SSTL seeks more funds

Sistema Shyam in talks to raise $300-400 mn to fund expansion

Press Trust of India / Hyderabad May 11, 2010, 21:10 IST

Sistema Shyam TeleServices, a joint venture between Russia's Sistema and India's Shyam Group, today said it is negotiating with various financial institutions to raise around Rs 1,350-1,800 crore for its expansion plans.
The funds will be used mainly towards the expansion of operations in 12 circles in the country, Sistema Shyam TeleServices (SSTL) President and Chief Executive Vsevolod Rozanov told reporters here.

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Also Read   Related Stories News Now - Sensex sheds 189pts on profit booking - Sistema Shyam in talks to raise $300-400 mn to fund expansion - Retail presence shoots up in key towns, urban India - Trai allows M&A, telecom valuations may soar - Volvo invests Rs 90 cr in Bangalore facility More

SSTL provides mobile service under the brand name MTS. "We are in touch with our Russian government to dilute around 20 per cent stake to raise around $700 million.
"We are also in talks with some of the Indian banks to raise around $300-400 million to fund our short-term growth plans lined up this year," Rozanov said.
The company will complete setting up of network in all the 22 telecom circles by the year-end, he said.
Rozanov said currently they are present in 12 circles and the remaining 10 will be covered by the end of 2010.
"We have necessary licences on hand and infrastructure is in place in every circle. We will launch services in all the circles before the end of the year," Rozanov said after announcing the launch of its MTS code division multiple access (CDMA) services in Andhra Pradesh.
The company will be investing Rs 400-500 crore in each of the four southern states.

SSTL launches services in Andhra Pradesh

BS Reporter / Chennai/ Hyderabad May 12, 2010, 0:45 IST

Sistema Shyam TeleServices Limited (SSTL), a joint venture company between Russia's Sistema and Shyam Group of India, will be investing Rs 250 crore to expand its code division multiple access (CDMA) network in Andhra Pradesh by the end of this year.
Announcing the launch of its MTS services in the state, which completes the company's presence in the entire south corridor and 12 circles across the country, on Tuesday, SSTL president and chief executive Vsevolod Rozanov said the plan for this year was to complete all the 22 circles with an investment of over Rs 5,000 crore. SSTL had tied up with Mobile TeleSystems (MTS), a $10-billion operator in Russia and the eighth largest telecom brand in the world, to franchise the brand in India.

Click here to visit SME Buzz

Also Read   Related Stories News Now - Sensex sheds 189pts on profit booking - Sistema Shyam in talks to raise $300-400 mn to fund expansion - Retail presence shoots up in key towns, urban India - Trai allows M&A, telecom valuations may soar - Volvo invests Rs 90 cr in Bangalore facility More

Currently, SSTL has 4.5 million subscribers, including 72,000 for high-speed data services. “Data is the future of our company and is clearly a differential business model than other aggregators. We expect data services to account for one-third of our revenues and achieve break-even by 2013,” Rozanov said. In Andhra Pradesh, SSTL services will initially be available in 557 towns covering 50 per cent of the population. Eight cities in the state will have MTS mobile broadband services this year, which will be scaled up further next year, he said, adding the company will also come up with post-paid services in the next few weeks.
The MTS-to-MTS charges within Andhra Pradesh will be one paisa for four seconds.
Replying to a query, Rozanov said the company would switch to another vendor if China-based Huawei Technologies’ products were not allowed into India.
It may be recalled that the Indian government has blocked Huawei Technologies and ZTE Corporation from selling telecom network equipment to domestic phone carriers due to security reasons.

President signs amendment for stake puchase of SSTL

http://eng.kremlin.ru/text/news/2010/05/225832.shtml

May 4, 2010
19:20

News
Dmitry Medvedev signed the Federal Law On Amending the Federal Law On the Federal Budget for 2010 and the Planning Period of 2011-2012.

The amendments specify the upper limit of Russia’s state internal debt for 2010 and the planning period of 2011-2012, as well as its state internal debt’s upper limit under the state guarantees of the Russian Federation denominated in its national currency, for the same period. It also specifies the upper limits for the State Programme of the Russian Federation on External Borrowings for 2010 and the planning period of 2011-2012, and for the programmes on state guarantees of the Russia Federation denominated in its national currency and in foreign currency, for the same period.

