Smart phones and modems spur growth

Sistema Shyam will most likely enter the stock market only after the Russian government becomes a shareholder. Russia is gearing up to invest around 676m dollars in the Indian company. The shares purchase will be financed by India’s so called rupee debt left from way back during the Soviet era. Russia estimates a total of 1 billion dollars will go into investments and financing mutual trade relations as part of India’s debt to the Kremlin. Both sides agreed to use this money for Russia’s purchasing of Indian goods and for financing Russian companies’ or the government’s shares in joint projects with India. Russia’s share in Sistema Shyam’s capital could be around 20%.

Plus, word broke that the Indian mobile operator intends to take out a 280m dollar loan from the State Bank of India. Tibor Bokor, an analyst at Financial Corporation Otkritie, points out that Shyam’s operations require around 50m dollars a month. He explains: “This loan will help the company keep afloat until a deal is struck to sell roughly 20% of its shares to the Russian government.” Vsevolod Rozanov, Sistema Shyam TeleServices (SSTL) president, stated earlier that the Kremlin could make a deal with the Indian company to purchase a share of its capital in the coming three to four weeks.

Mr Rozanov sat down in an interview with RIBR to talk about the Indian mobile service market’s prospects.

How do you see the prospects for a Russian telecommunications project in India?

The prospects are pretty big, considering that 3G is unlikely to hit the Indian market any earlier than the end of 2010 or beginning of 2011. Landline service in the country, while available in key cities, is very limited. You have a lot of demand outside of these cities since modern services and speed are already in demand, but only mobile operators are up to the task in providing it.

Why?

Landline infrastructure is very difficult to install. India has only three mobile operators working in CDMA that can offer broadband mobile internet access.

What does the broadband access market look like between the three companies?

- Reliance and Tata own roughly an 85% share of the market between them, while we have 15%. Our market share is growing every month because we just recently initiated a new project.

Will 4G come to India?

Yes, I think so, but that’s while keeping in mind that 3G is only now starting to make headway here. We are having certain problems in getting across to the consumer the value of having high-speed internet access. My subscribers still use their phones for checking their email, and you do not exactly need high-band speeds for that.
4G, of course, will come around eventually; the government has already started discussing possible auctions for this, but this is still 2 to 3 years down the road. Plus, Scandinavia is the only place so far to have 4G available commercially.

Why is demand for 3G or CDMA services so low?

In a country of more than a billion people, only 28 million of them have internet access, which pretty much sums up the answer to your question. The market, however, is consistently growing, and we expect growth rate to increase significantly.

Is this because Indians are becoming more and more well off?

You are partly right. The prerequisites for market growth, those being people’s lives becoming better and competition being on the rise, are solidifying more and more. This altogether has a double effect that lets all the more people use the internet. We still do, however, depend on the number of computers. Equipment prices are falling, giving a huge opportunity for mobile operators.
Smart phones and modems are two important segments for us, although between the two smart phones give us more reason to be optimistic. For instance, we recently launched television capabilities for our smart phones, something that GSM operators are unable to provide. This will give us a certain competitive leg up in the coming six to 12 months.

What product trends will dominate the scene in the near future?

Prices on voice services are falling, making them now some of the least expensive in the world, and I think that trend is going to continue. As for data transfer, the number of smart phones and additional services will make a huge leap forward. All mobile operators are going to see a big boost in demand, and, hopefully, including us, since we have our brand clearly positioned as one for data transfers. I believe that these two areas will, first and foremost, determine the industry’s growth trends in the coming six months.

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