Russian Government Investing in Indian Mobile Operator

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The Russian government is planning to invest in an Indian mobile services joint venture in which Sistema, a Russian company, holds a majority share of 74 percent, according to the company.

The funds raised from the investment, close to US$700 million, will help Sistema Shyam TeleServices Limited (SSTL) invest in expanding its network and its marketing, a spokesman for Sistema said on Friday. SSTL is a joint venture between Sistema and India's Shyam Group which holds a 23.5 percent stake in the company.

The Russian government will own about 20 percent of the company when the investment is completed.

SSTL has licenses and spectrum to provide mobile telephony services using CDMA (code division multiple access) technology in all 22 service areas of the country, covering 28 states. It has about 2.8 million subscribers across the country.

Sistema is a financial company and a major shareholder of 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 hopes to conclude the new investments by the end of December, the spokesman said.

India's mobile market has become very competitive with 12 operators vying for market share. The market is already saturated and new entrants will not find it easy to make a significant impact on the market, analysts said.

Deep cuts in tariffs by some established operators are putting pressure on new operators, who are increasingly relying on outsourcing some of their IT and network requirements like call centers and communications towers. For example, Etisalat, which plans to roll out services in India, has outsourced its passive telecommunications infrastructure requirements to Reliance Infratel.

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