Sistema case: Govt for amicable settlement

http://www.thehindubusinessline.com/industry-and-economy/economy/article3551341.ece

 New Delhi, June 20: 

The Centre is mulling a “negotiated amicable settlement” in the case related to the cancellation of 2G licences of Sistema Shyam TeleServices Ltd (SSTL).

It is learnt that this approach would be conveyed to the Russian Government during the bilateral talks in Moscow starting Thursday. The Indian side will be led by the Commerce, Industry and Textiles Minister, Mr Anand Sharma.

The Russian Government and Sistema hold around 74 per cent in SSTL.

Soft approach

India’s ‘soft approach’ in the SSTL case is due to fears that a no-holds barred legal combat in the matter would adversely impact the overall investment by Russia in other sectors.

The development comes at a time when the investment sentiment is low in India. New Delhi will be seeking big-ticket Russian investments in many priority sectors, especially in infrastructure and manufacturing.

India will also seek Russian cooperation in sectors such as power, oil and gas, coal and mining, fertilisers, defence and even diamonds.

During the bilateral talks, India is likely to point out that the 2G licence issue is currently sub judice and that the law would take its own course in the matter.

However, New Delhi would also add that it wishes a “continuous dialogue” between the Telecom Department and SSTL in the matter so that Sistema’s grievances can be completely addressed during the legal process.

The Russian Government has been constantly putting pressure on India on the issue. The sources said the case has already hurt Sistema’s investments in the Indian telecom sector.

Significantly, due to the case, Sistema’s losses on account of its Indian telecom operations could reach as high as $3 billion, of which Russian Government’s funds would be to the tune of $600 million, they said. The Russian major has already written off $700 million on its Indian investments.

They want the Centre’s intervention in the matter due to the huge money involved, the sources added.

SSTL — whose 21 licences were among the 122 licences cancelled by the Supreme Court on account of ‘illegalities’ in the manner in which 2G spectrum was allocated by the Telecom Department during the regime of the then Telecom Minister Mr A Raja — has around 15 million subscribers. Sistema had recently invoked the provisions of the India-Russia Agreement for Promotion and Mutual Protection of Investments in a bid to settle the dispute.

Legal action

Sistema had said if the dispute is not settled amicably by August 28, it reserves the right to start proceedings against India before an international arbitration tribunal set up in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law and/or in any other available forum.

Following this development, the Government has decided to look at other similar legal notices from ‘aggrieved’ foreign investors under the bilateral investment treaties.

arun.s@thehindu.co.in

Keywords: Sistema Shyam TeleServices, Anand Sharma, 2G licences

Dear fellow shareholders,

As you are aware the company simply is not adhering to the High Court Order of Aug 2008 for giving fair exit to the shareholders and /or coming with an IPO.  To add insult to injury, they say nobody has asked us for an exit in so many years.

I request all shareholders to send us their communication to the company if any (scanned letter /emails) and also any responses that they may have received back from them so that we may take that up with the company vigorously.

Rgds
AMSOST
amsost@gmail.com

Sistema Concall Q412 - Questions posed to the Management in Russia

This is the Association of Minority Shareholders of SSTL (subsidary of Sistema in INDIA)

Our questions to the Sistema Mgmt are :

1.  The High Court of Rajasthan India had mandated that an exit offer be given at fair price to more than 17000 SSTL shareholders (who are stuck with these shares since 2007) holding approx a total of  70 million shares of total face value  approx $US 14 mln only.  From Aug 2008 (date of court order) till date this requirement has not been met by SSTL despite selling equity at high prices to Russian Federation at almost $1 per share for a total of USD 600+ mln in 2011.

How do you plan to offer an exit to these shareholders ?

2. In the light of the India Supreme Court ruling, how do you plan to protect the interests of these 17000 shareholders.

Amsost

amsost.blogspot.com

The onus is on the government to suggest a way out: Vsevolod Rozanov

The onus is on the government to suggest a way out: Vsevolod Rozanov

Interview with President & CEO, MTS India

Mansi Taneja / New Delhi Apr 09, 2012, 00:45 IST

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Sistema Shyam Teleservices, one of the two pan-Indian licensees impacted by the Supreme Court decision of February 2 for cancellation of 122 licences issued in January 2008, continues to add subscribers and invest money in its operations, despite the uncertainty around. Vsevolod Rozanov, president and chief executive officer of MTS India, the mobile telecom service brand of Sistema Shyam, talks to Mansi Taneja about the situation. Edited excerpts:
The SC has dismissed all the petitions filed by telecom companies for a review. What will be your next step?
We are disappointed by the SC dismissal of our petition but it has admitted the government’s petition over auction time, which is a positive thing. At the end of the day, the onus is on the government to suggest a way out. Operators have invested a huge amount of money. Customers should not suffer. More, it will create a negative precedent — I am talking for all good-faith investors, be it Videocon, Tata or Sistema. The number of subscribers is increasing and it will be much more as time passes. It is for the government to decide what has to be done with the customers and how to treat the businesses.

