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Sistema Shyam Teleservices to enter Mumbai this week
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CDMA operator Sistema Shyam Teleservices (SSTL), the Indian arm of Russian telecom giant Sistema JSFC, will launch services in Mumbai this week, becoming the 12th player in the country’s largest revenue-generating telecom circle. The company is pumping in Rs 450 crore for its Mumbai foray, betting big on the high churn rate in the financial capital.

The entry of SSTL is expected to intensify competition in a market where operators are scrambling for subscribers even as their revenues are nosediving. As in other circles, SSTL is expected to offer per second billing in Mumbai, too.

SSTL will also roll out Mblaze, its pre-paid high speed data service with free-of-charge use of some websites including Yahoo and Wikipedia, sources told ET. The SSTL spokesperson declined to comment. The capex for new operators like SSTL is substantially lower than incumbents as they are riding high on infrastructure sharing and outsourcing of non-core services like IT and customer assistance. SSTL has outsourced IT operations to IBM and is sharing telecom infrastructure with Tata-Quippo and public sector BSNL.

The company offers services under the MTS brand and has over 3 million users across eight circles. While Mumbai will be the ninth circle to see the launch, Maharashtra & Goa will be the next to follow. SSTL suffered a loss of Rs 590 crore in FY09.

Sistema is the majority share holder in SSTL, formerly known as Shyam Telelink, with a 73.7% equity stake, while the Shyam group holds a 23.79% stake. The remaining 2.5% is held by Indian minorities.

The company will have to wage a tough battle to gain market share in Mumbai, where mobile density is already over 100%, said telecom analysts.

According to HSBC Securities and Capital Markets analyst Rajiv Sharma, outlook for new players is increasingly difficult. “Given sub-optimal operations in the 1800 MHz band and low volumes, new players will need to recover 70 paise per minute in order to break even, whereas incumbents can attain this at 37 paise per minute. Most exposed in our view are players with a regional focus and CDMA pure-plays,” he said.

However, the overcrowding in the world’s fastest growing telecom market is not a deterrent for new players. SSTL president & CEO Vsevolod Rozanov recently told ET that the company is focused on revenue generation, which is boosted by free minutes and low call rates. "We clearly see that at this stage, we are aiming at breaking even. We believe that these kinds of offers will support our ambitious targets," he had said. SSTL is targeting to rope in 30 million subscribers in the next three years to break even.

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