One of the nine players to be recently granted a telecom licence, Shyam Telelink is gearing up for a larger share of the Indian telecom market. Though currently confined to just once circle ?? Rajasthan ?? the Sistema-controlled company certainly doesn’t lack ambition. Having acquired a pan-Indian licence, it is looking to expand its footprint across the country.
The services arm of telecom equipment manufacturing company Shyam Telecom, the company currently offers CDMA-based wireless and wireline services under the brand name Rainbow in the Rajasthan circle. It has a wireline subscriber base of over 157,000 (as of April 2008), and is the second largest service provider in the circle after Bharat Sanchar Nigam Limited. It also has about 4,000 km of optic fibre cables. In the wireless space, however, the company is struggling to hold its own with a subscriber base of only 107,989 ?? the lowest in the country ?? accounting for a negligible 0.8 per cent of Rajasthan’s wireless market.
In an attempt to generate funds for expansion, the company was considering listing itself on the bourses in 2007 and had acquired all the necessary clearances. However, the IPO was finally not executed.
Despite its low subscriber base, the company was clearly an attractive investment option for Russian conglomerate Sistema, which has been steadily increasing its shareholding in Shyam over the past nine months. In September 2007, it acquired a 10 per cent stake in Shyam Telelink for $11.4 million and then raised it to 51 per cent for $58.1 million in January 2008, after obtaining approval from the Foreign Investment Promotion Board. Recently, the company finalised the purchase of an additional 21 per cent stake for $45 million. This will take Sistema’s stake in the company to 72 per cent.
However, according to Shubham Majumdar, analyst, Macquarie Securities, “Since Sistema is already a majority stakeholder in the company, the decision to hike its stake to 72 per cent is not likely to have any impact on future plans. Sistema is just consolidating its position in the company.”
In line with the trend of CDMA players migrating to the GSM platform, Shyam Telelink had applied for a pan-Indian licence in 2007 and was awarded the licence in January 2008. It recently received start-up spectrum for offering CDMA-based services in 12 circles covering 16 states. These include Tamil Nadu, West Bengal, Andhra Pradesh, Uttar Pradesh (East), Uttar Pradesh (West), Himachal Pradesh, Madhya Pradesh, Bihar and Haryana. It has also been allocated start-up spectrum of 4.4 MHz for offering GSM services in the Kerala circle.
The company intends to build a nationwide telecom network by the second half of 2009, taking on entrenched players like Bharti Airtel, Reliance Communications (RCOM), Vodafone Essar and Tata Teleservices. Sistema is planning to invest $7 billion over the next three years for building the network. “While there is huge potential in the market today as India is looking at a 600 million plus subscriber base by 2012, Shyam will have to expedite network rollout to capture this market,” says Sourabh Kaushal, industry manager, ICT Practice, Frost & Sullivan.
To expedite network rollout, Shyam is considering sharing both passive and active infrastructure. While the industry has witnessed considerable passive infrastructure sharing amongst operators over the past two years, Shyam is expected to undertake the first active infrastructuresharing arrangement in the country.
The company is also exploring the possibility of a Rs 50 billion deal, spread over 10 years, with Reliance Telecom Infrastructure Limited (RTIL), RCOM’s hived off tower company. Under this, Shyam Telelink would offer mobile services by riding on RTIL’s infrastructure, both active and passive, for 10 years. This would enable the company to launch operations without setting up its own network.
It would, moreover, allow Shyam to offer roaming services in circles where it does not have operations, making this the first inter-operator roaming service in the Indian CDMA space.
The Shyam-RTIL model is expected to pave the way for more such deals as new entrants try to save time in rolling out networks across the country. According to industry experts, rollout times can be advanced by eight to 12 months if the new players adopt such a model.
Going forward, Shyam has chalked out an ambitious gameplan, targeting a subscriber base of 60 million and a 9 per cent share of the wireless market by 2017. Given the competitiveness of the Indian telecom sector and the company’s own modest market share of 0.04 per cent, this, no doubt, is a Herculean task. But perhaps, that’s precisely the kind of challenge Shyam is spoiling for.