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We want auction to happen as early as possible, especially for the initial start-up spectrum. It will be impossible to restart everything again, as it will impact the brand value. About the legal options, we are looking at every possible one. The key task is to protect the interest of customers, partners and shareholders.
Sistema has also invoked the bilateral investment treaty (BIT). If the issue is not resolved within six months, what damages will you seek from the Indian government?
BIT has been invoked between Sistema and the Republic of India. The first six months is the cooling-off period where both will discuss the issues. There is no softening or change in stand from us. According to the treaty, ideally the issue should be resolved within six months. After that, Sistema may or may not go for arbitration, depending upon the discussions. It is a very strong message. But our intention is not to seek damages; our mindset is to find a solution simultaneously, within the framework of the SC ruling.
You recently got approval for raising Rs 6,000 crore. Where do you plan to invest the money or will you reserve it for bidding in the auction process? Despite the uncertainty, you are still investing money in your operations. What is your intent?
The public doesn’t realise how much loss a company incurs for maintaining business. This money will be used for our corporate needs, for expanding our business. After the SC order, the most concerned were the banks, especially public sector banks, which were financing our business. There is a huge face value of the decision of the government of India. I completely refute all accusations that we had to be much more accurate to discuss something, to double-check and do due diligence. We can do due diligence about a particular company or about a particular partner. You can’t do due diligence of a government decision. It was fully enforced for over six years. The companies received licences and spectrum on the basis of this.
In a way, the money will be our protection against uncertainity. Banks are now coming back, giving us funding. There were three weeks of ice-cold relations after the SC order. Banks have now softened their stand. It will be hard to say whether the money will be reserved for auction, since we are still unaware of the auction rules.
Second, this business is like a steam mill; it only stops when you want to close down. You can’t switch it off and on. I can’t tell my customers, who want a higher speed for data connection, that it will not be possible because of the SC order and we have stopped investing. At this stage, you need to invest; every day costs us $2 million. This also shows our serious intent to continue the Indian operations.
Will you look at entering the GSM segment in the coming auction. Or will you continue to a major player in the CDMA space at a pan-India level?
Our intent is to double-check our decision of not going to the GSM segment once the auction rules are announced. We will definitely look at it once again. Second, our intention is to continue being a pan-India CDMA player, but at the end of the day, it will also depend on the terms and conditions.
How far did you go in convincing your customers to stick to Sistema? You also came out with a new rate plan? How has that helped in addition of subscribers?
We did not take any specific efforts. The launch of a new tariff (rate) plan has definitely helped; it came as a huge boost of confidence, especially for our partners and employees. It was planned four months back; it was just a coincidence that it came out after the SC order. We have increased our focus on MNP (mobile number portabiliity). We have much more customers coming in now, rather than going out, because of increased attention towards this area. We continue to add more and more users. There is no sign of concern on the subscribers’ part.

In your Letter to SSTL - Please mention...

The following may be sent in your letter to the Company to rashid.malik@mtsindia.in


1. Mention Name and Address of investor
2. Give detail of No of shares and DP details
3. You may Demand exit offer at fair price as per direction of Rajasthan High Court order of aug 2008
4. You may Demand response from company why company has not offered the same and the required timeline to execute the same now.

If you would like to send a regular mail, the address is
Corporate Office: MTS Towers 334, Udyog Vihar, Phase-IV Gurgaon - 122001 Haryana.

Economic Times : Company says not enough people asking for exit !!

“SSTL has thousands of shareholders and is yet to receive any concern relating to the exit option from even 100 shareholders,” the company has said


We at AMSOST would like all shareholders to write to the company to give the court directed exit option.
The e-mails may be directed to the Co. Secy Sh. Rashid Malik at rashid.malik@mtsindia.in
Alternatively the emails may be sent to amsost@gmail.com and we will forward the same. ***********

