Norway's Telenor and Russian major Sistema JSFC are recalibrating their India strategy after the high 2G spectrum pricing suggested by the telecom regulator. The two foreign players were betting big on getting a favourable auction policy to continue their operations in India.
Certain recommendations from the TRAI pose serious challenges to all operators, including us, and now there is clearly decisions that the political leadership of India need to take to allow viability, affordability and continuing existence of competition. The industry continues its dialogue with the Government and how we will proceed will ultimately depend on the final policy that the Government makes,” Mr Glenn Mandelid, spokesperson for Telenor in Asia told Business Line.
Sistema JSFC, which owns little over 56 per cent stake in Sistema Shyam, said its consolidated results for the fourth quarter of 2011 and the full year were impacted as it has written off $698 million on India operations. The write off primarily relates to $ 346 million loss from impairment of SSTL licenses following Supreme Court ruling to cancel its licenses $352 million of SSTL goodwill write-off. Telenor has also written off 4.3 billion kroner as a result of the Supreme Court's ruling to cancel licences.
Mikhail Shamolin, President and Chief Executive Officer of Sistema JSFC, said “Recent news flow with regards to SSTL licenses has been a concern both to us and our shareholders. However, we are determined to resolve the situation and to that end are taking all necessary actions to protect our investment and minimize our exposure should the uncertainty remain.”
Going by the Trai pricing formula, Telenor will have to cough up at least Rs 18,000 crore for buying back pan India spectrum in the 1800 mhz band while Sistema Shyam will need a minimum of Rs 36,000 crore for CDMA spectrum in 800 Mhz band. “The new proposal from Trai forces a 2G player to pay the price for 4G spectrum. This is violating the Supreme Court's ruling,” said one of the new players.
According to analysts, these players could exit than pay the price set by the TRAI. “It is now highly unlikely Telenor will bid for a nationwide licence (in India), in our view, with the most likely course of action a significant scale-back or a complete exit, both of which would be positive for valuation," UBS analysts said in a note to clients.