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Sistema Wins 2G Auction in 8 Circles for Rs 3,639 Cr

Russian conglomerate Sistema's Indian unit today won telecom spectrum in eight circles or zones for Rs 3,639 crore in an auction shunned by all other companies.

Sistema Shyam TeleServices Ltd (SSTL) bid to recover airwaves it lost when the Supreme Court last year scrapped 122 wireless mobile permits amid graft charges.

Telecom Secretary R Chandrashekhar said the auction ended in just three rounds with lone bidder SSTL putting in bids at the minimum bid price, which had already been cut by about half after no companies bid for the band in November.

In all 24 blocks in eight telecom circles or zones were allocated out of 61 blocks that were put for auction. "In other words, 40 per cent of the spectrum that was put for auction has been won," he said.

In value terms, the value of the spectrum which has been won is around Rs 3,639 crore, which represents little over 56 per cent of the value of spectrum put for auction," he said.

The government may not get any upfront payment as Rs 1,626 crore has to be adjusted against the license fee SSTL had paid in 2008. The licences cancelled by apex court included 21 of SSTL.

The auction results may dampen Finance Minister P Chidambaram's efforts to garner a reduced Rs 19,400 crore from spectrum sale this fiscal. He had previously targeted Rs 40,000 crore from spectrum auction to cut budget deficit.

None of the 12 telecom operators in the world's second-largest mobile phone market including Anil Ambani's Reliance Communications and Tata Teleservices participated in the auction as most of them considered the reserve or auction start price set by the government as too high.

Last spectrum auction in November drew just five bidders but none for the 800 MHz spectrum that Sistema sought today, and netted the government Rs 9,407 crore as against the government's expectations of Rs 27,000 crore.

In 2010, 11 companies had bid for airwaves to offer high-speed third-generation mobile-phone services and wireless Internet connectivity. It took 34 days and 183 rounds of bidding for 3G auction and another 16 days for wireless broadband (BWA) spectrum.

SSTL, which operates on the Code Division Multiple Acces (CDMA) platform, said it won spectrum in 800 MHz band in Delhi, Kolkata, Gujarat, Karnataka, Tamil Nadu, Kerala, Uttar Pradesh (West) and West Bengal.

Sistema, which has written off USD 700 million of its USD 3.2 billion investment in India since 2008, had previously said it would cease operations in 10 zones and bid in select areas.

"Given the range of variables we have considered and the spectrum cost for 800 MHz, it was a big challenge to arrive at a core list of 8 circles and to bid accordingly," SSTL President and CEO Vsevolod Rozanov said in a statement.

The firm had deposited Rs 613.75 crore for the auction, which made it eligible to bid for minimum quantum of 2.5 Megahertz spectrum (two blocks of 1.25 Mhz airwaves frequency) in 11 circles.

SSTL bid for only eight circles, which means it will have to close operations in Mumbai, Maharashtra and UP East, where the company has over 15 lakh subscribers.

It has already announced discontinuation of services in 10 out of 22 telecom circles - Assam, Andhra Pradesh, Bihar, Himachal Pradesh, Haryana, Jammu and Kashmir, Madhya Pradesh, North East, Odisha and Punjab.<br /> <br /> SSTL said spectrum won by it is technology neutral and would be valid for 20 years.

The company would be required to pay Rs 3,639 crore for the license period and the terms include payment of 25 per cent of the final bid amount within 10 days, followed by a payment moratorium until March 2016.

However, the company is likely to opt for full adjustment of Rs 1,626 crore after which it will be required to pay the balance amount in 10 annual installments from March 2016.

Emerging story. Watch this space for updates as more details come in
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