Friday, March 29, 2013

Sistema to rebuild MTS brand, to step up marketing spending


Russian conglomerate Sistema will increase marketing spends to rebuild its MTS telecom brand in India, executives said.

KOLKATA: Russian conglomerate Sistema will increase marketing spends to rebuild its MTS telecom brand in India, two executives aware of the matter have said. The executives, who did not want to be named, said Sistema's Indian arm, Sistema Shyam Teleservices, will increase media spends in 2013 "by at least 20% to strengthen performance and customer appeal of the MTS brand across its nine-circle footprint".

The development follows an internal company email, a copy of which was reviewed by ET, in which Sistema's global head of telecom assets, Anton Abugov, has told all Sistema Shyam employees that "the uncertain times are finally over for the company and work needs to be done to replicate the success of brand MTS in Russia and CIS countries in India". Sistema Shyam's spokesman did not respond to ET's emailed query on the size of the brand-building budget. The telecom operator, which offers CDMA services under the MTS brand, was among the worst hit in the February 2012 Supreme Court order in the 2G-spectrum allocation case. Earlier this month, it won permits in eight zones in a government-conducted auction of airwaves.

Abugov has also assured the 2,500 employees of Sistema Shyam that the company will go flat out to return to profitability. "There is a sea of opportunity across all revenue lines — be it voice, data and smart phones — which calls for absolute commitment to optimise all available resources," the email said.

The executives quoted above said the company is likely to implement the "key learnings on the quality and innovation front" that have made MTS the top GSM technology-based mobile services brand in Russia and key CIS markets like Ukraine, Armenia, Belarus and Turkmenistan. They clarified that the international brand-related learnings would be adapted to the company's CDMA operations in India.

Vsevolod Rozanov, president & CEO of Sistema Shyam, said, "Year 2012 was a challenging year for us. But with the uncertainties over, SSTL will concentrate its energies and resources to effectively execute its data-centric, voice-enabled strategy." Rozanov declined to reveal investment numbers.

The decision to commit fresh resources is being viewed by some as the company's plans to start afresh in India. Sistema had said in June last year that it would cease all investments in its voice business in India and focus on data services. The company was then reportedly losing $1.5 million a day in the country.

Thursday, March 14, 2013

Sistema sets its sights on data



Sistema sets its sights on data

It is back in the fray with a plan to offer 4G services, but its limited reserve of spectrum may play spoilsport
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It was slated to be the next big telecom battle. And this slugfest, focused on high-speed data on LTE 4G networks, as everybody had predicted, was supposed to be a three-way fight with Bharti Airtel, Reliance and Aircel pitted against each other.

However, on Monday, Russia's Sistema shook things up further by declaring its intention to roll out 4G LTE services on the 800 MHz band, the first and perhaps the only player in the country to do so.

The announcement came soon after its Indian joint venture, Sistema Shyam Teleservices (SSTL), the sole bidder in the 800 MHz CDMA auction, won the spectrum in eight circles for Rs 3,639 crore. Sistema said it picked up only those circles that have a sizeable (over 60 per cent) share of the country's data market.

However, it might be a while before Sistema launches its LTE 4G services. With the LTE 4G market still in its infancy, new players, which also includes Videocon, are unlikely to be in any hurry to launch their services. RIL, which has chosen the 2300 MHz band for 4G, is going slow on the launch and the launch is not expected until the end of the year. Airtel is off the ground but is moving with measured steps and has so far launched services only in select cities. SSTL, too, will be following their lead.

Says its soft-spoken president & chief executive officer Vsevolod Rozanov: "We are looking at a time zone of two to four years before we launch 4G LTE services. We have to first work out a business case for it. But our focus will be on driving data services, though we cannot live without voice".

Sistema, which lost its licences in 2012 after the Supreme Court cancelled all licences issued by former telecom minister A Raja following allegations of fraud, has been treading cautiously. It bid for only those circles that measured up to its parameters on pricing, spectrum availability and the data potential of the market.

Win some, lose some
It has resulted in the company shrinking its operations substantially. From being a pan-India player, it has now cut its operations to just nine circles (including Rajasthan). As a result, its subscriber base has fallen sharply. It is expected to fall by another 3.5 million after it shuts operations in three more old circles. However, that may not be a huge loss for the company as its new nine circles make up for 75 per cent of its current revenue.

Sistema had to do some tough juggling to ensure it did not miss out on new data opportunity while keeping its budget in check. For instance, Rozanov says that while Mumbai has a large data market, spectrum price was prohibitive (base price constituted 24 per cent of the total price of the eleven circles it had earlier decided to bid for) and, therefore, he decided to give the city a miss and instead use the amount to buy spectrum in five other circles with good potential in the data market. Similarly, it wanted to be in Andhra Pradesh, but decided against it as enough spectrum was not available to provide both quality data as well as voice services.

Rozanov's immediate focus is to push data usage through smartphones. He hopes to leverage on the fact that he will be able to double his tower capacity (he has more spectrum now) to handle data, which will mean improved services and higher data speeds.

