| Q&A: Vsevolod Rozanov, President & CEO, SSTL |
| 'We will clear our accumulated losses by 2016' |
| K Rajani Kanth / May 6, 2011, 0:39 IST |
CDMA telecom player Sistema Shyam Tele Services Ltd (SSTL), a joint venture between Sistema of Russia and the Shyam Group of India, has been reeling under losses and has close to '5,570-crore consolidated debt from banks and financial institutions. The company, which operates under the MTS brand, says it is confident of clearing the accumulated losses by 2015. In an interview, SSTL president and Chief Executive Officer Vsevolod Rozanov shares with K Rajani Kanth the company's strategy to become OIBDA (operating income before depreciation and amortisation) positive and issues such as the showcause notice served by the telecom regulator and investment plans. Edited excerpts:Your OIBDA loss for 2009-10 was '1,503.7 crore. How much is your accumulated losses now and how will you clear these?
It would be difficult to throw any number now. I think we should be able to clear these by 2015 or 2016. Our focus on providing smartphones and dongles to our customers and gradually moving from this so-called cheap voice position is something which will enable us to get to positive OIBDA, and then to offset the accumulated losses.
Our strategy is purely data-focused and device-enabled. The key focus of the company is around data business – dongles and smartphones. Clearly, this is something which is successful in the field and will bring us a positive OIBDA. Our target is to become OIBDA-positive by 2013. This, we internally believe, is an extremely ambitious target. Your consolidated debt stands at '5,570 crore. How do you plan to write it off?
This is mostly long-term debt, and we believe these could possibly be re-financed in 2012. From that perspective, I see fewer risks. In fact, bankers realised that MTS has a differentiated strategy among all operators. Also, last year we saw a significant growth in average revenue per user (ARPUs) than over the last five to six years. So, clearly, I would say banks would start to see the sector more and more positively.
When do you plan to issue an initial public offer (IPO)?
Unless there is a clarity on the overall regulatory system, I don't think any operator will go for IPOs. Our IPO plans are not on the back-burner and we are doing all the back-end preparations and other activities, which basically is to make sure we are ready for that. We are already complying with corporate governance by releasing our financials. Maybe there will be a clear picture on this by next year.
Has the process of the $600-million investment by the Russian government for a stake of 17.14 per cent been completed? How are you deploying that?
It is complete. This is basically for business — extending our high-speed data network across circles of operation, expanding it to new circles and to roll our mono-brand retail store chain in various circles. We currently have just about 1,000 mono-brand stores and are planning to open 400 more by the end of this year.
How do you propose to raise funds?
It would be from more loans and more equity investments. Banks are once again interested as the business model is becoming clearer. From the shareholders' perspective, equity financing would make more sense than debt financing because the interest rate might also somehow jeopardise the net income. The two common sources of funding will be debt and equity. I assume these funds ($600 million from the Russian government) would be enough for this year. Next year, it might be a combination of various sources of financing.
Have you responded to the showcause notices of the telecom regulator to cancel your licences in certain circles (West Bengal, Kerala and Assam)?
No, not yet. We were given 60 days to respond. We believe there is a certain misunderstanding because we have already reported 1.7 million customers in those circles. We are very confident that we did not violate any rule. We will clarify our position in due course.
Can you give a break-up of revenues?
At this stage, non-voice business contributes around 25 per cent to the revenues, which is probably the highest in the industry, while dongles and smartphones together account for 12 per cent. I see this becoming 25 per cent from dongles. This year, it is still not going to be a major differentiator in terms of revenues from smartphones. But gradually, we are going to see that MTS-branded smartphones will create a significant line of business. I would say 20 per cent of our revenues in the next couple of years.
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