The Federal Law also contains a proposal to grant the [Russian] Government in 2010 the right to appropriate the federal budget funds toward purchasing shares in the Russian-Indian joint venture, Sistema Shyam TeleServices Ltd. (Republic of India).

The law also sets forth individual powers held by Vnesheconombank with regard to provision and performance of state guarantees, which powers it exercises on the instructions from the Government of the Russian Federation.
print

MTS may acquire another telecom operator : The Telegraph

Stake shake buzz in telecom
- MTS hunts for more spectrum
JAYATI GHOSE
Rozanov: Growth focus

New Delhi, May 4: MTS is likely to take the acquisition route to grab the extra spectrum necessary to improve its mobile services.

“We need additional spectrum to improve speed (of data services),” Vsevolod Rozanov, CEO of Sistema Shyam Teleservices Limited (SSTL), told The Telegraph.

SSTL is a joint venture between Russia’s Sistema and India’s Shyam Teleservices and operates under the MTS brand.

MTS, the only company in India that offers mobile services using CDMA technology alone, is betting on the mobile data segment to increase market penetration and generate high revenues.

Tata and Reliance Telecom offer CDMA services, but they also have mobile services that run on GSM technology.

Analysts said the firm could acquire another player to get additional radiowaves as the government has refused to hand out extra CDMA spectrum.

Rozanov said while the company believed in reasonable, organic growth, it was not averse to buying another player in the Indian market if the acquisition had potential.

The company recently requested the department of telecom (DoT) to grant additional airwaves as allowed for entrants using GSM technology. While CDMA players get 2.5 megahertz (Mhz) of start-up spectrum, GSM players get 4.4Mhz.

However, the DoT turned down the request saying CDMA is a more spectrum-efficient technology compared with GSM and can cater to “more customers for the same amount of spectrum”.

MTS is not planning to get into the GSM segment. Rozanov said, “CDMA is the technology of choice for data and demand for data services will increase in the future.”

He expects the market for mobile data services to expand beyond just corporate users to include SMEs, students and small households, given the popularity of live infotainment and social networking in India. The company recently launched high-speed data service Mblaze, which includes mobile TV, and plans to launch more data services this year.

MTS, which has over 4 million subscribers, is focusing on revenues and not on subscriber additions.

“There is no sense in entering a race over subscribers. Our key focus is to improve average revenue per user (ARPUs) and it is seen that data subscribers have low churn rates and generate high ARPUs,” said Rozanov.

MTS competes with Reliance Communications, Bharti Airtel, Vodafone and Tata DoCoMo to attract high revenue generating data users.

The firm is expecting an investment of $800 million from the Russian government for a 20 per cent stake in the company by end of 2010. The money will fund the company's expansion plans.

MTS, which debuted in India on March 26, 2009, has rolled out services in 11 circles and is expected to complete its pan-India coverage by the end of the year.

The company said it has sufficient start-up spectrum to complete the rollout in all circles.
Top

SSTL valuations - analyst view

With spectrum in 3G getting valued at around 10000 cr (or even more) , the
value of spectrum itself in hands of SSTL would be closer to Rs 10000 cr
or about 40 per share. One can safely add another 2500 cr or 10 Rs per share for
the current operations. The fair value of the shares can thus be
construed to be minimum of at least 50 Rs. We believe that once 3G and
BWA spectrum auction is completed, and the pricing of additional spectrum for 2G
is finalized, the stock may get revalued in the market.

These are observation of an independent market analyst and AMSOST may not necessarily endorse such views. However in light of the 3G auction figures, AMSOST's plea in court for buyback at Rs 50 is certainly a fair plea justified by market analysis and the option for promoters to buy equity at Rs 10 is thus a clear robbery of the minority shareholders' value.

MTS recognized among the World’s 100 Most Powerful Brands

MTS recognized among the World’s 100 Most Powerful Brands
TT Correspondent | New Delhi | 29 Apr 2010

The BRANDZ Top 100 rankings published by the Financial Times and market research firm, Millward Brown recognized MTS as one of the 100 Most Powerful Brands with a value of $9.7 billion.



MTS was ranked 72nd on the list.



The significant growth in brand value over the year is primarily due to the company’s continued execution on its corporate strategy, strong growth and its leadership positions in the Russian & CIS markets and Indian sub continent, said the company.