At present, 20 to 22 per cent of SSTL's revenues come from data, 90 per cent of which is through dongle subscribers and the share of smartphones is near negligible. "Our challenge would be to increase usage on smartphones and create more applications," he says.
However, his biggest challenge would be to launch LTE 4G services with so little spectrum. It has only 3.75 MHz in each of the nine circles and there is scope to raise it to up to 5MHz in only seven circles.

Globally, 800 MHz is becoming a popular band for rolling out LTE 4G services, especially in Europe. At present, there are more LTE 4G services in the 1800 MHz band (about 40 per cent of the network), but the 800 MHz band is fast catching up. There are over 70 devices and 4G phones which run on the band, despite prohibitive prices.

But unlike India, the UK and other countries have offered at least 10 MHz of spectrum in the band to start with. Sistema's challenge becomes even more acute as its competitors in India- Reliance and Airtel- have plenty of spectrum, 20 MHz each in the 2300 MHz band. It simply means they can offer more bandwidth at higher speeds to customers.

Rozanov admits that for LTE 4G services the minimum spectrum needed is at least 5MHz, but in many circles like Delhi and Mumbai there is no scope to get that much spectrum for lack of availability. He is pinning his hopes on the example of Metro PC in the US, which has been able to offer services with limited amount of spectrum.

In addition to that Sistema also has some advantages over its Indian rivals in the 2300 MHz band. For one, 800 MHz being a low frequency spectrum is more efficient and gives an operator wider coverage and better indoor coverage, which is critical for data services, which are mainly used in offices and homes. It also means lower investment as fewer towers are required to cover the same area. The savings in investment would mean it has more leeway in pricing its products or improving margins.

However, competitors say the advantages do not give Sistema an edge. They say that while initially operators in the 2300 MHz band will have to make higher investment than those in the 800 MHz, in the long run they will score over Sistema as it will have to invest in towers continuously to support more subscribers. "So while we make the investment up front, they will to do it over a period of time, " says a senior executive of a rival operator.

Divided opinion
The opinion, of course, is divided on Sistema's future. Analysts say Sistema can get over the problem of limited spectrum in the 800 MHz band by following the global model-offering LTE 4G services across various spectrums, with consumers moving seamlessly from one band to another without them knowing. "Sistema could buy more spectrum in the 700 MHz or in other bands to resolve the spectrum limitation."

For now though, Sistema does not have to make any major investments. It has to pay for the new spectrum in installments and the money that it paid earlier to acquire the spectrum will be adjusted in the price. Also, it does not have to pay anything till March 2016. And after that it has to pay Rs 200 crore every year for ten years.

It could also redeploy its towers and equipment in the eight closed circles to support its network in the new circles. The company has 18,000 towers and equipment in the closed circles.

But can Sistema take on the expected aggressive challenge from Reliance or Airtel? Says Rozanov: "At the moment, I don't even know the 2300 MHz business case, but in the few areas like Kolkata or Pune that Airtel has launched, we are not threatened."

Tuesday, March 12, 2013

Sistema to start 4G LTE services in direct competition with Reliance Jio....


SSTL said in a global statement on Monday: “Spectrum in the eight circles is technologically neutral and valid for 20 years. This provides an opportunity to strengthen SSTL’s data-driven strategy through a possible LTE rollout in the future.”

The company’s entry in LTE services would pit it against Reliance Jio — which is likely to launch 4G services with its pan-Indian 2,300-MHz spectrum by the end of the year — besides Bharti Airtel, Aircel and Videocon.

inputs from Business standard

Monday, March 11, 2013

SISTEMA ANNOUNCES RESULTS OF INDIAN LICENCES AUCTION


SISTEMA ANNOUNCES RESULTS OF INDIAN LICENCES AUCTION





SISTEMA ANNOUNCES RESULTS OF INDIAN LICENCES AUCTION

Highlights

  • Secured 8 circles, with 3 carrier slots of 1.25 Mhz each
  • Final footprint to service 40% of country’s population, address over 60% of data potential and safeguard 75% of SSTL’s current revenues. 
  • 3 circles to close with resulting operations to consist of 9 circles
  • Licence cost reduced to US$ 368 million (approx.) net of previous licence fees

Moscow, Russia – March 11, 2013 – Sistema JSFC (“Sistema”, or the “Group”) (LSE: SSA), the largest publicly-traded diversified holding company in Russia and the CIS, today announces that the Group’s Indian telecom subsidiary, Sistema Shyam TeleServices Limited (“SSTL” or the “Company”), has won a spectrum in the 800 Mhz band in 8 circles following its participation in today’s licence auction.

The circles won by SSTL include Delhi, Kolkata, Gujarat, Karnataka, Tamil Nadu, Kerala, Uttar Pradesh (West) & West Bengal. The Company’s operational footprint will also include the Rajasthan circle which was not affected by the Supreme Court of India’s order dated February 2, 2012. When bidding for the spectrum, SSTL carefully considered a range of variables including spectrum pricing, number of carrier slots available, levels of competition, future data potential in the circles, etc. Based on such criteria, the Company decided not to bid for Mumbai, Maharashtra and Uttar Pradesh (East) and will immediately inform its customers of the closure of SSTL operations in those circles. As a result, SSTL’s final footprint will include 3 carrier slots of 1.25Mhz each in 9 circles, servicing 10.45 million of its customers.

