SSTL seeks approval for FDI cap increase

24 Dec 2014

Russian-backed cellco Sistema Shyam TeleServices (SSTL), which trades under the MTS India brand, will soon renew its efforts to increase its foreign ownership threshold, the Economic Times writes, citing an unnamed SSTL executive. The operator plans to send a new application to the Foreign Investment Promotion Board (FIPB) to increase its foreign ownership above 74%, after its previous request was rejected on the basis that the transaction was structured as an overseas debt deal rather than Foreign Direct Investment (FDI). The cellco’s Russian owner, Sistema, is looking to increase its stake in the operator after the Indian government increased the foreign direct investment (FDI) cap on telecom providers from 74% to 100% in July 2013, but requires FIPB approval to complete the transaction.

According to the SSTL official, the company is ‘preparing a detailed response on various observations made by the FIPB, and will shortly urge the finance ministry to reconsider its proposal.’ Sistema’s previous application ran into difficulty as the mode through which it intends to make the investment – redeemable preference shares and optionally convertible redeemable preference shares – do not qualify as FDI according to the Department of Telecommunications (DoT).

India, Sistema, Sistema Shyam TeleServices (SSTL, MTS India)