Minority Sistema Investors Left High & Dry With cancellation of telecom licences, 7-yr wait of 18k investors to get dues got longer OUR BUREAU MUMBAI More than 18,000 minority shareholders of Sistema Shyam TeleServices are probably nearing a dead end after aseven-year wait to get what is due to them just got complicated with the Supreme Court cancelling 122 mobile telecom licences. The stakeholders who fought a legal battle with Shyam Telecom and its promoters Rajiv Mehrotra and Alok Tandon for not fulfilling a court direction to list the shares, see little signs of benefits accruing to them now after the court ruling. “There is no hope,’’ says Gokulchand Bansal, an investor from Kolkatta who owns around 5,000 shares in the company. “Despite the court order, company has not provided any exit opportunity. We don’t know whom to approach with our grievances.’’ The board of directors of Sistema Shyam TeleServices, the mobile phone operator that runs the MTS brand of services, will meet in March to consider the minority holders’ grievances, but it may be too late since the business prospects of the company are uncertain after the court order, said a person familiar with the development. In 2005, Shyam Telecom was split into two, with the second company being Shyam Telelink which has been rechristened Sistema Shyam Tele-Services which is now a joint venture with Russia’s Sistema. Owners of Shyam Telecom got 35 shares of the company, and 784 shares of Shyam Telelink for every 100 shares they held. That translated into an 85% ownership for promoters and 15% for minority shareholders in Shyam Telelink. Shyam Group promoters’ intent has been questioned by minority holders when the company did not fulfill the Rajasthan High Court order to list the spun off company, Shyam Telelink, in 2005. While the normal process leads to listing of the spun-off entity, Shyam Telelink did not get listed on the stock exchanges. But it sold new shares that diluted minority holders. “SSTL has thousands of shareholders and is yet to receive any concern relating to the exit option from even 100 shareholders,” the company said. “The matter is still under progress and all the shareholders of the company are also informed on the matter.” But between the 2006 court approval and now, the promoters sold new shares in Sistema Shyam that brought down minority holders’ stake to just 2%, from 15%. From September 2007 to March last year, Sistema and the Russian Russian Federal Agency-Rosimushchestvo’s stake rose to 74% from 10%. Because of the change in the shareholding pattern and other reasons, Sebi declined to allow the company to list Sistema Shyam’s shares. Following this, the promoters sought High Court permission to drop the listing condition which was a precondition to approve splitting of the company. But that was dismissed. Since Sebi declined to hear out minority holders, citing that it is an unlisted company, many retail shareholders have written to the ministry of corporate affairs to bail them out.

MTS India claims refuted by AMSOST..

As per MoneyLife Article published today(reproduced below).....the company has claimed it has begun initiatives to meet the minority shareholders for offering a exit option (Highlighted in red below) .  AMSOST would like to categorically point out that NO SUCH offers or initiatives are in our current knowledge.


We at AMSOST would like all shareholders to write to the company to find out about the exit options.
The e-mails may be directed to the Co. Secy Sh. Rashid Malik at rashid.malik@mtsindia.in
Alternatively the emails may be sent to amsost@gmail.com and we will forward the same.
***********
Sistema Shyam blames SEBI, BSE and NSE for not listing the company
March 01, 2012 05:55 PM |
Moneylife Digital Team

The mobile operator, in which Russian government has a stake, was quick to invoke its right under BIT signed between India and Russia after its licence got cancelled by the apex court. However, for over 42 months it has sidelined a high court decision and is blaming the regulators for non-listing

Sistema Shyam TeleServices (SSTL), which operates under the MTS brand in India, has said that the failure of its listing is a consequence of differences in perception on part of the statutory agencies—the Securities and Exchange Board of India (SEBI), National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The company was asked by the Rajasthan High Court to initiate listing process within 18 months starting from 8 August 2008. It is now over 42 months and the company has yet to fulfil the condition.

Surprisingly, earlier this week, SSTL’s parent Sistema JSFC sent a formal notice to the Government of India for honouring the ‘Bilateral Investment Treaty’ (BIT) to protect its investments in the company. This follows a judgement by the Supreme Court to cancel 122 telecom licenses, including 21 licenses of SSTL.

Sistema is the majority shareholder with 56.68% stake while Shyam Group and the Russian government hold 23.98% and 17.14% stake, respectively, in SSTL. Minority shareholders, who have allegedly been sidelined and not given appropriate valuation for their investment as well as an exit option by SSTL have 2.2% stake in company.

In an email reply, SSTL said, “...the company had made every possible effort to get the shares of the company listed in terms of the scheme and the failure of listing was a consequence of differences in perception on part of the statutory agencies, namely, SEBI, NSE and BSE. On account of disinclination expressed by SEBI; for allowing listing via the automatic route despite the in-principle approval granted by BSE, listing became a virtual possibility and to that extent implementation of the said clause (i.e. Clause 3.7) became impossible.”

The company is now citing adverse market conditions, especially after the judgement from the apex court for keeping its decision on hold for listing on Indian bourses. “The company has faithfully and scrupulously initiated the process of listing with the active involvement of internal committees of highest levels and with the advice of the merchant banker of international repute. But everyone would agree that in the current situation after the judgment of SC on licenses, all such big strategic issues cannot be processed further and are bound to be kept on hold till attaining the matter legal and regulatory finality from the government,” it said.

According to the scheme of arrangement passed by the Rajasthan High Court in 2008, the shareholders of Shyam Telecom (STL), a listed company, were allotted shares of Shyam Telelinks (STLL). At that time Shyam Telelinks was valued at Rs455 crore with 85% stake hold by promoters and rest by minority shareholders. As per the high court ruling STLL was asked to initiate listing process within 18 months starting from August 2008.

In September 2007, Sistema bought 10% stake in STLL for about $11.4 million and said that it would increase the stake to 74% following an approval from the Foreign Investment Promotion Board (FIPB). Following the stake sale, STLL, which used to operate CDMA and wireline services only in Rajasthan circle at that time, changed its name to Sistema Shyam TeleServices (SSTL).

STLL applied for licenses in 21 circles on 25 September 2007 (the date on which the first cut off date for 2G licenses was announced and subsequently this date was announced as revised cut off date). On the very next day (26th September) Sistema announced that it bought a 10% stake in STLL. As per the requirement of getting the licenses, the applicant should have a net worth of Rs11,380 crore and paid-up capital of Rs1,138 crore. Shyam Telelinks, at that time, had a net worth of Rs1,156.58 crore only. However, following stake sale to Sistema, the company was able to include the Russian conglomerate’s net worth (about Rs158,856 crore) as well, to fulfil the license condition.

While the high court was approving the scheme of arrangement for STLL, the company become the first new mobile operator to get a pan-India start-up spectrum for starting its mobile services. In January 2008, Sistema provided guarantee of $520 million of total $630 million (82.5% of total amount) to be paid for obtaining the licences by STLL despite having a shareholding of 10%. Subsequently, on 18 January 2008, Sistema increased its shareholding in SSTL to 51% from 10% for which it had signed a share purchase agreement in October 2007.

When Sistema first bought 10% stake in STLL for $11.4 million, the mobile operator was valued at around Rs1,450 crore. In January 2008, SSTL paid Rs1,653 crore for 2G licenses in 21 circles. A week later, Sistema increased its stake in SSTL to 51% by paying $46.7 million that shows there was not much change in SSTL's valuation.

According to a petition filed in December 2011 by Prashant Bhushan in the Supreme Court in March 2011, Rosimushestvo, the Russian Federal Agency for State Property Management, paid Rs12,669 crore for a 17.14% stake in SSTL. This deal increased the valuation of SSTL to Rs73,914.8 crore, several times higher than its original valuation when Sistema first brought stake in the company. However, SSTL has been left out of the 2G investigation because of the government’s intervention, Mr Bhushan had said in his petition.

In all the hype around stake sale, purchase and valuation, minority shareholders, who held about 15% in STL were left high and dry. Following stake sale by STL and to Sistema, minority shareholders’ stake got reduced to a mere 2.5%. Sistema, in a filing to the London Stock Exchange, said that on 23 May 2008 it bought additional 21% stake at minimum of Rs156 per share from the Indian promoters with an option of upping this amount if the fair value in September in 2009 was even more. However, when the Russian Federal Agency bought the stake in SSTL, the company had said that it would issue fresh equity shares at Rs49.31 per share for an investment of about $676 million. Both the times, minority shareholders were not provided any exit option at that value.

“In view of the changed conditions after SC judgment, the management has begun its initiatives to meet the minority shareholders and discuss the company’s current status, significant and serious legal and financial challenges before the company and also any alternate to the listing including exit option. This process will continue simultaneously along with the company’s fight for licenses and at the appropriate time, the whole matter will be placed before the board for a reasonable decision/direction in the matter,” SSTL said in the email reply.

However, Association of Minority Shareholder of SSTL, in an email clarified that they have not recieved any offer/ initiative for exit option from the company.

SISTEMA SENDS A LEGAL NOTICE TO THE REPUBLIC OF INDIA

Moscow, Russia – February 28, 2012 – Sistema JSFC (“Sistema”) (LSE: SSA), the largest diversified public financial corporation in Russia and the CIS, announces that it has today sent a formal notice to The Republic of India notifying it of a dispute under the Bilateral Investment Treaty (BIT) between the Government of the Russian Federation and the Government of the Republic of India arising from the decision of the Supreme Court of India issued on February 2, 2012, regarding the cancellation of 122 telecom licenses, including 21 licenses belonging to Sistema Shyam TeleServices Ltd (“SSTL”), in which Sistema owns a 56.68% share. Sistema believes that the cancellation of SSTL’s licenses following Sistema’s investment of billions of dollars into the Indian cellular sector is contrary to India’s obligations under the BIT, including obligations to provide investments with full protection and security and obligations not to expropriate investments.  

The formal notice requests The Republic of India to settle the dispute relating to the revocation of SSTL’s 21 telecom licenses in an amicable way within six months. If the dispute is not amicably resolved by August 28, 2012, Sistema reserves the right to commence proceedings against The Republic of India as provided in the BIT. 

Licences lost, telcos strive not to lose talent

Licences lost, telcos strive not to lose talent

Surajeet Das Gupta / New Delhi Feb 10, 2012, 00:23 IST

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When Sistema Shyam CEO Vsevolod Rozanov saw the number of employees attending a ‘town hall’ meeting organised at the company headquarters in Gurgaon double this Monday, he was not surprised.
The heavy attendance was only to be expected, as employees were concerned after the Supreme Court cancelled the company’s licences in 21 circles. The company has four months to switch off and has nearly 3,500 employees directly on its rolls, the highest among new telecom operators.

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Rozanov tried his best to allay all their fears. He assured them increments and performance-linked incentives — a substantial portion of pay — would come on time. He said annual appraisals would begin in February and vacant positions would be up for grabs for internal candidates before outsiders. And, the company would continue aggressive marketing to launch four new tariff plans in 30 days. He made it clear advertising spends would not be curtailed.
The company may appear to be putting up a brave face to keep its flock together. But, top managements across many of the eight companies whose licences were cancelled are spending a substantial part of their time to ensure their 7,500-odd employees do not panic.
Idea Cellular won’t talk, but Managing Director Himanshu Kapania wrote to employees on February 3, assuring them the judgment would have no impact on the continuity of services in the seven circles. However, he also warned them to be careful that the judgment had led to aggression from some competitors spreading misinformation to acquire their customers.
Some telcos have complained to the government that competing operators are creating panic among their subscribers.
At Uninor, which has 2,000 direct employees, Managing Director Sigve Brekke sent an email to all employees, giving a critical assurance: they would not close shop. The emotional email said “we are not closing down” and “Telenor group” did not come to India to “quit” and just “walk away”. Over the weekend, around 1,000 Uninor employees have hit shops and distribution points, registering their presence in the market to comfort distributors and retailers. So that employees are assured directly by the top management, Uninor has run live interviews on its intranet, where employees’ questions have been taken up. Senior executives have conducted town hall-type meetings at virtually all its offices. “We are flashing tickers on the internal network, detailing daily business achievements. The message is clear. Uninor is here to stay,” said a spokesperson.
The company says the efforts have worked. Uninor has secured 300,000 new customers, more than it ever has in a weekend since the start of operations. “We are a tightly knit team and we are right now very motivated to prove a point,” said the spokesperson.
Sistema’s Rozanov shared with his employees the shareholders’ decision to bid for 2G spectrum coming up for auction, and win back its licences. “Of course, there will be concerns in the 3,000 employees’ minds. But, our message is clear: it’s business as usual. We have told our employees they should not allow rivals to take their market share. They will all be given higher targets to achieve and we will push new tariff plans to woo new customers in the coming months,” says Rozanov.

“Except for one or two markets, we are not seeing any unusual trend in offtake after the judgment. I don’t see the churn going up, as we have limited competition in the CDMA space,” he says.
Sistema today launched a new tariff plan. MTS customers will be able to make unlimited MTS-to-MTS local and national calls at rates as low as zero paisa.
Everyone is not positive, though.
A senior executive of one of the smaller operators whose licences were cancelled says on the condition of anonymity, “We had 300 employees; 200 have already left after a lack of bank funding forced us to reduce manpower. I am sure most of the 100 who remain will look for jobs voluntarily.”
Analysts say the cancellation comes at a time the job market is not buoyant, especially in telecom.

MTS offers unlimited calls

MTS offers unlimited calls

Press Trust Of India
New Delhi, February 09, 2012

First Published: 20:59 IST(9/2/2012)
Last Updated: 21:14 IST(9/2/2012)

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Sistema Shyam TeleServices, which operates under the brand MTS, on Thursday launched a new tariff plan allowing subscribers to make unlimited local and national calls within the network.
“This is a first of its kind initiative for both for its new and existing prepaid voice customers

across India. MTS customers will now be able to make unlimited MTS to MTS local and national calls at a rate as low as zero paisa,” SSTL said.

Exiting India not an option, says Sistema Shyam

 New Delhi, Feb. 9: 

Russian major Sistema wants to stay invested in India and is not considering exiting the telecom venture as of now.

The company, one of the players affected by the Supreme Court ruling last week on licence cancellation, is now looking forward to fair auction rules so that it can buy back spectrum.

“Exiting is not an option being considered as of now. We have long-term plans for India and we are working with the Government to see how best we can move ahead. The rules of the auction will be crucial and we hope that the Government policy will create some differentiation between new and incumbent players,” Mr Vsevolod Rozanov, Chief Executive Officer, Sistema Shyam Ltd, told Business Line.

GSM spectrum

The operator offers services to about 15 million subscribers in 22 circles under the MTS brand on CDMA platform.

Mr Rozanov said that his team is thinking about bidding for GSM spectrum also along with CDMA to get dual technology status but the final decision will be based on the business case.

“We have the opportunity to get into the GSM space but it is not an obvious decision. It will depend on the business case which in turn is impacted by the auction rules,” Mr Rozanov said.

Apart from Sistema, other foreign players affected by the 2G ruling include Norway's Telenor, Bahrain-based Batelco and UAE-based Etisalat. While Batelco has already announced its decision to exit, Telenor is keeping that option open in case the auction rules are not conducive enough for it to win spectrum.

Sistema Shyam's confidence may be borne from the fact that it basically needs CDMA spectrum for which there may not be too many bidders. The only other player which may bid for CDMA spectrum is Reliance Communications that too for incremental airwaves. If the Russian company bids for GSM spectrum and wins, it will only be a bonus.

Separately, Sistema is also filing a review petition against the apex court's verdict. According to sources it is also invoking provisions of an international treaty signed between Russia and India which essentially protects investments from each others countries. (Russian Government has invested nearly $600 million in Sistema Shyam).

New tariff plan

A clear indication of its intention in India is the new aggressive tariff plan the company announced on Thursday offering free calls and SMS between its subscribers for a flat rate of Rs 147 a month.

“Our team is charged up even more post the recent developments. The next few weeks will be crucial but at the operational level its business as usual,” said Mr Rozanov.

tkt@thehindu.co.in

Exiting India not an option, says Sistema Shyam

 New Delhi, Feb. 9: 

Russian major Sistema wants to stay invested in India and is not considering exiting the telecom venture as of now.

The company, one of the players affected by the Supreme Court ruling last week on licence cancellation, is now looking forward to fair auction rules so that it can buy back spectrum.

“Exiting is not an option being considered as of now. We have long-term plans for India and we are working with the Government to see how best we can move ahead. The rules of the auction will be crucial and we hope that the Government policy will create some differentiation between new and incumbent players,” Mr Vsevolod Rozanov, Chief Executive Officer, Sistema Shyam Ltd, told Business Line.

GSM spectrum

The operator offers services to about 15 million subscribers in 22 circles under the MTS brand on CDMA platform.

Mr Rozanov said that his team is thinking about bidding for GSM spectrum also along with CDMA to get dual technology status but the final decision will be based on the business case.

“We have the opportunity to get into the GSM space but it is not an obvious decision. It will depend on the business case which in turn is impacted by the auction rules,” Mr Rozanov said.

Apart from Sistema, other foreign players affected by the 2G ruling include Norway's Telenor, Bahrain-based Batelco and UAE-based Etisalat. While Batelco has already announced its decision to exit, Telenor is keeping that option open in case the auction rules are not conducive enough for it to win spectrum.

Sistema Shyam's confidence may be borne from the fact that it basically needs CDMA spectrum for which there may not be too many bidders. The only other player which may bid for CDMA spectrum is Reliance Communications that too for incremental airwaves. If the Russian company bids for GSM spectrum and wins, it will only be a bonus.

Separately, Sistema is also filing a review petition against the apex court's verdict. According to sources it is also invoking provisions of an international treaty signed between Russia and India which essentially protects investments from each others countries. (Russian Government has invested nearly $600 million in Sistema Shyam).

New tariff plan

A clear indication of its intention in India is the new aggressive tariff plan the company announced on Thursday offering free calls and SMS between its subscribers for a flat rate of Rs 147 a month.

“Our team is charged up even more post the recent developments. The next few weeks will be crucial but at the operational level its business as usual,” said Mr Rozanov.

tkt@thehindu.co.in

Russia steps in to help AFK Sistema in India

February 9, 2012
Alexei Baev, Vladimir Zykov, Izvestia

India’s Supreme Court has revoked telecom licenses from AFK’s Indian division. The Russian authorities have intervened to settle Sistema Shyam Teleservices scandal.

An Indian court revoked 21 of the company’s 22 telecommunications licenses.

Related:

Statement from Sistema JSFC

“The Russian Embassy is concerned about the situation with SSTL. Russian legal experts are scrutinizing the 400-page ruling of India’s Supreme Court, seeking lawful ways to solve the problem in accordance with Indian legislation. Our primary goal is to settle the problem and protect the interests of Russian investors,” Sergei Karmalito, Senior Counselor at the Russian Embassy in India, told Izvestia. Russia’s Federal Agency for State Property Management invested a hefty $600 million in SSTL––something Indian officials should take into account.

It is no surprise that Russia’s government agency is intervening in the conflict: last year, the Federal Agency for State Property Management acquired a 17.4% stake in SSTL. Rather, it is the agency’s speedy reaction that is surprising: the Supreme Court passed its decision on Thursday of last week. According to the Indian court, the licenses – the court revoked a total of 122 licenses from 11 companies – were granted to operators in violation of the procedures and requirements of India’s Department of Telecommunications.

In February 2011, India’s Central Bureau of Investigation arrested ex-Telecom Minister Andimuthu Raja on charges of miss-selling mobile phone frequency licences. Raja is accused of failing to hold a tender for the licenses, despite the government’s recommendations, and instead selling them at 2001 prices. Indian government experts estimate the loss to the budget at up to $40 billion. The minister’s unlawful behavior provided grounds for the court’s decision to revoke the licenses.
All companies affected by the decision of India’s Supreme Court, including SSTL, will continue to provide services for four months. During this period, the Indian regulator promises to decide how to proceed.

“The hottest heads suggest holding a tender for the resale of frequencies and licenses where the affected companies would bid on par with new contenders. We think that would be unfair,” Karmalito said. “Over the past few years, the company has acted in strict accordance with India’s existing laws. In fact, during this period it was SSTL that shaped India’s market for CDMA services, as there were no other bidders when the company submitted its application for these frequencies.
SSTL says it will not surrender without a fight. “Our company reserves the right to use all lawful means to protect its interests,” SSTL Corporate Communications Director Viraj Chouhan told Izvestia. “We are not going to leave the Indian market, and we remain a nationwide operator servicing over 15 million customers across the country,” he stressed.

