Vladimir Evtushenkov co-founded Sistema in 1993 and, over the last two decades, the company has become a $34-billion conglomerate with diversified interests in sectors including telecommunications, oil and energy, banking and healthcare services.
In India, the Russian major has invested over $3.5 billion in the mobile services venture Sistema Shyam, which offers services under the MTS brand.
The venture hit a rough patch after its licences were scrapped by the Supreme Court ruling in the 2G spectrum case.
Though the company decided to stay invested in India and won back some spectrum through an auction process, regulatory uncertainties have come in the way of Sistema Shyam’s plans to grow faster.
Replying to BusinessLine’s queries by e-mail, Evtushenkov, Chairman of Sistema JSFC, voiced his concerns.
How significant is the India investment for Sistema’s global operations? Has the India business performed satisfactorily till now?
Sistema Shyam TeleServices is one of Sistema’s largest investments. We have brought over $3.5 billion into India’s telecom sector with a firm belief in its future and continue to see solid growth prospects. Since our investment, SSTL has grown to 10+ million customers.
At times it’s been a challenging experience, given the hypercompetitive industry and changes in judiciary and regulatory environment. However with the coming in of the new Indian government, we definitely see a renewed effort to reinvigorate the sector.
Realistic and sensible pricing of all spectrum bands including 800 MHz and an industry-friendly M&A policy, together with absence of artificial limits for FDI in the sector, are all important pillars which the Government should consider in order to return the telecom industry to its growth path.
Has the overall investment sentiment associated with India improved with the new Government taking over?
No doubt, with the coming in of the new Indian government, under the leadership of Prime Minister Modi, international investors including Sistema see increasing possibilities, both in telecom and beyond.
For example, the Indian Prime Minister has talked about creation of 100 smart cities in India. This is a fantastic vision; now the challenge is to put execution milestones to this vision.
Our group has enormous experience in providing the most modern technology solutions, having built subsystems for a number of Smart Cities, including Moscow, and large regional centres such as Rostov, Ufa, Makhachkala, Smolensk, Bryansk, Tula and Penza.
Looking ahead, I would say that besides the historic Defence-related trade between India and Russia, it is private business investments that need encouragement. Both India and Russia have set a bilateral trade target of $20 billion by 2015. This means economic activity between the countries needs to be significantly scaled up. While this is certainly doable, a greater focus and effort needs to be put in place with the participation of the business communities of both countries.
How do you see the M&A scenario in India and will Sistema look at inorganic growth in the country?
No doubt, there is certainly more clarity on the M&A rules for telecom companies in India; however, the most significant question which needs to be asked is: Are the M&A guidelines industry-friendly and in line with global practices to encourage consolidation?
I believe, more work needs to be done in this regard. Looking at global examples, real consolidation in a telecom market happens not when smaller operators merge but when relatively large telecom operators merge or buy out rivals. It seems that the M&A policy has been combined with liberalisation of spectrum policy. As per the new telecom policy, services are separated from spectrum.
If the merged telecom service provider still wants to continue with the same service offering as was being done before the merger, there is no case for an additional charge. However, if it wants to offer liberalised services, then there is a case for additional payment. All such issues need to be addressed.
What are the big challenges you see in the telecom space, in general?
Taking a macro view, nursing India’s telecom industry back to health should be a priority for all stakeholders. Given the infrastructure nature of telecom business, the rules of the game have to be clearly outlined for the next 20 years in telecom, and the goal-post should not be changed midway.
The rules also need to be made in a manner that facilitates consolidation and growth of the telecom sector. As a global investor, Sistema JSFC wants to support and be an integral part of the India growth story, both in telecom and beyond.