Russia’s Sistema slumped to a loss in the quarter ended December 2011, after writing off nearly $700 million from the suspension of its telecom licences in India.
The Supreme Court in February had ordered the cancellation of 122 licences issued in January 2008 over alleged irregularities in their allocation. The cancelled licences included pan-Indian licences of Sistema and Norwegian company Telenor.
Sistema posted a fourth-quarter net loss of $530.2 million, compared to a profit of $447.3 million in the year-ago period. The net profit figure, excluding one-off items, came in at $261.4 million. Revenue in the quarter climbed 15.3 per cent to $8.4 billion.
“Recent news with regard to (Sistema’s Indian) licences has been a concern both to us and our shareholders... We are taking all necessary actions to protect our investment and minimise our exposure,” chief executive Mikhail Shamolin said.
The apex court had asked the government to conduct auction, while the licences were to be quashed by June 2. However, earlier this week, it extended the validity of the licences to September 7, besides asking the government to conduct spectrum auction by August 31.
The Telecom Regulatory Authority of India also came out with its recommendations on spectrum auction earlier this week. It proposed a reserve price of Rs 3,622 crore per megahertz (MHz) in the 1,800-MHz band (for GSM services). The reserve price is close to 10 times higher than what operators had paid in 2008 for acquiring the licence at Rs 1,658 crore, which came bundled with 4.4 MHz of 2G spectrum.
“This price is absolutely unacceptable... So far, it is only a recommendation and we hope for a more economically reasonable approach,” Shamolin told reporters in Moscow. Shamolin said he would propose a buyback of around $300 million worth of shares at the group’s next board meeting.
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Sistema had earlier asked the Indian government to resolve the issue in six months, lest it would start proceedings against the government as provided in the Bilateral Investment Treaty. Telenor, too, had said it would seek damages from the Indian government, if the issue of its 22 licences was not resolved.
Telenor, which owns a 67.25 per cent stake in Unitech Wireless through its unit registered in Singapore, has sent a notice to the Indian government threatening international arbitration if the latter fails to find a solution.
Telenor and Sistema have invested close to Rs 30,000 crore in India. Both had also filed review petitions in the Supreme Court, but these were dismissed. Telenor plans to file a curative petition in the court, while Sistema has maintained it would explore legal course of action.