Speaking on the announcement, Mr.Vsevolod Rozanov, CEO, Sistema Shyam Teleservices Ltd, said, “We are delighted to be among the top 100 brands in the world and are confident that the ranking will boost our presence in Indian market.” He further added, “Our recognition among the league top 100 brands will further strengthen our association with our customers.”



"Since the launch of the new MTS brand in 2006, we have focused on developing it to become the strongest brand in our markets to reflect our position as the leading telecommunications group in Russia, Eastern Europe and Central Asia,” commented Mikhail Gerchuk, Vice President and Chief Commercial Officer of MTS.

Russia's upper house approves budget for buy into Indian SSTL !

[April 28, 2010]

Russia's upper house approves budget for buy into Indian SSTL
(M&A Navigator Via Acquire Media NewsEdge) The upper house of the Russian parliament today greenlighted a bill to allocate up to USD676m (EUR514m) of the 2010 budget for the acquisition of a 20% interest in Indian mobile operator Sistema Shyam TeleServices (SSTL), part of Russian conglomerate AFK Sistema (MCX:AFKC).

The bill is now awaiting the clearance of the president.

The deal was scheduled to close in 2009 and funds for the acquisition were earmarked in the 2009 budget. However, the delay forced the government to vote again and transfer the sum to the 2010 budget.

SSTL's shareholders gave the go-ahead to the issue of new shares to the Russian government in December last year. Following the transaction, the stake of Sistema in its Indian arm will fall to 54.22% from the current 74%.

Country: India; Sector: Telecommunications Target: Sistema Shyam TeleServices (SSTL) Buyer: Russia's government Vendor: AFK Sistema OAO Deal size in USD: 676m Type: Stakebuilding Status: Agreed Comment: Upper house okays budget for stake acquisition ((Comments on this story may be sent to tww.feedback@m2.com)) (c) 2010 M2 COMMUNICATIONS

NO IPO IN CURRENT FISCAL SAYS SSTL !!!!

Russia may buy 20% stake in SSTL after investing $800 mn
Press Trust of India / Chandigarh April 12, 2010, 19:51 IST

Telecom company Sistema Shyam TeleServices (SSTL), which is a joint venture between Russian conglomerate Sistema and Shyam Group, today said the Russian government may acquire 20 per cent stake in the company after infusing $800 million in it to help it expand across India.
"The Russian Federation will be investing about $800 million to fund our expansion programme in the country. Following this, the Russian government may have 20 per cent or little over 20 per cent stake in our venture," company's Deputy Chief Executive Officer T Narasimhan told reporters here today.

Stating that this was for the first time the Russian government was investing in such a venture, he said talks between Russia and Sistema were going on to work out the ratio of exact stake of the former in SSTL.

He further said the Foreign Investment Promotion Board (FIPB) had already given its approval to this proposal. "We are just awaiting the clearance from Russian government... and the whole process (capital infusion) will take another 3-4 months to complete all the formalities," he said.

After the investment of the Russian government in the telecom venture, the stake of Sistema in SSTL will come down to about 54 per cent, said Narasimhan.

At present, Sistema holds 73.71 per cent equity stake in SSTL, while Shyam Group has 23.79 per cent and the remaining 2.5 per cent is publicly held.

SSTL has projected to infuse a sum of $1 billion in the next one year to roll out its CDMA services in the balance 11 circles.

SSTL, which is eyeing break even point by year 2013, has ruled out the possibility of an initial public offer in the current fiscal. "The launch of the IPO is being talked about for quite some time but the market has to be conducive. I do not think we will come out with IPO in this fiscal," he said.

"Moreover, the position of availability of funds for expansion is very comfortable with the company," he added.

SSTL, which has invested $1.5 billion already to roll out CDMA services, is aiming to have a subscriber base of 15 million post expansion. "After rolling out services in the remaining circles, we wish to have 15 million subscribers within 12-15 months," he said.

SSTL currently has a subscriber base of 4 million with presence in 11 circles, including Rajasthan, Bihar, Jharkhand, Kolkata, West Bengal and Mumbai.

The company today also announced the launch of CDMA services under MTS brand in Haryana by offering half a paisa per second tariff. The company is also offering a million free minutes on its Mcard 498 plan. It is offering 24 hours free download with a speed of 3.1 Mbps as part of the inaugural offer

Most media reports showing SSTL lost subscribers in FEB!!!! There is no clarification from the company yet.

http://in.reuters.com/article/domesticNews/idINSGE62S0FZ20100329

TABLE-India adds 18.8 mln mobile users in February

Mon Mar 29, 2010 6:11pm IST

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March 29 (Reuters) - Mobile firms in India added 18.76
million subscribers in February, taking total users in the
world's fastest-growing, and second-largest, wireless market to
563.73 million, the Telecom Regulatory Authority of India said.