Sistema has not yet announced its response. Speaking on condition of anonymity, a source with AFK suggested that operators could be asked to pay more to keep their frequencies. “All this arm-twisting is aimed at getting more cash out of the operators’ pockets, thus compensating for the alleged loss of $40 billion caused by the ex-minister’s unlawful behavior. This amounts to blackmail at the government level. Such situations have never occurred on other countries’ markets,” he emphasized.

Yet, analysts don’t doubt the advisability of Russia’s investment in the Indian telecom market. “AFK Sistema hoped to bring its Indian subsidiary to a breakeven EBITDA margin by 2014, which is a long-term goal,” said Ilya Rachenkov, an analyst with Investcafe. “Investing in the Indian company is very promising business, as this market is gaining momentum,” he added. If the companies face a choice between losing business and paying more, they will pay, according to Leonid Delitsyn, an analyst at Finam.

“This is a quick solution for the companies. They could start a legal battle but it would take a long time. It is more expedient for the companies to pay again and settle the conflict quickly,” Delitsyn suggests.

According to Mr. Rachenkov, the Indian authorities hugely inflated the presumed loss by putting it at $40 billion.

MTS willing to bid at any price to stay

Rates will double due to higher price of spectrum, Rozanov

Surajeet Das Gupta / New Delhi Feb 08, 2012, 00:20 IST

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Sistema Shyam Teleser-vices boss Vsevolod Rozanov predicts rates in the mobile space will double because of the higher price of spectrum to be paid through an auction process by operators.
Sistema Shyam TeleServices Ltd is a venture involving equity participation by Sistema of Russia, the Russian Federation and the Shyam Group of India. The company brought the MTS brand into India under a brand license agreement with Mobile TeleSystems (MTS).
Breaking his silence after the Supreme Court cancelled all its licences, Rozanov, president and CEO of Sistema Shyam told Business Standard: “One has to be ready with the consequences of the judgment. Rates will surely double. Not what some have said, that it will be only 20 per cent. I think rates will hit at Rs 2 per minute, as companies now have to pay higher price for spectrum in auction. Earlier, the new operators were not making money from low spectrum price but passing on the benefit to consumers. That is over now.”

Rozanov said the decision of the court had serious consequences for not only operators but tower operators, network operators and other vendors who depend on them for business.
On Sistema’s plan, Rozanov said it would follow a dual policy. It will continue to look at legal options while participate in the auction. The company is in the process of filing a review petition against the judgment. However, he said, the key concern was on abruptly stopping services after four months or wind-down operations. “Our main concern is, if we have to wind down operations, its impact on customers and our vendors. We can’t switch on and switch off networks; it takes many months for networks to stabiles. So, something has to be done for serious players who want to stay,” said Rozanov.
The Sistema chief also added they had invested $ 3.1 billion in India operations.
“As far as I know, our shareholders have no intention of writing off any investment,” added Rozanov.
However, the Sistema boss said the company was eager to bid for the auction and also for getting additional spectrum, already due in many circles. “We would like to bid. However, it will depend on the rules of the auction. We will bid at whatever price,” he said.

Russian President may take up the issue in his March visit..

CANCELLATION OF 122 TELECOM LICENCES Russia to Take Up Sistema’s Cause with Indian Govt KALYAN PARBAT KOLKATA Russia is set to join Norway in mounting diplomatic pressure on India to protect foreign investors who have pumped in billions of dollars in telecom firms whose licences were scrapped by the Supreme Court last week. Norway’s minister for IT and Government Administration Rigmor Aasrud met telecom minister Kapil Sibal on Tuesday to express her government’s concern over Telenor’s . 14,000 crore investment in its Indian operation, Uninor. Russia’s communications minister Igor Shchyogolev is likely to follow suit and communicate concern over the cancellation of Sistema’s pan-India mobile permit by the apex court. Indian operations of Telenor, Sistema, Dubai’s Etisalat and Bahrain’s Batelco are among the 122 licences that have been scrapped. The Russian Federation, which owns a shade over 17% in Sistema Shyam, is likely to depute Shchyogolev to take up the matter with his Indian counterpart Kapil Sibal, a top official in the Russian embassy told ET. Shchyogolev is expected to drive home the point that Sistema did not break Indian laws and is being unfairly penalised. Sistema Shyam, a joint venture between Russian conglomerate Sistema and India’s Shyam group which retails mobile services under the MTS brand, is also likely to file a review petition in the Supreme Court. Its mobile permits in all regions except Rajasthan were quashed by the apex court. Russia, an official who did not wish to be named said, does not favour immediate international arbitration proceedings because it believes its long-term economic ties with India can help break the ice within the next two months. “Arbitration in any international court of law is both time consuming and costly. The outcome can also never be predicted,” the official quoted above said, adding that the meeting of the two ministers should yield a resolution. Sistema has not formally enlisted the support of the Russian government yet, the official said. If the Russian minister fails to make headway, the issue may figure during Russian Federation president Dmitry Medvedev’s upcoming meetings with the Indian leadership during his Delhi visit in late-March for the Bric summit. “President Medvedev’s intervention on the Sistema case may be sought only if all bilateral initiatives, including talks at the level of the communication ministers of both countries fail to resolve matters,” said a top official in the Russian embassy. Meanwhile, the Russian Federation is about to nominate a director on the Sistema Shyam board. “SSTL has decided for induction of a Russian Federation representative as director on its board. However, a formal nomination of the director is awaited from the Russian Federal agency,” said a Sistema Shyam spokesman. According to The Wall Street Journal, Sistema has said it will not lay off its India staff nor renegotiate deals with equipment vendors, about 50% of whom are Chinese. Like Telenor, it has reportedly indicated that its Indian JV, SSTL will bid for the 2G airwaves provided the base price is reasonable once the new auction rules are notified. Sistema and the Russian government collectively own nearly 74% in SSTL, while the Shyam group and others hold 24% and 2.8%, respectively.

