Russian conglomerate Sistema has finalised an agreement with Indian telecom services provider Shyam Telelink, the unlisted telecom services arm of the Shyam Telecom [Get Quote] group, to acquire 74 per cent in the company. The deal values Telelink at a conservative $114 million.

Simultaneously, Shyam has applied to the department of telecommunication for unified access service licence to operate networks in 21 Indian states.

Shyam's application comes even as real estate major DLF Ltd confirmed on Wednesday that it will apply for telecom licences by Friday, the fourth real estate company to do so in the recent past. IndiaBulls Real Estate Ltd [Get Quote], Unitech Ltd [Get Quote] and Parsvnath Developers [Get Quote] are the others.

This takes the total number of companies that have applied for telecom licences to 13, including the Reliance [Get Quote] Anil Dhirubhai Ambani-backed Swan and Cheetah Telecom, HFCL and the Ruia-backed BPL Ltd [Get Quote], among others.

The scramble for applicants comes even as Communications Minister A Raja has announced that DoT would not accept any new applications for mobile licences after October 1 this year.

Under the terms of the deal, JSFC Sistema, a company listed on the London Stock Exchange, has agreed to acquire 51 per cent in Telelink, which operates a small but well-performing CDMA technology-based fixed and mobile services network with over 250,000 users in Rajasthan.

The company also controls 100 per cent of the local internet service provider Shyam Internet Ltd and owns other telecom infrastructure including 4,000 kilometres of fiber-optic lines.

Sistema is the largest private sector consumer services company in Russia and the CIS and reported revenues of $2.7 billion for the first quarter of 2007, and total assets of $21.6 billion as of March 31, 2007.

Sistema will seek the Foreign Investment Promotion Board's approval for acquiring 51 per cent in Telelink and has rights to enhance its stake to 74 per cent, the maximum that a foreign company can have in an Indian telecom service provider.

Sistema president and CEO Alexander Goncharuk said: "The acquisition of the stake in Shyam Telelink is in line with our strategy to enter rapidly developing markets. We consider India as one of the most attractive markets with a high growth potential. We are pleased to be the first Russian company to enter the Indian telecom sector."

This marks the second time that the Russian company is trying to get a foothold in the booming Indian telecom services market.

In 2005, Sistema had signed a non-binding agreement to acquire 49 per cent in Aircel (a mobile operator in Tamil Nadu then promoted by NRI businessman C Sivasankaran) for $450 million. The deal fell through even as Sistema was pushing a plan to use part of India's rupee debt to Russia for financing such bilateral projects.

For Shyam, this marks the second major divestment in its services business -- it sold its GSM operation in Rajasthan to Bharti Airtel Ltd [Get Quote] in a cash-and-stock deal some years ago.

Industry experts said the key reason for Sistema buying out Telelink, rather than applying on its own for a licence is that the latter is already an operator and, therefore, ahead of new applicants in the race for allocation of spectrum.

Experts in the telecom business say realty companies like Unitech and DLF with their large market capitalisation can raise the resources needed for the telecom business. With startups requiring nearly $1 billion to begin operations, most of them see a large upside in the mobile services business which is expected to grow to 500 million subscribers by 2011.

"We do not have a telecom partner right now, but we are going ahead and applying for licences. A special purpose vehicle will be set up for the venture," a DLF executive said.

The government is currently reviewing the policy on spectrum allocation and grappling with plans for introducing next generation high-speed mobile services in India.

Since telecom licensing norms were changed in 2003 to allow for universal access (before this licences were linked to the technology being used), the government granted over 97 such licences.