Sistema scales back Indian mobile ops ahead of auction

NEW DELHI/MOSCOW Thu Feb 21, 2013 10:02pm IST

Sun rises over the telecommunication towers in New Delhi December 22, 2007. REUTERS/B Mathur/Files

Sun rises over the telecommunication towers in New Delhi December 22, 2007.

Credit: Reuters/B Mathur/Files

Related Topics

Stocks

   

NEW DELHI/MOSCOW (Reuters) - Russian conglomerate Sistema (SSAq.L) said on Thursday that its Indian mobile phone unit would cease operations in almost half its regions as it prepares to bid in a spectrum auctions re-run.

The company's London-listed shares fell after the statement and were down 5.2 percent by 1606 GMT, which an analyst said reflected investor discontent with potential extra costs Sistema would incur to regain licences.

All but one of 22 zonal permits held by Sistema Shyam TeleServices (SSTL) were ordered to be revoked by the Supreme Court last year. The company is required to win back airwaves in those zones to continue services.

Sistema confirmed on Thursday that Shyam would take part in the auctions starting on March 11, but it did not specify the number of zones it would bid for.

"There was a slender hope that Sistema would decide against bidding in the auctions. As an investment company they should have chosen projects with a more reasonable risk-reward profile," said Igor Semyonov at Deutsche Bank.

"Exiting India would not have amounted to an epic failure of Russian capital but would have, on the contrary, shown Sistema as a rational investor," he said.

Sistema said in a statement that it needs to conserve resources because of uncertainties resulting from the cancellations and that it will start to inform customers in 10 zones to shift to other carriers.

Its subscriber base, which stood at 14.88 million at the end of 2012, will decline by 15 percent, a company spokeswoman said.

Sistema added that it is allowed to set off previous licence costs - which stood at about $300 million - against the new auction prices.

Last month India approved a 50 percent cut in the auction reserve price for CDMA (code division multiple access) airwaves, used by Sistema, after an auction in November attracted no bidders, with Sistema saying at the time that the price was too high.

The auction followed a court order to revoke several cellular carriers' permits awarded in a scandal-tainted 2008 state grant process and redistribute airwaves through open bidding.

(Reporting by Devidutta Tripathy in New Delhi and Anastasia Tetereveleva in Moscow; Writing by Maria Kiselyova; Editing by David Goodman and Hans-Juergen Peters)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Earnings Season

Earnings Season

Wipro sees rosier end to year as U.S. clients spend.  Full Article 

DLF Appeals

DLF Appeals

DLF seeks interim relief from capital market ban  Full Article 

Business Climate

Business Climate

Fears for tough penalties grow as India cleans up business  Full Article 

New Email Service

New Email Service

Google launches new email service dubbed "Inbox".  Full Article 

Falling Oil Prices

Falling Oil Prices

Indian consumers respond to softer oil, food prices  Full Article 

Pollution Levels

Pollution Levels

Delhi braces for worst air quality this Diwali week.  Full Article 

Book Keeping

Book Keeping

RBI fires warning shots on companies' lack of FX hedging.  Full Article 

Policy Repo Rate

Policy Repo Rate

Most external members suggested rate cut in RBI's Sept review.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage