21 Dec 2010 12:34

Russia pays $600 mln for 17% stake in Sistema Shyam

MOSCOW. Dec 21 (Interfax) - The Russian government has now paid $600 million in rupees for a 17% stake in Sistema Shyam TeleServices Limited (SSTL), the Sistema holding's India-based subsidiary, Sistema said in a statement.

Sistema and the Russian Federal Property Agency (Rosimuschestvo) will not own more than 74% of SSTL following a supplementary share issue.

The final details regarding the government's buy-in will be made public once the share issue has been conducted.

SSTL expects to issue the shares to Rosimushchestvo during Q1 2011, subject to the successful completion of a rights issue to SSTL's Indian shareholders and compliance with all applicable Indian regulatory requirements.

SSTL plans to use the funds to finance the continued development of the company, and in particular to strengthen its leading position in wireless broadband). The funds will also be used to expand the branded retail network in its current telecommunication circles and to accelerate the launch of operations in a number of new circles.

Russian Prime Minister Vladimir Putin in September ordered that government agencies spend the equivalent of $600 million acquiring a stake in SSTL. Rosimuschestvo was told to subscribe to an additional share issue by SSTL at not more than 49.31 rupees per share. The Finance Ministry and the Property Agency had until December 31, 2010 to pay for the shares.

The Shyam group will also subscribe to new shares on a pro-rata basis but at par value of 10 rupees per share. This will dilute Sistema's stake in SSTL to 56.6% from 73.7%.

The terms for the government to buy into SSTL will be set down in a special agreement between Sistema and the Russian Federal Property Agency. Reports have said the state will get an option to sell its stake in SSTL after five years of investment. Sistema would have to buy the shares back at a premium over the initial transaction price after repaying the debt in dollars.

Russia is paying for the stake in SSTL not for cash but in lieu of India's debt, in rupees. Russia spent much of last year preparing to buy the stake, but did not close the deal in the end. The 2010 budget did not originally contain the funds, and these had to be carried over. The relevant amendments to this year's budget have been approved and endorsed by the president.

Sistema bought 10% of Shyam in September 2007, and increased its stake to 51% in January and 73.7% in June 2008.

SSTL, established in 1998, launched its full operations in the State of Rajasthan in 2000. The company received the pan-Indian license for mobile network operations in March 2008, and presently owns right to use frequencies for provision of mobile telephony services in 22 circles across the country. The company provides telecommunication services to more than 8 million subscribers in 13 circles: Rajasthan, Tamil Nadu (and Chennai), Kerala, Kolkata, West Bengal and Sikkim, Bihar (and Jharkhand), Delhi, Karnataka, Mumbai, Haryana, Maharashtra, Andhra Pradesh and Gujarat. The company provides mobile broadband services under MBlaze brand to more than 400,000 people in 84 cities in India.