Spectrum Cost Very High in India, Says SSTL

In process to merge with bigger rival Reliance Communications, Russian giant Sistema's Indian telecom arm SSTL Monday said cost of spectrum is "very high" in India and it is too tough for it to keep investing in New Delhi.

"We thought of partnership (merger with RCom) because actually the game is quite big. The cost of spectrum is very high. That's probably a common opinion. Just keep investing is too tough for us," Sistema Shyam Teleservices CEO Sergey Savchenko told PTI.

SSTL is in process to merge with RCom and it will hold about 10 percent stake in the new venture. SSTL operates in Delhi, UP West, Rajasthan, Gujarat, Karnataka, Kerala, Tamil Nadu, Kolkata and rest of West Bengal under MTS brand name.

His comments came against the backdrop of upcoming spectrum auction which is expected to fetch record bids of Rs. 5.36 lakh crores mainly due to highly priced telecom frequencies in the most efficient 700MHz band.

"Right from day one we invested in most advanced equipment which were LTE (4G) capable and future ready. In 2012 when (spectrum) prices went up we have to adjust with small footprint but still it was a serious game. We kept investing after 2012," Savchenko said.

Beyond spectrum companies have to invest in networks which was becoming tough for it to do alone, he said while explaining the rationale behind the merger call.

"We are not selling spectrum. We are not saying we are leaving India. We will watch how this strategy will develop," Savchenko said.

He also said that parent firm Sistema has created Sistema Asia Fund which is looking for investment opportunities in Asia, including India.

"We are looking at the opportunities in India market. Might be not at big scale as telecom investments. We have set $50 million (roughly Rs. 338 crores) Sistema Asia fund to look at strategic investment in startups and they are using our experience and knowledge specifically in IT and Telecom. $50 million is first tranche," Savchenko said.

Sistema entered India by buying stake in Shyam Teleservices in 2009. This was the year when other companies like Norwegian firm Telenor, UAE-based Etisalat and Japan's DoCoMo also entered in India.

The entry of new players led to cut throat competition in the telecom sector with call rates dropping as low as about 30 paise per minute from about Rs. 2.4 per minute.

Even before merger, MTS had cut data rates by up to 75 percent in some circles.

"We are not making any capital investment. Our effort is on to retain customers and give them uninterrupted quality service. RCom is interested in customers and these customers will be given a migration path. RCom will decide if MTS tariff will continue," Savchenko said.

At the end of February, MTS had over 77 lakh customers.