Sunday, Feb 06, 2005
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By Vladimir Radyuhin
MOSCOW, FEB. 5. A Russian conglomerate has confirmed plans to buy Aircel Televentures Ltd. as part of its expansion into foreign telecommunications markets. Russia's telecom giant, AFK Sistema, said it had signed a non-binding agreement to acquire 49 per cent in Aircel Televentures, the holding company of Aircel and Aircel Cellular, which provide mobile service in Tamil Nadu. The deal would be worth $450 million, the Russian company said in a stock prospectus it sent to investors. The prospectus also said the agreement gave AFK Sistema an option to increase its stake in Aircel to 51 per cent free of charge. The option would be available after the Indian Government has raised the foreign direct investment cap in the telecom sector to 74 per cent from the current 49 per cent. AFK Sistema is one of Russia's biggest companies in the non-commodity sector. Its most valuable asset is Mobile TeleSystems (MTS), Russia's biggest mobile phone company. It also manages the Moscow fixed line telephones (MGTS), and a number of big telecom companies. Sistema is in the midst of an initial public offering on the London Stock Exchange that could bring in a record $1.55 billion, which the company plans to use to expand its business in Russia and abroad. Experts said Sistema's move into India was highly speculative at this stage. For one thing, the company said the Aircel deal would involve "a swap of some of India's sovereign debt to Russia to Sistema." This means that AFK Sistema, which is close to Moscow's powerful Mayor, Yuri Luzhkov, is pushing to include its Aircel purchase in a list of investment projects India and Russia are discussing under a plan to use part of India's remaining rupee debt to Russia worth about $3 billion for investment in bilateral projects. However, Indian officials said they favoured rupee-debt investments to be used for setting up new projects, rather than for acquiring existing assets in India. The proposed Aircel deal is just one of several investment options AFK Sistema is considering.
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