevolod Rozanov
told reporters in Moscow on Tuesday. That includes interest costs,
capital expenditures, covering losses and possibly developing faster
wireless services using LTE technology, he said.
Sistema’s five-year campaign to benefit from growth in
India’s mobile-phone market has so far failed to add to earnings amid
intense competition. The India unit now projects operating income before
depreciation and amortization to become positive in about two years,
and it may consider market consolidation or an initial public offering
once profitable, Rozanov said.
SSTL’s fourth-quarter net loss narrowed to Rs.779 crore, the unit said on Tuesday in a statement. Sistema, which controls Russia’s largest mobile operator OAO Mobile TeleSystems or MTS,
with 101 million users at the end of 2012, entered India five years ago
via a joint venture with local Shyam Group. The Russian government
acquired a 17% stake in SSTL two years ago.
Sistema, based in Moscow, fell 1.7% to 25.50 rubles at 2.52pm local time.
License challenges
Last year, India’s Supreme Court cancelled 122 permits
held by telecommunications operators in the country as the government
sought to auction these licenses again at a higher price, citing
corruption during their original allocation.
Sistema skipped a November auction, which collected less
than a quarter of the government’s $7.3 billion target. It was the only
bidder in a repeated auction in March this year, when India agreed to
lower prices for the remaining spectrum. SSTL, which earlier had a
pan-Indian license, decided to stay in nine out of 22 regions, servicing
40% of the country’s population.
SSTL agreed to pay about $665 million for 20-year
licenses for 800 megahertz spectrum, Sistema said in a 11 March
statement. The $297 million paid by Sistema in 2008 for the same
licenses will count toward the total and the remainder may be paid
during 10 years starting in 2016, according to the statement.
Evtushenkov, with wealth valued at $6.7 billion by Forbes
magazine, made his money in telecommunications. MTS accounts for about
36% of AFK Sistema’s revenue and 62% of the company’s operating income
before depreciation and amortization, according to third-quarter
presentation. Sistema also controls oil producer OAO Bashneft.BLOOMBERG
Kartikay Mehrotra in New Delhi contributed to this story.
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