CDMA auction: Sole bidder Sistema to shut shop in 3 circles

New Delhi: Sistema Shyam Teleservices, the sole bidder in the second round of spectrum auctions which began and ended today, will be shutting shop in three telecom circles of Mumbai, UP East and Maharashtra.

The company, which had lost licenses in 21 circles after the Supreme Court cancelled licenses issued by former telecom minister A Raja last February, will therefore now operate only in nine circles. It has won back spectrum in eight circles, retains Rajasthan already and has previously announced its decision to shut operations in 10 circles.

[caption id=“attachment_655422” align=“alignleft” width=“380”] Reuters[/caption]

Sistema offers CDMA services in the 800 mhz spectrum band.

In a statement issued this afternoon, the company said shutting down operations in three circles would impact 13% of its customer base and 15% of its employee base and efforts were on to either absorb these employees in other circles or find them jobs with other companies.

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“Given the range of variables we have considered and the spectrum cost for 800 Mhz, it was a big challenge to arrive at a core list of 8 circles and to bid accordingly. With Rajasthan circle also a part of MTS India’s footprint, we would be able to service 40% of country’s population, address over 60% of data business potential, safeguard 75% of our current revenues and significantly optimize our losses,” Vsevolod Rozanov, President and CEO of Sistema Shyam Teleservices said.

The company now has to pay Rs 3639 crore for winning spectrum in 8 circles but it has already got a reprieve from the Department of Telecom (DoT): pay just 25% of the final bid amount within 10 days, no more payments till 2016 and then pay the balance amount in 10 equal annual installments. Besides, DoT has also allowed Sistema to set off the previous license cost of Rs 1626 crore against the new spectrum cost.

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The Circles won by MTS India include Delhi, Kolkata, Gujarat, Karnataka, Tamil Nadu, Kerala, Uttar Pradesh (West) & West Bengal.

Now that Sistema’s spectrum buying is over, all eyes will turn to the next course of action by DoT, which is expected to seek a Supreme Court directive on what to do with the unsold spectrum and whether to reduce price further.