Sistema takes Rs 3,700 cr hit on cancelled licences

New Delhi: The parent company of Sistema Shyam Telecom Ltd (SSTL), which lost 21 licences in India, has had to write off $700 million (roughly Rs 3,700 crore) because of the Supreme Court verdict in this regard. Sistema JSFC , the majority shareholder in Sistema Shyam, said on Thursday that its results for the fourth quarter of 2011 and the full year were impacted mainly by non-cash one-off items (“one-offs”).

These one-offs primarily related to the $346 million loss from impairment of SSTL licences in India following the Supreme Court’s cancellation of 122 licences issued by A Raja in 2008. The losses include the cost of the licences and $352 million of SSTL goodwill written off.

[caption id=“attachment_289838” align=“alignleft” width=“380” caption=“The company has already invested over $3 billion in India and has been consistently saying that it would bid when auctions open again. Reuters”]  [/caption]

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“Recent news flow with regards to (Sistema’s Indian) licences has been a concern both to us and our shareholders. We are taking all necessary actions to protect our investment and minimise our exposure,” Chief Executive Mikhail Shamolin said.

The Supreme Court recently extended the government’s deadline for holding fresh auctions of 2G spectrum to August end from the earlier deadline of 2 June.

Sources told Firstpost that despite the writeoff Sistema was unlikely to pull the plug on the Indian telecom sector. It is watching how spectrum will be priced in future and hoping it will be rationalised so that it can bid for licences again. The company has already invested over $3 billion in India and has been consistently saying that it would bid when auctions open again.

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The Telecom Regulatory Authority of India (Trai) has set the base price for fresh 2G auctions at 1.08 times the price at which 3G auctions happened in 2010 - and almost all telecom companies have termed this pricing as exorbitant.

Despite the Supreme Court order cancelling licences in February, SSTL’s revenues increased by 77.3 percent year-on-year in the fourth quarter to $76.1 million ($42.9 million). For the 12 months ended March 2012, revenue increased by 128.8 percent to $262.3 million ($114.6 million). Strong revenue growth resulted from a 78 percent increase in SSTL’s mobile subscriber base which reached 15 million. But net loss widened more than three-fold to $318.7 ($99.4).