SSTL: If things don’t work out, we will wind up

Half a year after Russian conglomerate, Sistema's Indian unit, Sistema Shyam Teleservices, won back airwaves in the 800MHz frequency band for eight circles, the company's global finance chief Vsevolod Rozanov has warned that foreign investment will not flow in until the government creates a level-playing field and brings a policy to promote consolidation. In an interview with ET, Rosanov warns that if sectoral anomalies aren't corrected, it would jeopardize the company's investment of $3.6 billion till date. Excerpts:

What is your view on Trai's suggestion that there should be no auction of 800MHz band due to low demand?
We were taken aback by the regulator's decision. We participated in the March auctions on the premise that there will be roadmap and continuity for expansion of CDMA technology but received a rude shock. We only hope the telecom department understands our perspective and provides continuity for our expansion. We had to shrink in geography because the price was exorbitant.

If the government goes ahead with Trai's proposal, will you challenge it in court?
I can only say that I hope 800MHz is treated at par with 1800MHz. As a foreign investor, we don't have the ability to fight and use the tricks which domestic operators can. We can only ask the government to protect and support us. Before escalating this issue to higher levels in the government, we want to resolve this amicably. But, if things do turn out to be unfavourable, it makes sense to wind up rather than fight a court case for 5 to 10 years.

The government has permitted 100% FDI. Will Sistema buy out its minority partner or up its stake in the company?
Firstly, our till date investments need to be respected. Despite six months past the March auctions, we still haven't received the third carrier we had won. It is very frustrating, but we are given to understand that winners of the November auction haven't received their airwaves either.

Each time we meet government officials, we are assured that spectrum will be allotted in the next two to three weeks, but now it is more than six months and we still haven't received our spectrum. There is no point in buying anyone out in such a regulatory environment. We first need technical grounds, and then only will we be willing to increase our stake. We are committed but not a single rational foreign investor will put money into this mess right now.

Is Sistema looking to consolidate in the telecom market and does it make business sense for you to hence enter the GSM market?
Today, the first task for the management is to become positive cash flow by the first half of 2015. Moving into another technology will mean additional investment of $1-2 billion. Only after that can we talk about the future. At the current base to move into a different technology we will push our return on investments business by another four to five years.

So, will you participate in the 800MHz auctions if they are held?
If the Trai's proposal of reducing the floor price of spectrum were extended to 800MHz, it makes absolute sense for us to invest in the market. We will expand our geographical reach. May be not to all the 22 circles but there would be a very strong case for us to invest. For instance, we didn't want to forgo the Mumbai market but given the spectrum pricing in the March auctions, we had to let go of that fantastic data market.

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