Sistema Shyam Plans Plea Against License Cancellation

NEW DELHI -- The Indian unit of Russia's Sistema JSFC is preparing to file an appeal asking the Supreme Court to review its order cancelling the company's telecommunications licenses along with those of several others.
"We think there are good reasons to believe that we can be successful [in the review petition]," Vsevolod Rozanov, president and chief executive at Sistema Shyam Teleservices Ltd., said Tuesday. "Our overall management is finalizing the steps."
In case the review petition is unsuccessful, Sistema Shyam plans to file a curative petition.
According to Indian law, an individual or company can apply for a review of a Supreme Court ruling within 30 days of the judgment. If that is dismissed, another plea--termed a curative petition--for reconsidering a judgment can be filed.
Sistema Shyam Teleservices is 17.14%-owned by the Russian government, 56.68% by Sistema and the rest by India's Shyam Group.
The company has invested more than $3 billion and provides services on the Code Division Multiple Access, or CDMA, technology, in all of India's 22 service areas under the MTS brand. It has 15 million users.
India's Supreme Court last week ordered the cancellation of 122 mobile telecom service licenses--including 21 of Sistema Shyam--issued without auction after January 2008. The ruling, which will be operative after four months, came on complaints of corruption in the allotment of the licenses.
Sistema Shyam follows Tata Teleservices Ltd. in stating that it will file a review petition. Tata Teleservices' three licenses are affected due to the court order.
Mr. Rozanov said the Russian government is "concerned," and is being apprised on the developments.
Russian government officials couldn't be reached for comments. They may get involved in discussions with Indian authorities to protect Russian investments.
Norway's information technology minister has already met India's communications minister to discuss the license cancellation of the Indian unit of Norwegian company Telenor ASA.
Sistema Shyam still has faith in the potential of the Indian telecom market, which is the second biggest and the fastest growing in the world. It plans to participate in the auctions that India's telecom department has to conduct within four months to real lot the licenses and bandwidth, Mr. Rozanov said.
"We have invested huge money, we do believe in India and we do believe in the opportunity," Mr. Rozanov said.
For now, its business usual for Sistema Shyam. It isn't planning any layoffs or cutting its contracts with vendors, he said.

Sistema Shyam Teleservices Signs Agreement With Vodafone India

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MOSCOW -(Dow Jones)- Sistema Shyam Teleservices Ltd., majority owned by Russian conglomerate AFK Sistema (AFKS.RS), has signed a franchising agreement with Vodafone India, Russian daily Vedomosti reports Tuesday, citing Vsevolod Rozanov, Sistema Shyam's general director.
According to the agreement, Vodafone sells modems under the NetCruise brand that run on Sistema Shyam's network. Sistema Shyam will share the revenue for servicing clients with Vodafone. Modem users will be considered Sistema Shyam subscribers but will be billed by Vodafone, Rozanov says.  

Sistema Shyam Teleservices Ltd raises Rs 1280 cr loan from banks through NCDs

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The Indian arm of Russian conglomerate Sistema, that offers mobile services under the MTS brand has raised Rs 1280 crore loan from a consortium of banks through Non Convertible Debentures (NCD).

Deutsche Bank is the lead banker of the issue. This issue has been partially secured by guarantee of one of Russia's leading bank, Sberbank.

This is the second time in the last six months the company has raised money to fund its expansion plans. In September 2011, it has raised a Rs 920 crore loan from Barclays Bank and ICICI Bank. The telco has also said that it currently had several other facilities in pipe-line.

The entire amount of INR 1280 Crore has been received by SSTL. The 8 year Debt is payable by 2019, the company said in a statement.

"It was quite challenging to raise such significant funds with such long tenor under current uncertain regulatory environment in India, but business has to continue and grow. We are planning to utilize the proceeds to further scale up our telecom operations and repayment of maturing loan," Sergey Savchenko, chief financial Officer of Sistema Shyam Teleservices Ltd said.

The company also got about $600 million when the Russian government bought under 20% stake in it in December 2010.

Post this deal, Sistema's stake in the JV has declined to about 54%. There are no changes in the Shyam group's shareholding and it has about 24% in the JV. Other minority shareholders own the residual 2% in the telco.