Friday, May 31, 2013

Sistema, It s tough to do business in India


Vladimir Evtoushenkov is co-founder and chairman of Sistema, the $34 billion Russian conglomerate, which is the majority shareholder in mobile telecom firm Sistema Shyam. The Indian venture has managed to win back nine of the 21 licences that it had lost due to the Supreme Court ruling last year. Although it is looking to invest in new sectors such as retail and power, Evtoushenkov says future investments will depend on how quickly the government deals with some of Sistema concerns in telecom. Excerpts:
Telecom is your largest investment and it's been through ups and downs. Has it gone the way you wanted it to go?
We have substantial investment of around $3.6 billion and we will make further investments . But it is very difficult to recover this investment because the telecom market is not very stable. It is very difficult to say how much investment is needed because the rules are not stable and the regulatory system is changing. According to preliminary business we should have achieved break-even in 2013. Now, the cash break-even is beyond 2017, or may be even longer . That's why the Indian market is very peculiar. But, the market is getting more sophisticated and the situation will improve.

Is India one of the toughest places to do business in?
I don't know if it's the toughest but it is certainly tough. Regulatory climate is not very good. You can put together a business plan but you can't implement it because the rules keep changing.

You had a setback because you had planned for pan-India presence but you are now in nine circles...
As the government prepared new rules, we decided to decrease the number of circles to nine. Once we see an EBIDTA break-even by 2014-end, we will then look at going to further circles.

You had sought arbitration with the Indian government, are you going to pursue that further?
It's in abeyance at this moment . We want to wait and see if we will get what we were promised. We are awaiting clarity on merger and acquisition rules and actual allocation of spectrum. A lot of things need to be put in place and delivered before we can withdraw the notice.

You have other business interests, including retail. Will you enter this sector since FDI is now allowed?
As soon as he telecom issue is solved we will look at it. For us, priority is the safe city project for which we had done a pilot in Delhi. The pilot project was very successful. We are the leader in Russia in the safety and security system. There are issues on financing and a national policy is missing. There are federal guidelines in Russia and municipal financing. We are talking to the home ministry on a policy on this. It is an integrated model where the entire city, including buses, have cameras and is connected to an emergency response system. In a city like Delhi it can be very helpful. We did the pilot in Delhi three years ago and if it was implemented, rapes and other crimes would have been checked. We also have a navigation system and we have an agreement with BSNL but that is not working. We are looking for pilot projects. We also want to look at power station, construction and real estate development but all this depends on what happens in telecom.

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