Sistema talks tough on 2G: asks govt to show how it will help

New Delhi: The government has given out repeated assurances to foreign telecom companies which lost licenses after the Supreme Court’s February judgment that an amicable solution would be found to their problems.

But Sistema Shyam Teleservices (SSTL) remains unconvinced. The company wants the government to clarify what is meant by “amicable solution” and is awaiting this clarity before taking any decision on participating in the upcoming auctions.

SSTL is the only CDMA player which lost licences this February (all other telcos operate in the GSM space) and has been consistently pointing out that there was no question of any first-come, first-served policy being violated when it was given these licences because there was no other contender for CDMA licences at that time.

Speaking to reporters after announcing the June quarter results,Vsevolod Rozanov, President and Chief Executive Officer, said: “We are clear. The Indian government has to tell us how it will protect our investments…..what does the government really mean when it says it is interested in an amicable solution?” He said Sistema has invested $3 billion in India till date and despite these investments being under risk, has taken no decision to withdraw from the country.

Rozanov said he was not really aware if the Russain government had sought a refund of the $3 billion investment which the company has brought to India till date and said “We are not looking to exit India right now. But this would be an option if things do not work out”.

He said a decision on whether to participate in the coming 2G auctions, if at all, could come at the very last minute since things were nor clear at the moment.

Besides, since its licences were cancelled, the company continues to lose money in India. It had reported 79 percent higher net losses at Rs 1,180 crore for the second quarter ended 30 June compared to Rs 657 crore in the corresponding period last year.

The company has attributed the dip in net profit to forex losses during the quarter.However, driven by growth in the voice and data segments, the company’s revenues grew 50 percent to Rs 417 crore during the quarter compared with Rs 278 crore in the second quarter last year.

The total wireless (voice and data) subscriber base for the quarter grew by 4.9 percent to 16.60 million. The number of data subscribers increased by 11.8 percent over Q1 2012 to 1.73 million.Revenues from non-voice services, including data and mobile value-added services for the quarter, increased by 3.9 percent to Rs 148.4 crore.

The non-voice revenue now contributes 35.5 percent towards the overall total. However, the average revenue per user (ARPU) for mobile services for the quarter declined by 2.3 percent to Rs 83.

“The recent regulatory and tax developments have significantly impacted the growth of the Indian telecom industry. Despite these challenges, SSTL has maintained its scale of operations and has also grown its business by further strengthening all its revenue lines,” Rozanov said.

Since losses have widened, SSTL has begun to take some cost rationalisation measures - it is no longer hiring people “as aggressively as before” and has already reduced it monthly expenses by over 10 percent to $50 million. Rozanov said these would be reduced further.

He said the ARPU has fallen by a rupee to Rs 83 for the first time since Sistema began operations because sector regulator Trai has banned carry forward of revenues from one quarter to another for pre-paid users.

On whether Sistema was exploring entry into the GSM space through acquisitions, he said that growing on its own was quite challenging and acquisitions could be considered but only after regulatory clarity on cancelled licenses. There have been reports earlier about Sistema talking to Aircel for picking up a minority stake in that telco.