Six million customers in India
Established in 1993 Sistema Group includes public listed telecommunications and technology companies such as MTS, Comstar-OTS and Sitronics and in 2007 became the first private Russian company to get an operating licence in India.
The AFK Sistema India project is the first multi-billion dollar joint venture between Russian and Indian companies in the Indian consumer market. The corporation is building its new operations in India from the ground up, using its own funds and external loans. The company has a 73.71 % stake in Sistema Shyam TeleServices Ltd which provides mobile telecommunications services and high speed internet to six million customers in 11 states across India under the MTS brand.
AFK Sistema's strategic plans in the Indian market include building an emergency situations mission control centre, implementing systems for monitoring the coastal economic zone, security systems for municipal facilities (the Safe City project), and the development of the GLONASS programme, which mirrors the group’s priorities in Russia, for which it appears to have strong government support.
GLONASS is the Russian system, backed by Sistema, which aims to rival the U.S. Global Positioning System (GPS). The system has been under development since 1976 and under Sistema’s guidance is now within striking distance of being commercially viable.
Because GPS started life as a US military system, Washington can switch it off for civilian subscribers, as it did during military operations in Iraq.
Europe has a similar GS competitor, Galileo on the blocks but after launching one satellite in 2005 it has stalled.
In a recent meeting with Russian Prime Minister Valdimir Putin, Yevtushenkov was asked for an update on GLONASS. “What about its ground-based infrastructure?” Putin asked, implying an up to date knowledge of the project.
“We have created a federal network operator,” responded Yevtushenov saying that it is already providing navigation services to all Russian ministries, departments, having obtained approval from all ministries, “which took us a long time,” he said.
GLONASS will be operational in 2010
“ We are now waiting for the Government to issue an executive order, which is currently on your desk. The federal operator will service (and is already servicing) all departments.
In the Novosibirsk Region, we have tested the provision of comprehensive navigation services to all units of the Emergencies Ministry, local transportation, ambulances, and the police. We are now trying to extend these services to the rest of Russia. Nobody has any objections of principle; there were a great many details, but they were all sorted out. I believe we will launch these services in full this year and continue to develop them.”
Talking about the commercial aspect of GLONASS, Yevtushenkov told Putin Sistema .would manufacture telephones, navigators and a lot of other equipment in order to give a commercial benefit to average customers and also allow GLONASS to compete with existing GPS devices.
“With this goal in mind, we have completed the work on the GLONASS-GPS chip in cooperation with Qualcomm, a recognized leader in this field. Starting at the end of this year, we will produce mobile phones with the GLONASS-GPS chip, hand-held satellite navigation systems for cars, and so on.”
Protection for GLONASS equipped devices
Yevtushenkov said, “ This allows us to keep a very competitive price on these devices. Most important, they will soon be sold in retail stores. They are in no way inferior to those with the GPS chip, and will even be a little cheaper.”
Sistema’s CEO asked Putin to protect the market, “like the Americans do. They have a law that prevents mobile telephones without a built-in GPS chip from entering the country. We should do the same. We should somehow encourage foreign producers of equipment and telephones to build the GLONASS-GPS chips into equipment supplied to Russia.
Putin suggested the protectionist measures should go further, in a revealing exchange with the tycoon. “It should be GLONASS. Let them deal with GPS in America”, he said.
Yevtushenkov responded, “Y?u know, we have made separate GLONASS chips as well, but we believe that the transition should be a little more gradual. We should work on GLONASS and GPS for a year, with the ultimate goal of switching completely to GLONASS. We have to do this because we must learn to do the coverage, which is rife with technical details. It goes without saying that GLONASS should be used for special purposes. As for commercial services, we should offer customers the right to choose, and make our GLONASS system more competitive.”
“ Why should we compel telephone producers to build in both systems?,” asked Putin.
“Switching exclusively to GLONASS is very easy. It is an absolutely simple technical task.,” said Yevtushenkov. “Initially, we did not even know whether we would be able to secure full satellite coverage. Technologically, this was a long process. Now that we are confident that GLONASS has made it, I will tell you honestly that we do not see any problem in switching fully to GLONASS.
“We simply need a technically small period of time, and we will make it.I think that GLONASS will become a commercial project in 2010 because we are currently still involved in all kinds of developments. Any customer, not to mention federal bodies or commercial agencies, will be able to use these services. I think they will be very much in demand. They are already in demand on Russian territory, but via GPS for the time being. In the future, they will be in demand via GLONASS.
He told Putin that the firm had held conversations about the technology with manufacturers such as Nokia, Siemens and Motorola. "They understand that we will close the market for equipment without a GLONASS chip anyway," said , according to the transcript of the meeting posted on the government's website.
"It is good that our partners understand that we will defend our interests and promote our own product," Putin said, citing Russia's experience with global car makers, which opened plants after Russia abolished import duties on car parts.
Yevtushenkov told Putin that foreign firms had accepted the warning: "They will get over it because the Americans at a time when they were moving to GPS also protected their market."
Partnership proposed with Europeans
Sistema's subsidiary Sitronics is developing chips for GLONASS navigation receivers after licensing a 90 nanometre integrated circuits technology from Europe's top computer chip maker STMicroelectronics.
Russia is also talking to Germany about Sistema's interest in taking a stake in German chipmaker Infineon, a deal that has been mooted since late 2009 although it is not clear whether the purchase is linked to GLONASS chips.
Piutin demonstrated that he wanted Sistema to have a partnership with Europeans in this exchange:
Putin: As for Europeans, I think it is possible to begin a partnership with them, especially after they pushed back the deadline (for the Galileo navigation system)..
Yevtushenkov: So you think it is possible to produce microchips together?
Yevtushenkov: I also think it is possible. It's no problem even if they start launches in 2015. Time flies, and they initiated contact with us, after all. They wanted to do everything together with Russia-but when we made our talks more profound, we saw that their desire to join hands was not so great.
Putin: Are they less interested than they appeared to be?
Yevtushenkov: There is no great interest-but if a relevant decision is made they will need 4 billion Euros immediately. They are all waiting for the decision to fund the project.
Putin: It is unlikely to come soon, considering the present situation.
Yevtushenkov: If they don't get the money, the job will proceed at a slow pace. We can only regret that there is no opportunity for joint projects yet.