Sistema Shyam bids for 8 circles as CDMA auctions kicks off

Russia’s Sistema Shyam Teleservices (SSTL) has bid for 8 out of the 22 license regions in the ongoing 800 MHz CDMA spectrum auction in India, according to sources.

The company, which operates CDMA-based telecom services under the MTS brand in India, had earlier told subscribers in 10 license regions (called circles) to switch over to other networks within a month.

Sistema was expected to bid for the remaining 12 circles.

The government is conducting today’s CDMA auction as a follow-up from an auction in November. In the November event, no bidder showed any interest in the 800 MHz spectrum. The earlier auction had priced the spectrum at Rs 9,000 crore (about $1.75 billion) for a pan-India allocation of 2.5 MHz each.

However, since none of the three CDMA-focused operators, Reliance Communications, Tata DoCoMo and MTS, showed any interest, the government was forced to the cut the starting price of the CDMA auction by 50% in January.

As such, Sistema would now be able to get pan-India spectrum for Rs 4,500 crore. If it is bidding only for 8 (premium) circles, it would need to shell out only about Rs 3,000 crore.

In addition, Sistema has already paid nearly Rs 1,650 crore (~$350 million) as part of its license fees, and therefore may likely have to pay only the remaining amount to restart its operations in the new circles. Earlier, Norwegian operator Telenor had bid for six circles at Rs 4,000 crore after its licenses were scrapped by the court in the same judgment. The company was allowed to set off its earlier payment of Rs 1,650 crore against the bid amount.

Sistema had an allocation of about 2.5 MHz across India as part of a 2008 licensing process. The licensing process was found to be conducted in violation of law, and all the allocations were scrapped by the Supreme Court two years ago.

The 10 circles that Sistema is scheduled to close are Assam, Andhra Pradesh, Bihar, Himachal Pradesh, Haryana, Jammu and Kashmir, Madhya Pradesh, North East, Orissa and Punjab. Most of them, however, are low revenue generating ones, though with high growth.

Sistema has had fairly impressive growth due to its data-focused approach in India.

Unlike the other new entrants, who were given spectrum in 1800 MHz, Sistema had got spectrum in the 800 MHz band, making it easier for the company to cover large areas with a smaller number of towers. The other CDMA players like Reliance Communications and Tata DoCoMo have also successfully tapped the demand for higher speed wireless internet in India.