Sistema Shyam Teleservices Ltd, which runs CDMA-based mobile services under the MTS brand, has decided to exit three more circles (the company had earlier shutdown operations in 10 circles) reducing its pan-India operations from 22 circles to nine.
The company on Monday bought spectrum in the 800 MHz band in eight circles for Rs 3,639 crore. The auction ended within a few hours because Sistema Shyam was the only bidder. The operator also has mobile service in Rajasthan under a licence given to it before the 2008 2G scam was discovered.
Although the company had earlier expressed interest in bidding for 11 circles, it decided to stay out of Mumbai, Maharashtra and UP East circles. This would impact around 400 employees and 1.5 million subscribers. Sistema Shyam said that it would immediately initiate the process to inform its customers in three circles to port out to other telecom operators.
The company said that efforts are being made to absorb affected employees in other circles or offer placements in other companies. Earlier, the company’s move to shutdown services in 10 circles had affected more than 300 workers and two million subscribers. The company was forced to take this move due to the uncertainties resulting from the Supreme Court’s decision to cancel 2G licences given in 2008 by the then telecom minister A. Raja.
Repositioning for data
The scaled down operations will shave off 25 per cent SSTL’s revenues and brings down the subscriber base to just over 10 million across the remaining nine circles. But it has also given an opportunity to the company to consolidate its business in circles known to generate high revenues.
The nine circles — Delhi, Kolkata, Gujarat, Karnataka, Tamil Nadu, Kerala, Uttar Pradesh (West), Rajasthan and West Bengal — account for over 60 per cent of current data market in India. The spectrum in eight circles is technologically neutral (which means Sistema can deploy even 3G or 4G services on these airwaves) and is valid for 20 years.
This provides an opportunity to strengthen SSTL’s data-driven strategy through possible 4G roll out in the future. In addition, Russian major Sistema’s claim under the bilateral investment protection treaty is alive under which it can claim compensation for cancelling its licences.
The money paid by the company, Rs 1,626 crore, in 2008 for 2G licence will be adjusted as the upfront bid amount. Therefore, the Government will get Rs 2,013 crore from selling spectrum to Sistema.
The company plans to pay this amount over a 10-year period at just over Rs 200 crore a year.