In January, the firms had added a record 19.9 million
users. Mobile subscribers grew at a monthly average of nearly
15 million in 2009.

Following are the additions by mobile operators and their
total subscriber base.
 LEADING COMPANIES:
 COMPANY                 ADDITIONS (MLN)     TOTAL USERS (MLN)
-------------------------------------------------------------
 Bharti Airtel (BRTI.BO: Quote, Profile, Research)      2.90              124.62
 Reliance Comm (RLCM.BO: Quote, Profile, Research)      2.81               99.41
 Vodafone Essar (VOD.L: Quote, Profile, Research)       3.09               97.23
 Bharat Sanchar Nigam Ltd     1.65               66.76
 Tata Teleservices            2.84               63.16
 Idea Cellular (IDEA.BO: Quote, Profile, Research)      2.26               62.14
 Aircel                       1.83               34.86
 SMALLER PLAYERS:
 COMPANY                     ADDITIONS         TOTAL USERS
(MLN)
--------------------------------------------------------------
MTNL (MTNL.BO: Quote, Profile, Research) (MTE.N: Quote, Profile, Research)         77,880             5.00
 Unitech Wireless (TEL.OL: Quote, Profile, Research)   1,017,074             3.56
 Sistema Shyam Teleservices     -6,980             3.18
 Loop Telecom                   74,651             2.78
 S Tel BTEL.BH               210,920             0.72
 HFCL Infotel                    3,700             0.33
 --------------------------------------------------------------

Note: Wireless tele-density, or mobile connections per every
100 people, was at 47.91 at the end of February, the regulator
said.

Fixed-line subscriber base declined to 36.96 million in
February from 36.99 million in January, the regulator said.
Including fixed-line phones, India had 600.69 million phones at
the end of February, or a total tele-density of 51.05.
 (Reporting by Devidutta Tripathy in NEW DELHI) 

Review from a MTS data card user.....

MTS MBlaze Mobile Broadband is stealing my money and wasting my time

March 28, 2010

By adam.watt |  Email This Post

I bought an MTS ‘MBLaze’ USB Mobile internet device because I was told it works on Mac OS X, 2 weeks ago. The cheaper model, infact, does not. Despite the box saying it does. I returned that and got the more expensive of the two models, which worked, but not properly.
It deducts my balance at a ridiculous rate – 10/15MB in 5 minutes while connected, even if my computer nether up nor downloads any data in this time. This is theft, simple as as that.
I have spoke to their amazingly inefficient ‘customer services’ so many times I can’t stand them anymore. I have explained the problems to over 20 people. Over and over again. Many of them have lied about returning calls, a few simply hung up the phone on me, many times I have been left on hold for no reason. I have all their names. Even today, 15 days after purchasing the second device I still have to explain everything to them and the still ask the same stupid question, lie, put me on hold and are generally incompetent and evasive in the extreme.

We cannot give any time line for IPO !!

MTS eyes10 mn users in India by December

The company expects an investment of $676 million from Russian government to come into its account within six months' time for spending in India

CMN Correspondent

NEW DELHI, INDIA: Sistema Shyam TeleServices (SSTL), a joint venture between Russian conglomerate Sistema and India's Shyam group, expects the user base of its MTS brand to reach 10 million with the launch of services in 11 new circles by the year-end. "Right now, we are operating in 11 circles and we hope for pan-India expansion by this year-end," company president and CEO Vsevolod Rozanov told reporters here Thursday.
MTS will launch its service in Andhra Pradesh and expand mobile broadband services in more than 90 cities across the country

“At present our subscribers can move around and use our service in all circles. We have decided to launch MTS service in Andhra Pradesh in second quarter of this year and few more circles in third quarter,” said Vsevolod Rozanov, president and CEO, Sistema Shyam Teleservices, while speaking to media on the occasion of celebrating one year of the company’s presence in India.

As per TRAI report, the company has more than 3.2 million subscribers in the country by the end of January.

On the occasion Rozanov mentioned that the company this year will focus on increasing business of its data services and will come up with various offers related to these services.

