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Corporate Dec 27, 2012

Why is Sistema confident of continuing service after 18 Jan?

By Sindhu Bhattacharya

New Delhi: Sistema Shyam Teleservices (SSTL) seems to have jumped the gun by announcing to its subscribers that it intends to continue services beyond 18 January.

As per the Supreme Court (SC) directive, those telcos which lost licences earlier and failed to win back spectrum must disconnect by 18 January. While there is speculation that the Department of Telecom (DoT) will seek extension of the 18 January deadline since it wants to conduct a fresh auction for CDMA airwaves, one wonders what prompted Sistema to declare it will continue operations when it has not obtained specific permission from the apex court for this.

How is Sistema so hopeful? Reuters

Has the telco gone ahead with making its views public on some specific assurance from the government during the recently held talks between Prime Minister Manmohan Singh and Russian President Vladimir Putin?

SSTL is majority owned by Sistema, a Russian company. A source in the Ministry of External Affairs said some discussions were held between the two sides on the Sistema issue during Putin's visit but what exactly was decided is not known.

An SSTL statement said, "MTS wishes to inform millions of its customers that being fully committed to its customers and the investments it has made in India, it intends to continue its operations beyond January 18, 2013." SSTL operates under MTS brand name.

Sistema's confident assertion of continuing beyond 18 January comes just when there are reports about a possible meeting of the Empowered Group of Ministers (EGoM) next week to consider lowering the price of CDMA airwaves.

The CDMA technology is offered over the 800 mhz band and in the auctions conducted in November this year, no telco (including Sistema) participated, saying the price was too high.

Now, when the government is looking to lower the price of 800 mhz airwaves and also seek licence extension beyond 18 January, there are two viewpoints on how the pricing math should work out.

A section of the industry says that since spectrum pricing for all bands was to be benchmarked to that of 1800 mhz band or 2G auctions, CDMA airwaves should be accordingly priced. It was earlier decided that CDMA airwaves would be priced 1.3 times 2G with the base price for 2G being Rs 14,000 crore for 5 mhz.

So this viewpoint says except for four circles (Delhi, Mumbai, Rajasthan and Karnataka where 1800 mhz band price was slashed by 30 percent each) price for CDMA airwaves should remain the same. But another section of the industry says the government should look at lowering price of CDMA airwaves on a pan-India basis.

Meanwhile, the Supreme Court is yet to take up a curative petition filed by SSTL where it has said it was not the beneficiary of former telecom minister A Raja's first come, first served policy since it bagged licenses in the CDMA space where no other telco came forward to claim licences.

Sistema's 21 out of 22 total licenses are to be decided by the apex court.

by Sindhu Bhattacharya

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