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:
Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Republic Day

Reuters Showcase

RK Laxman Dead

RK Laxman Dead

'Common Man' cartoonist RK Laxman dead at 93  Full Article 

Banking Revolution

Banking Revolution

India turns to corner shops, mobile phones for banking revolution.  Full Article 

Nuclear Group

Nuclear Group

China urges India to take steps to satisfy standards of NSG  Full Article 

Gold Market

Gold Market

Chinese gold demand holds up ahead of holiday, Indian buying weak  Full Article 

India-U.S. Relations

India-U.S. Relations

Column - U.S. and India should join to balance China's rise  Full Article 

Padma Bhushan

Padma Bhushan

India honours Bill Gates with civilian award  Full Article 

Fashionable Modi

Fashionable Modi

When Modi met Obama, his name was all over - his suit  Full Article 

New Greek PM

New Greek PM

Greek leftist Tsipras sworn in as PM to fight bailout terms  Full Article 

Australian Open

Australian Open

Venus fireworks illuminate Australia Day  Full Article 

Reuters India Mobile

Reuters India Mobile

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