In the process, the company will double the number of cities to provide mobile broadband services. At present MTS provides mobile broadband services in 48 cities and by the end of the year it has plans to cover more than 90 cities.

The company will almost double its branded retail outlet across the country which is currently 300 in numbers.

Rozanov also mentioned about an anticipated investment from Russian government of $676 million which is expected to come into the company's account within six months time for spending in India.

“The Russian government has clear intension to invest in our company. Only paper work and policy formalities are left for this investment. We expect that to happen in six month. We have got all kinds of legislative works completed in India,” said Rozanov.

After getting the investment from the government of Russia, Shyam Sistema will work out on shareholding structure and then get listed on Indian stock exchange.

“We cannot give any time line for IPO. After getting investment money in our account, we will work on shareholding structure of the company,” said Rozanov.

He added that amount that company will raise has not yet been decided but will depend on market condition at the time of IPO.

MTS said that it will roll out services in four more circles by December against a promise of 11 earlier !!

MTS, the CDMA mobile services brand of Sistema Shyam Teleservices (SSTL), said that it will roll out services in four more circles by December.  Speaking to Telecom Yatra on the sidelines of a press conference, T Narasimhan, deputy chief executive officer, SSTL, said, "We will be launching our services in four circles by the end of this calendar year. The first launch will be in Andhra Pradesh in the second quarter, followed by Uttar Pradesh (West), Uttar Pradesh (East) and Gujarat. The company has completed one year since its launch in India, and to celebrate this, will offer free local and STD calls as well as free downloads through its Mblaze USB broadband service to, its subscribers today.  Vsevolod Rozanov, president and chief executive officer, SSTL, said that the company will have four million subscribers by the end of the month and has been adding about 1.5 million subscribers every month. He said the company's current average revenue per user (ARPU) is about Rs 100, and it is most successful in the Karnataka and West Bengal circles. It hopes to break even by the end of 2012.  MTS also said it is planning to double the number of exclusive outlets to more than 200 in Delhi and NCR. Rozanov made it clear that the company has no plans to foray into GSM services and is totally committed to CDMA.  The company has also announced a tie up with over 200 operators across 90 countries to offer international messaging services. These tie-ups will enable MTS to offer its services in Australia, Brazil, Canada, Egypt, Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Russian Federation, Saudi Arabia, South Africa, Singapore, UAE, United Kingdom, and USA.  MTS India has over three million subscribers and was launched in March 2009.

It’s very difficult to stay rational in this kind of turmoil that we have seen in the market.: Rozanov

Sistema Shyam Teleservices Ltd (SSTL), the JV between Russia’s Sistema and Shyam Teleservices, just completed a year in India. It believes in reasonable, organic growth, but isn’t “allergic” to consolidation, Vsevolod Rozanov, president and CEO, told DNA in an interview. Excerpts:

How has the year been?
It was extremely exciting. I don’t think anywhere else in the world such opportunity exists like it does in India. The competitive atmosphere in this country makes everyone run. It was a very rewarding experience. We were the first Russian company in the consumer business segment to dare to go out. India is one of the most Russia-friendly markets.Another important thing is India was a fantastic place to be in at the time of global meltdown.
Would you like to change any of your strategies, now that you have experienced the Indian market for one year?
We already changed our strategy last year. Initially, we were focused on pure mass market play with very simple tariff plans. We realised that it was hard to get even with the scale. We changed the strategy, and started focusing additionally on data. Without the data offering, it was hard to justify the cost with the current level of arpu (average revenue per user). So, I feel data is the future for us and for all markets.
Do you see consolidation in the telecom landscape of India? And in such a scenario, could you become a target for consolidation?
It’s the position of the regulator that will be the key driver for consolidation. If there is any consolidation, I clearly see that we could be a target. But, MTS (the brand used by SSTL) is a very long-term player in India.
Sistema was trying to enter the Indian market for six years. The first discussions happened in January 2003… Therefore, we are not here to be a target. Our position is very simple —- we believe in reasonable, standalone organic growth. But if somebody approaches us, we will of course consider. MTS (the telecom arm of the Sistema group in Russia) itself is a creation of a merger and acquisition (M&A). So, there is no allergy to it or anything… But, as of now, we are perfectly fine, working as we do now.
Are you confident of meeting SSTL’s target of pan-India operations by the end of 2010?
Whatever we were planning to do, we will do. Since we are focused on data, the key target for us is to double the number of mobile broadband cities.
But, are you planning to be commercially active across all 22 circles in the country by the end of this year?
This is not sacrosanct for me.
Do you have any subscriber target in mind for the company?
Not in mind, and not in the Budget. The key target that I have in mind, which I cannot announce to you, is the financial and the shareholder interest. That I think is quite reasonable, otherwise it’s very difficult to stay rational in this kind of turmoil that we have seen in the market.
What has been the biggest challenge for you in the Indian market?
There are two challenges. One is the ability to differentiate among so many players; second and more important is execution.
Do you think third generation (3G) telecom services will be successful in India?
Yes, I think it would be successful. There are some fundamental reasons to believe that mobile broadband could be successful in India. You can already get 3G like experience from us and other CDMA (code division multiple access) players.
Your company could have applied for participating in the broadband wireless access (BWA) auction slated for April. Why didn’t you?
Yes, we thought of that. But since we are already offering very reasonable speed, and going forward we hope that the regulator would come up with norms on 3G and 4G for CDMA players, we stayed out. We are in discussion, through CDMA association Auspi, with the regulator on this.
What does the proposed deal between Bharti and Zain indicate for the Indian telecom market?
I don’t know how much it will help the Indian market. But, the magnitude of this deal shows that Indian telecom operators are becoming global players. It shows the level of development of the industry.

