Russian telecom operator Sistema JSFC has sought government approval to raise its stake up to 100% in its Indian unit Sistema Shyam Teleservices, becoming the second telco after UK’s Vodafone to move towards fully-owning its local venture.
Sistema JSFC, together with the Russian federation, holds about 74% in the Indian subsidiary, and the proposal, once approved, will pave the way for the Russians to buy out Indian partner Shyam Telecom, which holds the balance stake. In its application to the foreign investment promotion board (FIPB), Sistema has sought approval that it be allowed to increase foreign equity beyond 74%, though it hasn’t specified the exact amount of equity investment it proposes to bring or the methodology.
Sistema’s proposal to raise stake comes as a shot in the arm for India’s telecom sector, which was once the beacon of the country’s economic growth, but has fallen on hard times, thanks to intense competition and regulatory uncertainty. Recently, Japan’s NTT DoCoMo decided to exit the country by selling its stake in local JV Tata Teleservices as the loss-making Indian venture could not meet performance parameters.
Still, many feel that the worst is over for the sector with many of the regulatory issues being sorted out, pricing power returning to the telcos, and data being looked upon as the next growth driver – a segment which Sistema Shyam is focused on. Vodafone also bet on these factors while deciding to raise stake in Vodafone India to a 100%. In March, Telenor’s Asia head Sigve Brekke had also said that the Norwegian telco is considering increasing promoter stake to 100% in its Indian unit Uninor.Sistema entered India in 2007 during the sector’s glory days by buying a 10% stake in an Indian entity. In 2008, the JV was awarded licences and spectrum to offer telecom services in all of India’s 22 circles using the CDMA technology, and Sistema gradually raised its stake in the JV. Regulatory uncertainty then took over, and the mode of the 2008 bandwidth allotment came under scrutiny, resulting in the Supreme Court cancelling all but one of Sistema Shyam’s licences, along with many of other telcos.
Sistema JSFC, together with the Russian federation, holds about 74% in the Indian subsidiary, and the proposal, once approved, will pave the way for the Russians to buy out Indian partner Shyam Telecom, which holds the balance stake. In its application to the foreign investment promotion board (FIPB), Sistema has sought approval that it be allowed to increase foreign equity beyond 74%, though it hasn’t specified the exact amount of equity investment it proposes to bring or the methodology.
Sistema’s proposal to raise stake comes as a shot in the arm for India’s telecom sector, which was once the beacon of the country’s economic growth, but has fallen on hard times, thanks to intense competition and regulatory uncertainty. Recently, Japan’s NTT DoCoMo decided to exit the country by selling its stake in local JV Tata Teleservices as the loss-making Indian venture could not meet performance parameters.
Still, many feel that the worst is over for the sector with many of the regulatory issues being sorted out, pricing power returning to the telcos, and data being looked upon as the next growth driver – a segment which Sistema Shyam is focused on. Vodafone also bet on these factors while deciding to raise stake in Vodafone India to a 100%. In March, Telenor’s Asia head Sigve Brekke had also said that the Norwegian telco is considering increasing promoter stake to 100% in its Indian unit Uninor.Sistema entered India in 2007 during the sector’s glory days by buying a 10% stake in an Indian entity. In 2008, the JV was awarded licences and spectrum to offer telecom services in all of India’s 22 circles using the CDMA technology, and Sistema gradually raised its stake in the JV. Regulatory uncertainty then took over, and the mode of the 2008 bandwidth allotment came under scrutiny, resulting in the Supreme Court cancelling all but one of Sistema Shyam’s licences, along with many of other telcos.
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