BANGALORE, 9 SEPTEMBER 2010 - The Russian government has agreed to pick up an equity stake in an Indian mobile operator in which Sistema holds a 74 percent stake, the Russian company said on Wednesday.
Russia will invest the equivalent of US$600 million in Sistema Shyam TeleServices Limited (SSTL). The money will come in Indian rupees from funds owed by India to Russia, Sistema said.
Sistema is a shareholder in companies operating in different industries, including mobile services operator Mobile TeleSystems (MTS). SSTL has entered into an agreement with MTS to launch its Indian operations under the MTS brand.
SSTL indicated in December last year that the Russian government would be taking a 20 percent stake in the company. A decision was taken at a shareholder meeting in December to allot additional equity to both the Russian government and the Indian promoters. By this move, the foreign equity in the company would stay within the 74 percent required under Indian rules.
The additional funds from the investment by the Russian government will be used by SSTL for increasing its wireless broadband internet coverage, expansion of its branded retail network, and for the launch of operations in new service areas, Sistema said.
SSTL, which holds licenses for offering services in 22 service areas in the country, has so far rolled out services in 12 service areas.
With a subscriber base of 5.6 million, it had less than 1 percent of the 652 million mobile subscribers in India at the end of July, according to data from the Telecom Regulatory Authority of India.
A number of operators have delayed their expansion as the market has become more competitive with 14 players and tariffs have fallen. The Department of Telecommunications is working on the rules for those companies that want to surrender their licenses and get out of the business, according to reports.
The issuance of shares to the Russian government is subject to the receipt of necessary regulatory and corporate approvals, including the approval by the general meeting of shareholders of SSTL, Sistema said.
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