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.