For the first time, a Russian company has entered the Indian telecom market. Sistema, the largest private sector consumer services group in Russia, on Wednesday announced its acquisition of a 10 per cent stake in Shyam Telelink, a code division multiple access (CDMA) and basic phone player in India.
Sistema, which is both into global systems for mobile communications (GSM) and CDMA, acquired the stake for a cash consideration of $11.4 million.
The Russian company reported revenues of $2.7 billion for the first quarter of 2007 and had total assets of $21.6 billion, as on March 2007.
According to press statements issued by Sistema and Shyam Telelink, Sistema wants to increase its stake to 51 per cent after receiving Foreign Investment Promotion Board (FIPB) approval.
“The overall value of the deal may touch $58.1 million at that point,” the Sistema statement added.
It is believed that the Russian company may further increase its stake to 74 per cent subsequently. At present, FDI is capped at 74 per cent in the telecom sector.
Shyam Telelink, which operates only in the Rajasthan circle and has a subscriber base of 2.57 lakh, has applied for unified access service (UAS) licences across the country.
According to analysts, Shyam Telelink's application for pan-India operations would push up its valuation to around Rs 1,000 crore-Rs 1,200 crore.
Sistema has tried to enter the Indian telecom market earlier also.
It was believed to be in talks to acquire AT&T's stake in Idea Cellular some time back. Also, Sistema was one of the many names doing the rounds when Hutch was selling its stake in its India operation, Hutch Essar.
Some of the other foreign players in the Indian telecom market are Vodafone, SingTel, Telekom Malaysia and Maxis.
An analyst pointed out that the deal size may not be too big in this case but Sistema's entry is another signal that the Indian telecom sector is booming.
As of end of August, India had over 200 million mobile subscribers, and more than 241 million telecom users (mobile and fixed).
Sistema chief executive Alexander Goncharuk's comments reiterate the bullish sentiment about India's telecom sector.
According to Goncharuk, “The acquisition of the stake in Shyam Telelink is in line with our strategy to rapidly enter developing markets and further integrate Sistema in the global business community.”
He added: “We consider India as one of the most attractive markets with a high growth potential. We are pleased to be the first Russian company to enter the Indian telecom sector.”
The Shyam Telecom group had, around four years ago, sold its GSM operation Oasis in Rajasthan to Bharti.
“The induction of Sistema in Shyam Telelink ushers a new era in Indo-Russian relationship as this is the first commercial venture between an Indian telecom service provider and a Russian private sector company,” Shyam Telelink chairman Rajiv Mehrotra said.
Shyam Telelink, which had demerged from parent Shyam Telecom group recently, has been operating CDMA and fixed phone services since then.
Besides Shyam Telelink, some others like DLF and India Bulls also applied to the Department of Telecommunications (DoT) for pan-India licences on Wednesday.
With this, the queue for UAS licences has got even longer, with the number of applications crossing the 200 mark.
Some unknown companies are also in queue for telecom licences. They include S Tel, Swan, Cheetah, Datacom Solutions, Alliance Infratech, Parsvanath and Unitech.
Companies have just two more working days to apply for telecom licences. Recently, the DoT announced a cut-off date of October 1 for receiving applications for telecom licences.
The government reasoned that the cut-off date is to screen non-serious applicants, especially as there's a spectrum crunch in the country.
Significantly, the telecom regulator had recommended that there should be no cap on the number of operators in the telecom sector, as competition cannot be curbed.
Source: Sify