mts-logoSistema Shyam TeleServices (MTS) is one step away from securing $676 million from the Russian Government which is buying a 20 percent stake in the joint venture. According to Business Line, the Department of Telecom (DoT) has okayed the buy and the decision is now pending with the Indian Foreign Investment Promotion Board (FIPB). The Economic Times reports that the FIPB which will consult with the Home Ministry before clearing the proposal, which will allow MTS much needed funds, in the wake of a rather muted launch in comparison with its peers. It has been eight months since news of the Russian government planning to pick up the stake first came out.

After the stake buyout, Russian partner Sistema’s stake in the JV will fall from 73.71 percent to 54 percent, the Delhi-based Shyam Telelink will continue to hold on to its 23.79 percent stake (2.5 percent is with the public). The stake acquisition is a bail out by the Russian government – Sistema has not been faring well financially and the funds were needed for MTS to roll out in India. The group witnessed a net loss of $17.6 million in the quarter ending June 2009 and of $395.5 million in the quarter ending March 2009.

Funds In, Roll Out

The JV which operates its CDMA service under the brand MTS is still on its way to a pan-India coverage, having covered only 8 of 22 circles. MTS received its licenses in January along with Unitech Wireless, Swan Telecom, S-Tel, Loop Telecom and Datacom Solutions.  It recently launched in Tamil Nadu, Delhi and Kerala and has covered Bihar-Jharkhand, Delhi, Karnataka, Kerala, Kolkata, Rajasthan, Tamil Nadu and West Bengal.

Revenues from the telco in India increased by 18.9% year on year and by 34.9% quarter on quarter. ARPU fell from $2.9 in the quarter ending March to $2.5 in the quarter ending June. The company notes this is a result of the growth in prepaid customers. Total Minutes of Use increased from 338 in the first quarter of 2009 to 402. The telco generated an operating income loss (before depreciation/amortisation) of $41.1 million due to expenses associated with the roll out of new networks.

Download: Quarterly Release

MTS now has 2.29 million mobile connections and added 335,842 new users in the month of October. MTS has also launched 3.1 Mbps EVDO services in Delhi called MBlaze. Headquartered at Gurgaon, the company hired Cheenu Seshadri as Chief Strategy Officer and Sandeep Yadav as Chief Operating Officer for Rajasthan circle operations in October. Its President & CEO is Vsevolod Rozanov; more on management on the company’s site.

Lowering Costs

In order to cut costs on roll-outs, the operator entered into two long term deals: one was a 10-year deal with BSNL to share the PSU’s existing telecom tower network and the second was a 5-year deal to share its bandwidth across all 22 circles in the country. Aircel and Datacom have also signed similar deals with BSNL.

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