IPO NOT THIS YEAR...!!!! SHAREHOLDERS A JOKE FOR THIS COMPANY !

Sistema Shyam expects 10 mn user base by December

Bombay News.Net
Thursday 25th March, 2010 (IANS)

Sistema Shyam TeleServices (SSTL), a joint venture between Russian conglomerate Sistema and India's Shyam group, expects the user base of its MTS brand to reach 10 million with the launch of services in 11 new circles by the year-end.

'Right now, we are operating in 11 circles and we hope for pan-India expansion by this year-end,' company president and CEO Vsevolod Rozanov told reporters here Thursday.

SSTL, which is completing a year in India, has licences to launch mobile services in all the 22 circles across the country. Its subscriber base now stands at four million.

'We are planning to launch the services in all the 22 circles, double from present 11. We are also expecting the subscriber number to be more than double by year-end,' he said.

MTS services will available by June in Andhra Pradesh. 'In other circles, we will roll out services in the third and fourth quarters of the year,' Rozanov added.

The telecom company is present in CDMA space and has no plans to enter the GSM market. But it is planning to expand its broadband wireless services in 100 cities across India by the year-end from present 48.

Recently, on his visit to India, Russian Prime Minister Vladimir Putin had said his country will provide financial aid worth $676 million to help SSTL expand.

'We hope to receive the $676 million aid between July and September after regulatory clearances. We will use part of the amount this year for India expansion and the remaining next year,' Rozanov said.

To fund its expansion, the company is also planning to hit the capital market.

'The IPO launch is likely to happen next year. By this year-end, we will file the draft red herring prospectus with securities and exchange board of India,' he said.

The company expects to receive a $100 million loan from an Indian bank by next week.

Sistema is the majority shareholder in SSTL with a 73.71 percent equity stake.

HT MINT writes about SSTL shareholders grievance....Kindly register yourself at the earliest if not done so already.

Russia will pay premium for 20% stake; minority shareholders want chance to stay, or exit at a higher price

Kolkata: Minority shareholders in mobile phone operator Sistema Shyam TeleServices Ltd (SSTL) are protesting against founder Shyam Group being allowed to buy new shares at face value while the Russian government will pay a premium for a 20% stake.

The firm plans to issue 220 million new shares to the Indian promoters Shyam Group at Rs10 apiece, and 660 million shares, amounting to a 20% stake, to the Russian government at Rs49.31 a share for a total $676 million (Rs3,130 crore).

Small stakeholders represented by the Association of Minority Shareholders of Sistema Shyam TeleServices Ltd, or Amsost, said SSTL should either issue new stock to them at Rs10 apiece to make sure that their ownership did not get diluted, or create an exit opportunity by arranging a sale of shares to the Russian government at the higher price. Some 17,000 shareholders collectively own around 60 million shares, or a 2.5% stake, in SSTL.

