Sistema to finalise stake sale to Russian govt by year-end

Sistema Shyam Teleservices Ltd (SSTL), a joint venture between Russia’s Sistema and Shyam Group of India, has initiated the process to offload around 20% stake to the Russian government through a fresh issue of equity.

Vsevolod Rozanov, president and chief executive officer of SSTL, said a decision on this would be taken before the end of this year.

“We are going through the process but key documents have not yet been signed. The decision (on the stake sale) would be made before the end of this year,” he said.

Currently, Sistema, which is owned by the Russian government, is the majority stakeholder in domestic mobile services provider with 73.71% while Shyam Group holds 23.79% and the rest 2.5% is held by the public.

Under Indian foreign direct investment norm, there is a cap on investments of foreign investors in a telecom venture at 74%.

Rozanov said the Russian government will be utilising part of the rupee-rouble trade reserve balance of $2 billion in the Reserve Bank of India for procuring SSTL shares.
It is estimated that Sistema will have to spend around $600-700 million to pick up the 20% stake.

Rozanov said that the company was planning to roll out its mobile telephone services in all the circles by 2010 and expects to grow subscriber base at the rate of 5 lakh to one million every month.

SSTL’s current subscriber base is 2.3 million, which pegs its market share at 0.5% in the total 400 million subscriber domestic market.

“We will break even once we have subscriber base of 30 million and we should hit that mark in three years,” he said.

The company, which launched its services in Karnataka on Thursday, will focus on data services for better revenue generation in an intensely competitive market.

“With data services, our revenue per subscriber per month will be better than what we can earn from voice service,” a senior executive of the company said.

SSTL’s launch of data services, which was to begin from New Delhi, has already been delayed. The company is now planning to kick-start data service from Bangalore next week.

“Delhi is not yet ready for the data service. Since there is a better understanding of data services in Bangalore, we will launch the service from here,” the company executive said.
SSTL is currently present in seven telecom circles — Delhi, Rajasthan, Tamil Nadu, Kerala, West Bengal, Bihar and Kolkata. It has spectrum to provide services in all 22 circles.