Business Standard

Sistema gives 3 circles a miss in CDMA auction

Picks spectrum in 8 circles for Rs 3,639 cr, says will launch 4G LTE services

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Sistema Shyam Teleservices Ltd (SSTL), the lone participant in the auction of 800-MHz (CDMA) spectrum, on Monday bid for airwaves in only eight telecom circles — the total cost of which would be Rs 3,639 crore — instead of the 11 it had earlier applied for. Also, setting the stage for an intense battle in India’s future 4G play, the telco, for the first time, said it would look at launching 4G LTE services using spectrum.

The government coffers will, however, have to wait until 2016 for proceeds from on Monday’s auction, thanks to the decision to allow payment in instalments. Even so, the actual amount the government would get from would be much reduced after adjustment of the Rs 1,626 crore the telco had paid upfront in 2008 for a pan-Indian unified access service licence (UASL), cancelled last year following a Supreme Court order.

Under the deferred payment scheme, a telco pays only 25 per cent upfront, gets a moratorium of two years and then pays the rest of the money in 10 equated instalments. So, SSTL would have to pay a total of Rs 2,013 crore in 10 instalments of Rs 201.3 crore a year, starting March 2016.

SSTL said in a global statement on Monday: “Spectrum in the eight circles is technologically neutral and valid for 20 years. This provides an opportunity to strengthen SSTL’s data-driven strategy through a possible LTE rollout in the future.”

The company’s entry in LTE services would pit it against Reliance Jio — which is likely to launch 4G services with its pan-Indian 2,300-MHz spectrum by the end of the year — besides Bharti Airtel, Aircel and Videocon.

Sistema’s presence — across 22 circles before the Supreme Court cancelled its licence for 21 — had got significantly reduced after it decided a few weeks back to shut shop in 10 circles. Its operations, after obtaining spectrum in eight circles in on Monday’s auction, would be limited to nine circles (including Rajasthan, for which its licence was not cancelled).

Even as the company claims these nine circles account for 75 per cent of its current revenues, its subscriber base is set to shrink 25 per cent, from 14 million to 10.5 million. About 15 per cent of the company’s 2,850 employees are in the three circles it has not bid for. It said in a statement: “Full efforts are being made to absorb employees in other circles.”

In on Monday’s auction, SSTL decided not to bid for Mumbai, Maharasthra and Uttar Pradesh (East) — the three circles currently account for 1.5 million of its customers — as the combined base price for these three was more than 35 per cent of the total reserve price for the eleven circles it had earlier thought of bidding for.

After the auction, Department of Telecommunications Secretary R Chandrashekhar said: “It is clear that the company has taken a business decision, on the basis of the circles it wishes to continue in... following its analyses and considerations.”

SSTL won 3.75 MHz of spectrum in Delhi, Kolkata, Gujarat, Karnataka, Tamil Nadu, Kerala, UP (West) and West Bengal in on Monday’s auction.

“We would be able to service 40 per cent of the country’s population, address 60 per cent of data business potential, safeguard 75 per cent of our current revenues and significantly optimise our losses. Our plan would be building an even stronger brand by focusing on our data-centric voice-enabled strategy,” said SSTL President & CEO Vsevolod Rozanov in a statement.

Meanwhile, the Supreme Court on Monday cleared the way for SSTL to provide its services in the eight telecom circles it bid for. A Bench comprising judges G S Singhvi and

K S Radhakrishnan said: “The applicant (SSTL) is entitled to continue services in eight circles.”


MONEY MATTERS
  • Rs 3,639 crore: Total spectrum cost
  • Rs 1,626 crore: Adjustment against cancelled licence
  • Upfront payment: Nil; the entire adjustment to be made in the first installment
  • Rs 2,013 crore: Total amount payable in 10 equated instalments
  • Rs 201.30 crore: Amount to be paid every year, starting March 2016

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