Russia’s Sistema increases its share capital in its India unit Sistema Shyam TeleServices Ltd

Sistema, the largest diversified public financial corporation in Russia and the CIS, Friday announced an increase in the share capital of Sistema Shyam TeleServices Ltd (SSTL). Sistema Shyam TeleServices is Sistema's subsidiary in India that provides telecommunications services under the MTS brand. The capital stake increase was by means of an additional Sistema share issue.

Sistema said SSTL increased its share capital by 28,894.5 million rupees, around US$ 647 million. The move follows the placement of additional shares with the Russian government and investors in India. The Russian government was represented by the Federal Agency for State Property Management and acquired a 17.14% stake in SSTL for 26,988 million rupees, around US$ 600 million.

The Russian Federation's portion of the transaction was financed with funds held in Indian rupees, which represented Indian government debt to the Russian Federation. Post the transaction, Sistema's stake in SSTL amounts to 56.68%, while Indian investors own 26.05%.

Under the agreement between the Russian Federal Agency for State Property Management and Sistema, the Russian state agency retains a put option to sell its stake in SSTL to Sistema during a one year period beginning five years after the purchase of shares in SSTL. However, Sistema has an obligation to purchase SSTL shares from the Russian government for the higher of US$ 777 million or market value determined by an independent valuator.

Under the terms of the agreement, until the put has been exercised or expires, Sistema has agreed not to reduce its stake in MTS below 50%+1 share, said the announcement. SSTL plans to use the proceeds from the secondary offering to further strengthen its position in the mobile broadband market, to expand its mono-brand retail network in existing telecommunications circles, and to launch services in new circles.

Sistema is the largest diversified public financial corporation in Russia and the CIS. The firm invests in and is a major shareholder of companies serving over 100 million customers in the sectors of telecommunications, high technology, oil and energy, radars and aerospace, banking, retail, mass-media, tourism and healthcare services.
Sistema reported revenues of US$ 7.3 billion for the third quarter of 2010, and total assets of US$ 42.0 billion as at September 30, 2010.

Sistema Shyam TeleServices Ltd 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.

3rd April 2011