Sistema dials for pan-India telecom play

Will enter into alliance with a regional player; has already announced $1 bn for India

MOSCOW: Russia’s Sistema plans to create a pan-Indian telecoms operator as it targets the world’s fastest-growing mobile market, and may expand into Africa, Sistema president Alexander Goncharuk said.

“We want to build a pan-Indian operator that would be ranked among the market’s leaders,” Goncharuk said.

“We have ambition and resources, as we are acting together with a local partner which invests in it pro rata.”

In September, Sistema bought 10% in domestic telecoms operator Shyam Telelink Ltd and signed an agreement in October to buy a further 41%. It also has a call option for another 23%.

“We will raise (our stake) to 51% as soon as we can, I think before the end of the year,” Goncharuk said.

The overall purchase price of the 51% stake will be $58.1 million, of which Sistema has already paid $11.4 million for the 10%. Goncharuk said Shyam Telelink, which currently provides CDMA cellular services in Rajasthan, had placed bids for licences to operate in 21 of the country’s 28 states.

Shyam, which also has a GSM licence in Rajasthan and owns local Internet provider Shyam Internet, is among the smallest in terms of subscribers but represents an entry ticket into a vast market.

“This company is a base on which we will develop the operator together with the domestic partners. The main question mark now is what decision will the authorities make,” said Goncharuk.

There are about 217 million mobile users in India and service providers have been signing up more than eight million new subscribers each month on the back of a booming economy, low call tariffs and falling handset prices.

The potential for growth is huge as only about a fifth of the country’s more than 1.1 billion people have access to a mobile phone, while Russia’s mobile market is close to saturation.

“India, in my opinion, offers just fantastic rates of growth and development,” Goncharuk said.

“We have already trained on the domestic market, so now it is time to compete at international level.”

Goncharuk has said that Sistema plans to invest up to $1 billion on expansion in India, including $500 million to buy CDMA licences and $500 million on rolling out networks.

“We are opening a representative office in India because we are confident that we will not only enter the domestic mobile service market,” he said, referring to Sistema’s diversified portfolio.

Sistema, majority owned by billionaire Vladimir Yevtushenkov, is the country’s leading services conglomerate with a market capitalisation of around $15 billion. 

Its business portfolio includes telecoms, real estate, oil, retail, banking, healthcare and media assets which generated $5.9 billion in sales in the first half of this year.   

“I am sure that our developer Sistema-Hals will operate there, because our experience of bridge, road and tunnel construction is definitely wanted there,” said Goncharuk.

“This is in line with our common strategy: if we develop any business outside Moscow, it is joined by other units,” he said, adding that next year would be the right time to move.

Goncharuk said Sistema was studying possibilities to enter African markets, but declined to name the countries.

“We are deciding where to start. It will be definitely to the north of South Africa. In central Africa, there are several countries with quite a large population we are looking at,” he said.

He also said Sistema would first push telecoms to the market. “This is our strongest sector, the most developed and organised. The others will catch up.”   

Sistema’s main asset, Russia’s top mobile phone firm Mobile TeleSystems (MTS), services around 80 million clients in Russia, Armenia, Belarus, Ukraine, Uzbekistan and Turkmenistan.