The Hindu Business Line : Russia's AFK Sistema in deal to buy 49 pc Aircel stake for $450 m

AFK Sistema, a Russian company, has signed a non-binding deal to acquire a 49 per cent stake in Aircel, a cellular service provider now offering services in Chennai and Tamil Nadu circles, for $450 million (about Rs 1,960 crore). The Russian company has an option to increase its stake to 51 per cent.

It may be recalled that Sterling Infotech Ltd, which owns Aircel Cellular Ltd and Aircel Ltd (the two companies providing the services in Chennai and Tamil Nadu circles), signed an agreement in June 2004 to sell the two companies to Hutchison Essar in a deal estimated to be valued at Rs 1,600 crore. Both Sterling and Hutchison expected regulatory approvals within 45 days.

However, that has not happened yet and though both companies have not officially called off the deal, Sterling Infotech says that the time period of the exclusivity agreement with Hutchison has expired.

When contacted, Mr V. Srinivasan, a Director of Aircel, said that since the expiry of the exclusivity agreement with Hutchison, Sterling Infotech had been looking for buyers. A number of companies had shown interest, of which AFK Sistema was one. He, however, would not name the other companies.

The deal with the Russian company is subject to regulatory approvals. At the time of the deal with Hutchison, Sterling Infotech officials said the money would be used to start mobile services in eight new circles for which the company had obtained licences. These were Madhya Pradesh, Uttar Pradesh East and West, Bihar, Orissa, Jammu and Kashmir, Himachal Pradesh, Assam and the North East.

It is not clear now whether the deal with the Russian company would include equity stake in the company that will operate the services in the other circles too.

According to information available on AFK Sistema's Web site, it is one of Russia's largest non-natural resources company. It possesses and manages a diversified investment portfolio that includes Mobile TeleSystems, Russia's largest mobile operator, and MGTS, Moscow's fixed line monopoly.

Besides, AFK Sistema has interests in insurance. For the first nine months of 2004, the company had revenues of $4.1 billion. It is planning an initial public offering of 79.6 million Global Depository Receipts and has applied for the GDRs to be listed on the London Stock Exchange.

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