India needs more transparent rules to allow phone operators to merge, said Vladimir Evtushenkov, whose AFK Sistema (SSA) is struggling to recover its wireless licenses as Russian President Vladimir Putin visits New Delhi.
“The industry can’t be successful with a dozen operators fighting for a market share, it’s clear that consolidation is needed,” the Russian billionaire said in an e-mailed response to questions. India’s government needs more clarity in regulating the industry, including for mergers and acquisitions, he said.
India’s Supreme Court canceled 122 permits in February, prompting Prime Minister Manmohan Singh’s government to alter airwave policy, requiring operators to bid at auctions that collected less than a quarter of the planned $7.3 billion last month. The original allocation in 2008 had been corrupted by “money power” and some buyers’ “ability to manipulate the system,” the high court said.
Sistema unit Sistema Shyam TeleServices Ltd stayed away from the November auction and may now lose its license as soon as Jan. 18. Putin’s visit to India for talks with Singh today may help defend Sistema’s position, according to Alexander Vengranovich, an analyst at Otkritie Capital in Moscow. Sistema Shyam is 17 percent owned by the Russian government.
Sistema is appealing the court decision and wants its licenses returned. The Russian company is among operators including Norway’s Telenor ASA, Emirates Telecommunications Corp., or Etisalat, and Indian billionaire Kumar Mangalam Birla’s Idea Cellular Ltd. that lost permits. In the November auction, companies including Vodafone Group Plc and Bharti Airtel Ltd. avoided nationwide licenses and concessions in two of the biggest cities, New Delhi and Mumbai, because of high prices.
“Our situation is special,” Evtushenkov said. “In 2008, Sistema Shyam was the only operator seeking a pan-Indian CDMA spectrum. India’s controller and auditor general never said that CDMA frequencies were in such high demand as the GSM ones.”
Sistema’s talks with India are continuing, Evtushenkov told reporters in New Delhi today.
Sistema is set to buy Aircel Cellular Ltd., a unit of Malaysia’s Maxis Communications Bhd, for $3 billion, to expand in India, the Economic Times newspaper reported on Sept. 14, citing unidentified people.
Evtushenkov declined to discuss strategic plans for India until the decision on the company’s appeal is made. Indian legislation makes it unclear whether a company that acquires a license holder will retain the permit, according to Sistema.
Sistema’s shares advanced 0.4 percent to 24.5 rubles at 12:30 p.m. in Moscow.
During Putin’s visit, another Sistema’s unit, NIS, may sign agreements with Indian fixed-line operator Bharat Sanchar Nigam Ltd. and an information-technology company Tata Consultancy Services Ltd (TCS) on providing navigation services based on a Russian global-positioning system with local partners, NIS said.
Russia is trying to challenge U.S. dominance in space-based navigation systems. The country has spent at least $3.3 billion in the last decade to develop its Glonass system with 24 satellites. It’s an alternative to GPS which was first developed by the U.S. Department of Defense and then spread to civilian applications such as mobile phones and transport monitoring.
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