For the 8 circles won by SSTL in the spectrum auctions today, the Company will be required to pay a total of approx. US$ 665 million (INR 3,639 crores) for a licence period of 20 years. The terms include payment of 25% of the final bid amount within 10 days, followed by a payment moratorium until March 2016, after which the balance amount will be paid in 10 equal annual installments. The Government of India has confirmed that SSTL will be able to set off the previous licence cost of approx. US$ 297 million (INR 1,626 crores) against the new spectrum cost.

The spectrum in 8 circles is technologically neutral and is valid for 20 years. This provides an opportunity to strengthen SSTL’s data driven strategy through a possible LTE roll out in the future. Moreover, the selected circles account for over 60% of the current data market in India.

SSTL intends to provide a more detailed operational update on the new footprint and future strategy before Sistema’s annual results on 16th April.

Mikhail Shamolin, President and CEO of Sistema commented: “Today’s news is an important result which highlights the success of our strategy as SSTL’s operations will now focus on the most prospective regions, servicing 40% of the country’s population, amounting to over 60% of the data market whilst also maintaining 75% of the company’s revenues. Crucially, this outcome results in no upfront cash licence cost, substantially reduced operating losses and a clearer roadmap for SSTL’s profitability. We look forward to providing more details about SSTL’s resulting footprint in due course.”

Thursday, March 7, 2013

Pass on Benefit of any Spectrum Price Cut: Sistema to DoT


Pass on Benefit of any Spectrum Price Cut: Sistema to DoT

JOJI THOMAS PHILIP NEW DELHI  : ET



    Russia’s Sistema has demanded that any cut in base price for airwaves in auctions should be extended to it, a move that may thwart the Centre’s efforts at slashing the reserve price for third round of spectrum auctions. Sistema-Shyam (SSTL), which offers mobile phone services under the MTS brand on the CDMA technology platform, is the lone participant in the second round of airwaves sale that begins on March 11. The Centre was forced to restrict the upcoming spectrum auctions to just the 800 MHz band used by CDMA operators as there were no bidders for the other frequencies. The government had earlier planned to sell unsold spectrum in the 1800 MHz band from last year’s auctions in four circles — Delhi, Mumbai, Karnataka and Rajasthan — along with a portion of airwaves held by incumbent operators in the 900 MHz band, during the March 2013 sale.
The Supreme Court had directed the government last week to sell all airwaves vacated by companies whose permits were quashed by the apex court in February last year and the move has forced the government to go in for a third round of airwaves sales, the timelines for which are yet to be finalised.
“Our participation in the ensuing auction is with a clear understanding that the relative price band will not be disturbed. Fairness and equity warrants that in the event Government of India takes a decision to reduce the reserve price in any of the 2G bands, the benefit of the price so reduced be extended to Sistema-Shyam by way of refund, adjustment on the excessive price paid by SSTL,” the company said in a March 4 com
munication to the telecom department.
Sistema said the decision to participate in the March 11 auctions were taken with ‘huge pain’, as it had to ‘simultaneously decide on closure of operations in other circles’ where it decided not to play a part in the airwaves sale. “We had to shrink our footprint as the reserve price has been so steep and not making any economic sense. The decision to close some of these circles are primarily due to the high reserve price, causing inconvenience to customers, loss of jobs for direct and indirect employees, loss of capital employed, huge dent on the image of Sistema, directly impacting the MTS brand,” the company’s communication added. Sistema’s communication comes even as the panel of ministers on spectrum headed by finance minister P Chidambaram is looking at reducing the base price for the third round of spectrum auctions. The empowered group of ministers on Wednesday decided that it would decide
on base price for airwaves with regard to future auctions only after the conclusion of the March 11 sale.
Sistema further said that India was a highly competitive market and relative advantage or disadvantage in spectrum prices had huge financial impact on companies. “We once again reiterate that the telecom department should consider reduction in reserve price for 800 MHz spectrum in case it is considering reduction in 1800 MHz and 900 MHz irrespective of participation in auction for the 800 MHz band,” the company said.
SistemaShyam, which has a customer base of over 14 million across 22 circles, had lost 21 of its mobile permits in the February 2012 Supreme Court order in the 2G-spectrum allocation case that impacted several operators. The company, which is the sole telecom operator in the country that uses only 800 MHz for its services, had stayed away from the first round of spectrum auctions in November citing high reserve price.

Disclaimer

A BLOG FOR ALL THE SHAREHOLDERS OF SSTL (FORMERLY SHYAMTELELINK LTD) TO COME TOGETHER AND DISCUSS ISSUES OF COMMON INTEREST. YOU CAN REACH US AT AMSOST@GMAIL.COM