MUMBAI: A strategic merger with one of India's top seven telecom operators could be on the cards for Sistema Shyam Teleservices provided it gets a say at the management level, the company's chief executive told ET.
However, to take a step in that direction the company is awaiting clear merger and acquisition regulations from the government, Vsevolod Rozanov said in an interview. "We have business model tuned to organic growth. But if there is anything that can improve the business model by merger, I completely don't rule this out. I am ready if the rules get relaxed. We have the detailed information on all players. The situation is very different for every circle. We know what assets are there."
The company is a joint venture between Russian conglomerate Sistema and Shyam Teleservices of India. It is the only company in India that operates on only code division multiple access (CDMA) technology. Reliance Communications and Tata Teleservices also started with CDMA operations, but have now diversified into competing technology GSM and offer services in both the technology platform.
Sistema Shyam offers services under the brand MTS. So far, 85% of the company's revenue comes from voice, but its "game changer" has been data services, Rozanov said. The company has an average monthly revenue per user of 80, which is lower than what it spends per customer.
Yet, data customer revenue is typically several times that value. "We are adding 60,000 to 70,000 data customers every month, and I see trends of improving Arpu in the coming months," he said.
CDMA is traditionally known as a better technology for communication offering better speeds for web browsing, but its global uptake for voice calling has been slow because it locks users into specific handsets, and has emerged as less glamourous.
Like peers in his industry, Rozanov says the Indian telecom sector is begging for more spectrum, or air waves, that are not very efficiently utilized by public enterprise. "At this stage if I get all the spectrum I am entitled to, I will be happy for a couple of years."
As a CDMA operator Sistema Shyam is allowed 5 MHz of spectrum but has been allotted only 2.5, which would be increased given a threshold of minimum subscribers. In many of its service areas the company has crossed the requirement, he said.
Some chatter emanating out of the Department of Telecommunications suggests the government may impose a charge for additional spectrum to make up for allotting it too cheap initially. The talk comes in the wake of the alleged 2G scam which a government report says cost the exchequer up to 1.76 lakh crore.
Rozanov said any additional cost will take a toll on Sistema Shyam's business objectives. "The target is to be Ebitda (a measure of operating profit) positive by 2013 but that is already extremely stretched. If something (fees) else is imposed, the payback will be extended for many years. I don't think it will even be relevant for my generation of CEOs."
The company is also looking forward to stable, open telecom policies, that won't be changed as they have been in the past, he said. "We want to see stable regulations, to feel comfortable our investments in India are safe."
Given the amount of competition, Rozanov feels there is little need for defensive regulations. He cites the example of a limit set under existing norms on market share an operator can control.
However, to take a step in that direction the company is awaiting clear merger and acquisition regulations from the government, Vsevolod Rozanov said in an interview. "We have business model tuned to organic growth. But if there is anything that can improve the business model by merger, I completely don't rule this out. I am ready if the rules get relaxed. We have the detailed information on all players. The situation is very different for every circle. We know what assets are there."
The company is a joint venture between Russian conglomerate Sistema and Shyam Teleservices of India. It is the only company in India that operates on only code division multiple access (CDMA) technology. Reliance Communications and Tata Teleservices also started with CDMA operations, but have now diversified into competing technology GSM and offer services in both the technology platform.
Sistema Shyam offers services under the brand MTS. So far, 85% of the company's revenue comes from voice, but its "game changer" has been data services, Rozanov said. The company has an average monthly revenue per user of 80, which is lower than what it spends per customer.
Yet, data customer revenue is typically several times that value. "We are adding 60,000 to 70,000 data customers every month, and I see trends of improving Arpu in the coming months," he said.
CDMA is traditionally known as a better technology for communication offering better speeds for web browsing, but its global uptake for voice calling has been slow because it locks users into specific handsets, and has emerged as less glamourous.
Like peers in his industry, Rozanov says the Indian telecom sector is begging for more spectrum, or air waves, that are not very efficiently utilized by public enterprise. "At this stage if I get all the spectrum I am entitled to, I will be happy for a couple of years."
As a CDMA operator Sistema Shyam is allowed 5 MHz of spectrum but has been allotted only 2.5, which would be increased given a threshold of minimum subscribers. In many of its service areas the company has crossed the requirement, he said.
Some chatter emanating out of the Department of Telecommunications suggests the government may impose a charge for additional spectrum to make up for allotting it too cheap initially. The talk comes in the wake of the alleged 2G scam which a government report says cost the exchequer up to 1.76 lakh crore.
Rozanov said any additional cost will take a toll on Sistema Shyam's business objectives. "The target is to be Ebitda (a measure of operating profit) positive by 2013 but that is already extremely stretched. If something (fees) else is imposed, the payback will be extended for many years. I don't think it will even be relevant for my generation of CEOs."
The company is also looking forward to stable, open telecom policies, that won't be changed as they have been in the past, he said. "We want to see stable regulations, to feel comfortable our investments in India are safe."
Given the amount of competition, Rozanov feels there is little need for defensive regulations. He cites the example of a limit set under existing norms on market share an operator can control.
However, operators are not expecting the churn due to MNP to be more than 1 per cent, from a current industry average churn rate of 4-5 per cent per month. This is also based on their experience in the circle of Haryana, where MNP was launched in December last year and about 100,000 customers decided to change their operators on a customer base of 19 million.
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