Russia's Sistema in deal to pick up 49% in Aircel

MUMBAI: Russian conglomerate, AFK Sistema, has entered into a non-binding agreement with Aircel Televentures to buy a 49% stake for $450m.

The agreement was signed with Sistema after the Memorandum of Understanding (MoU) with Hutchison Essar expired in November last year. As per the agreement, Sistema had the option to increase their stake to 51% if government regulations permit them to do so, at no extra cost.

Incidentally, although the deal with Sistema was signed in December last year, the news of the deal coincided with the preparations for the $1.55bn initial public offering (IPO) of Sistema on the London Stock Exchange.

AFK Sistema owns a controlling stake in Mobile TeleSystems (MTS), the country’s top mobile operator. The group also controls Moscow’s fixed-line monopoly MGTS, insurance powerhouse ROSNO and the Moscow Interbank Currency Exchange. Other assets in its portfolio include property, banking, retail and media.
Hutchison Essar had signed an MoU to acquire the Chennai and Tamil Nadu operations of Aircel for about Rs 1,600 crore, including Rs 400 crore of debt. However, the deal fell through, since it failed to get approval from the Department of Telecommunications (DoT).

Since the exclusivity with Hutchison was over, Aircel was free to discuss a stake sale with other players.

The higher valuation being offered for Aircel is now being attributed to the fact that Aircel has added more licences and also begun to roll-out operations in several circles since it signed a deal with Hutch last year.

Aircel Televentures, the holding company of Aircel and Aircel Cellular, has licences to provide mobile services in 12 of India’s 23 telecom circles. It currently provides cellular services in Tamil Nadu and Chennai.

In a release issued last year, the Sterling Infotech Group that includes Aircel had stated that post-acquisition (by Hutch), it planned to “continue with its focus on various wireless business initiatives, including GSM businesses in North and East India, with a specific thrust on penetrating rural markets.”

Source: The Economic Times