Russian CDMA biggie Sistema likely to hike stake in Sistema Shyam TeleServices

KOLKATA: Russia's Sistema may soon increase its stake in its Indian mobile JV, Sistema Shyam TeleServices Ltd (SSTL), to meet a portion of the company’s financing requirement in calendar 2012, a top executive with direct knowledge of the development said. With SSTL’s promoters — the Russian government, Sistema and India’s Shyam Group — deferring the company’s listing plans amid adverse market conditions induced by the 2G scam, Sistema as principal stakeholder may play a lead role in thrashing out an alternate financing plan. At present, Sistema owns 56.68% of SSTL. The Russian government and the Shyam Group hold 17.14% and 23.98%, respectively while a clutch of minority shareholders own the residual 2.2% in the company.

“With the IPO on hold, Sistema increasing its stake in SSTL is a possibility to arrange the next round of funding. But that could change if the promoters go for a mix of debt and equity. A final decision will be taken by October after factoring in both the opex and capex requirements,” SSTL president & CEO Vsevolod Rozanov told ET.
But indications are SSTL’s funds requirement for Year 2012 will be well below the $600 million raised for calendar 2011, since the company’s revenues from both voice and non-voice are in step with internal targets. “Delivering quality CDMA-based voice and data-centric wireless broadband services with a paltry 2.5 MHz of spectrum is a challenge. Our shareholders keep asking us about future technology strategy in the event the spectrum crunch continues. There are no easy answers and these are issues that will influence the financing plan. But for the moment, SSTL’s revenues are growing, especially our dongles business which accounts for 15% of quarterly revenues,” said Rozanov.

Today, 28% of SSTL’s revenue emanates from the non-voice space and that is expected to grow to 30% shortly.
Technology strategy may well hold the key in so far as the financing plan goes. For instance, SSTL is yet to take a final call on whether it will nationally upgrade its CDMA networks to the EVDO-Rev. B level, which is known to offer faster data speeds and better spectrum utilisation. So far, it has embraced the technology only in Rajasthan.

At present, SSTL runs CDMA mobile services in 20 circles under the MTS brand banner, with the exception of
J&K and Northeast. It has 12 million subscribers (including 0.8 million data customers). Till date, SSTL has
invested over $3 billion in network rollouts across its 20-circle footprint.