Sistema unit wins spectrum for $670 million

By Devidutta Tripathy

NEW DELHI (Reuters) - Sistema Shyam TeleServices, the Indian mobile phone unit of Sistema , won airwaves in eight telecommunication zones in India with its sole bid of 36.39 billion rupees, said R Chandrashekhar, secretary of the country's telecommunications ministry.

India is using spectrum auctions and stake sales in state-run companies to contain its deficit to within 5.2 percent of GDP this fiscal year and 4.8 percent in the next fiscal year that starts in April.

The country is struggling however, to sell airwaves to carriers stressed by heavy debt loads and who have mostly shunned the bidding process, complaining that base prices set by the government are too high.

The government raised less than a quarter of its $7.4 billion target in a November auction and had initially planned to sell airwaves worth at least $7.9 billion at Monday's auction.

It had to scrap the sale of two key frequency bands that are used by operators of the popular GSM technology and account for about 85 percent of the total value of the airwaves due to lack of participants.

The government is expected to cut prices for the unsold airwaves at the next auction, the details of which have yet to be finalised.

Sistema Shyam TeleServices, which saw its permits revoked in 21 service areas after an Indian Supreme Court ruling covering a scandal-tainted award process in 2008, won the airwaves at the minimum bid price, which had already been cut by about half after no companies bid for the band in November.

Sistema, which operates on the Code Division Multiple Access (CDMA) platform, had earlier said it would cease operations in 10 zones and bid in select areas.

The company will shut down operations in three other zones, including Mumbai, for which it decided not to bid on Monday. It will be allowed to offset about $300 million it paid for earlier permits.

The government expects revenue of 408.5 billion rupees from airwave surcharges, auction of spectrum and licence fees in fiscal 2013-14 that starts in April, it said in its budget last month, a target some analysts call ambitious.

(Writing by Aradhana Aravindan; Editing by Matt Driskill)