Russia has restructured the option to sell the stake in SSTL

Moscow. On 5 November. Put option of the Agency on the sale of a minority stake in the Indian operator Sistema Shyam Teleservices Ltd. (SSTL) of its major owner, Sistema restructured, said the head of the Agency Olga Dergunova at a meeting of the budget Committee of the state Duma.

In the budget for 2016 pledged partial proceeds from the exercise of the option in the amount 15,76 billion rubles, which corresponds to $249 million at the exchange rate of 63.3 per ruble for $1, said the first Deputy Finance Minister Tatyana Nesterenko, speaking in the budget Committee.

According to her, the payment option will be spread over 5 years. General obligations of “the System” the option “in accordance with the amounts that we passed, doznanie for dollars “System” – $750 million Now reached an agreement, which is at the stage of design, restructuring of this debt, stretching for 5 years. The first volume is 25%, then 20%, in descending order”, – he said. “Almost agreement now in high degree of maturity”, – said Nesterenko.

In “the System” have confirmed that negotiations about re-structuring of the option being, refusing further comment. In June, the President of Sistema Mikhail Shamolin said that the company has made progress in negotiations on the restructuring of the option.

AFC owns 56,68% of SSTL, the Federal property management Agency is owned by 17,24%, Indian Shyam Group – 24%, minority shareholders – more than 2%. Rosimushchestvo has a put option to sell the stake in SSTL over a year after March 2016. According to the original terms of the option “System” is obliged to repurchase shares from SSTL for larger amounts: $777 million or market value determined by an independent appraiser.

Dergunova noted that when “the System” bought SSTL, the situation in the Indian market “was much better than later, when the Indian authorities have in fact stopped the activities of the operator”.

On Monday, the “System” has announced that it has signed a binding agreement to merge and SSTL operator Reliance Communications Ltd. (RCom), controlled by billionaire Anil Ambani. The deal involves the allocation of the telecommunication business from SSTL and its Association with Reliance. The Reliance Board of Directors approved an additional issue of shares amounting to 10% of its authorized capital in favour of SSTL. Market capitalisation of Reliance prior to the announcement of the transaction was approximately $2.9 billion. Thus, the Telecom business SSTL estimated at $290 million, excluding debt in the amount of $518 million, from which the operator must remove to complete the transaction.

Question the option is not associated with the transaction, as SSTL, although loses the status of a Telecom operator, continues to exist as a legal entity was explained in the ROS. After the closing of the transaction SSTL’s minority shareholders will have the right to exchange its shares for shares of Reliance proportionally belonging to them before the transaction the shares in the capital of the operator.

Effective share of the “System” in the capital of the United RCom will amount to 5,67%. Lockup-period for sale of shares a year after the completion of the transaction. In the case of redemption of shares of the Agency and of the preferred shares SSTL “System” will be able to increase its stake in RCom to 9.4%.

Five years ago, SSTL was estimated for transactions with the government are more than 10 times more expensive than the merger with RCom. In fact it was DCA ROS, as provided for the obligation of the company to repurchase shares with a guaranteed return. Occurrence of the Russian state in the capital SSTL has become possible due to the special structure of India’s sovereign debt before the Russian Federation. By agreement between the countries, arrivals from India in repayment of this debt should be invested in rupees.

SSTL serves 8.7 million subscribers and occupies 0,9% of the Indian mobile market Operator owns a frequency of 800 MHz and provides mobile telecommunications services based on CDMA technologies licensed in nine districts of India.

SSTL’s revenues in the second quarter of 2015 increased by 12% to 3.7 billion rupees ($56.6 million). SSTL – consistently loss-making: in April-July, the company’s net loss amounted to 4 billion rupees ($60,5 million), which is 1% higher than a year earlier. Average monthly revenue per subscriber (ARPU) increased by 5%, approximately to $2.1.

Reliance Communications is about 11% of the Indian mobile market. The company serves more than 115 million cell phone subscribers in India, including 35 million users of data services. ARPU of the operator in April-June this year was the same as SSTL – approximately $2,1.

Revenue Reliance in India in the second quarter of 2015 increased by 1.5% to 47.9 billion rupees ($730 million), EBITDA rose by 0.1%, to 16.9 billion rupees ($260 million).