A joint venture between AFK Sistema and Shyam Group of India

The Russian government has paid the rupee equivalent of $600 million for a stake of approximately 17% in telecommunications operator Sistema Shyam TeleServices Limited (SSTL), a joint venture between AFK Sistema and Shyam Group of India, Sistema said.

Following the additional share issue, the total stake in SSTL's share capital owned by Sistema and Russia's state property agency, Rosimushchestvo, will not exceed 74%, Sistema said in a statement, adding that it would ensure full compliance with all applicable Indian regulatory requirements.

After the deal, Sistema's stake is expected to fall from 74% to 54%, butthe company will still hold a controlling stake.

SSTL expects to issue shares to Rosimushchestvo during the first quarter of 2011.

SSTL plans to channel the raised funds toward development, in particular strengthening its position in the wireless broadband segment (based on the EV-DO Rev. A standard). The funds will also be used to expand the branded retail network in its current telecommunication service areas and to accelerate the launch of operations in a number of new telecoms service areas, Sistema said.

The Russian government agreed with the Indian authorities on acquisition of a 20% stake in SSTL in April 2009 for 23.7 billion rubles. In December 2009, SSTL shareholders approved an additional 35 billion rupee ($703.5 million) share issue in favor of Rosimushchestvo and the company's current shareholders.

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