The association was formed for “the protection of their interests”, according to Narendra Gupta, who owns 500,000 shares in SSTL and is one of the group’s co-founders. Amsost refused to disclose its membership strength.

SSTL, which owns spectrum in all 22 circles in India and offers services under the MTS brand, is controlled by Russian conglomerate Joint Stock Financial Corp. Sistema, which currently holds 73.7% of the unlisted firm, while Shyam Group owns around 23.8%.

If the preferential allotment of shares to Shyam Group and the Russian government goes through, Sistema’s stake in SSTL would be pared to around 54%, according to the firm’s president and chief executive officer Vsevolod Rozanov. SSTL obtained shareholder approval for the share sale at an extraordinary general meeting held in December.

“Most of us became shareholders of Sistema Shyam by compulsion and not by choice,” said Gupta. He was referring to the restructuring of the erstwhile Shyam Telecom Ltd, which resulted in the formation of an unlisted company. “We have been waiting for an exit opportunity for a long time now,” Gupta said, adding that Amsost is weighing legal options.

SSTL said in an emailed statement that the allotment of shares to Shyam Group was done to expedite the Russian government’s investment in the company.

“The fresh equity allotment is to facilitate the investment of the Russian Federation…and (to) speed up the network roll-out obligations in all the 22 circles in India,” a spokesperson for SSTL said, referring to the cap on foreign direct investment in mobile phone operators in India at 74%. “This is in the best interest of (all) shareholders and a large chunk of minority shareholders are supporting us on the issue.”

MTS currently offers mobile telephony services in 11 circles, and has 3.2 million subscribers. It is adding 400,000-450,000 new subscribers every month, according to Rozanov.

The money that Moscow is considering investing in SSTL is parked with the Reserve Bank of India under an agreement between Russia and India. This amount can only be invested in Indian projects, according to Rozanov. The Russian government hasn’t, however, taken a final decision on investing in SSTL’s shares.

Rozanov said “only about 10%” of the 17,000 shareholders were protesting against the firm’s decision to allot shares to Shyam Group at par. “Though it is an issue to be resolved between groups of shareholders, I appreciate the concern of the minority shareholders and meet them every quarter to provide updates on our performance and plans,” he said.

Four years ago, Shyam Telecom, a listed firm, was carved up to form Shyam Telelink Ltd. Shareholders received 794 shares of Shyam Telelink and 35 shares of Shyam Telecom for every 100 held. Over 2007 and 2008, a 73.7% stake in Shyam Telelink was sold to Sistema in phases, following which the firm was renamed SSTL.

Under new corporate laws, which are currently being drafted, minority shareholders such as those of SSTL would have greater power over protecting their interests, according to Salman Khursheed, Union minister for corporate affairs.

“While empowering these people, we have to strike a balance to make sure that they did not obstruct every decision taken by a company and deter its growth,” he added. The minister was speaking in general and not about SSTL in particular.

SSTL hasn’t decided on its listing as mandated by the Jaipur high court in August 2008, when it ordered the company to prepare for an initial public offering by February 2010, following a suit filed by some shareholders.

“We will definitely abide by the court order…an exit opportunity will surely be given to the minority shareholders,” Rozanov said. “But the market conditions aren’t suitable yet for us to list our shares immediately.” SSTL, he added, would be recovering operating costs, or become “Ebitda positive”, in three years. Ebitda stands for earnings before interest, taxes, depreciation and amortization and is a reflection of profitability.

Minority shareholders aren’t convinced. “We haven’t received any commitment on listing till now,” said Gupta. “I don’t think it will happen even in a year.”

An independent telecom analyst, who did not want to be named, said SSTL is waiting to see how the entry of Abu Dhabi-based telecom company Etisalat affects the mobile telephony business in India.

“It is the only key player that in the foreseeable future could adopt disruptive tactics to enter India,” he said. “If it does so, it could change the dynamics of the business in the same way as the new entrants did by cutting call charges. Any operator looking to go public will surely wait till Etisalat has announced its plans for India.”

The dispute over allotment of shares in SSTL recalls a similar dispute between minority shareholders and the promoters of the erstwhile DLF Universal Ltd (now called DLF Ltd) over allotment of convertible debentures.

The debentures were converted into some 400 equity shares each, thanks to a share split and a 7:1 bonus issue. The Union government and market regulator Securities and Exchange Board of India eventually intervened and forced DLF to compensate minority shareholders who were not allotted the debentures.