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MTS India To Discontinue Its Investment In Voice Business

Sistema Shyam Teleservices Ltd which operates its telecom services in India as MTS, will be discontinuing all its investments in its voice business until the spectrum auction commences in the country, and focus on its data services, reports The Economic Times. Vsevolod Rozanov, president and CEO of Sistema Shyam Teleservices, however informed that the existing customers will not face any issues at present, and that the company will take a decision on its voice services once the 2G spectrum auction concludes.

MTS was one of the 22 telcos whose licenses were revoked when the Indian Supreme Court cancelled 122 licenses in February 2012, giving its verdict in the 2G spectrum allocation scam case. Following the cancellation, Russian conglomerate Sistema had claimed that its investments were protected by Indo-Russian Bilateral Investment Treaty (BIT), and had asked the Indian government to honor the treaty to protect its $3.1 billion investment in Sistema Shyam TeleServices Ltd. (SSTL), the telecom joint venture with the Shyam Group. The company had also requested the government to settle the 2G dispute in six months i.e. by August 2012 and had filed a curative petition in the Supreme Court against the cancellation of its telecom licences on May 4, 2012.

Speaking to ET, Vsevolod Rozanov stated that the company was suffering a loss of $1.5 million every day and that their investors were slowly losing patience due to lack of clarity in the company’s future in India, which necessitated this action. He added that CDMA operations require significant CAPEX (Capital Expenditure) and it was becoming increasingly difficult for the operator to continue its operations in the country.

Financials: MTS currently claims to offer high speed mobile data services in more than 400 towns in India and last month, the company had reported a net loss of Rs 528 crore and total revenues of 407.2 crores for Q1 2012, a 72% growth YoY and 3.8% growth QoQ. Its mobile subscriber base had increased by 5.3% QoQ, touching 1.58 million customers as of 31st March 2012, while its data card subscriber base for the quarter had increased by 15% QoQ to reach 1.54 million subscribers as of March 31, 2012. Its non-voice revenues, which include both data and mobile VAS revenues, stood at Rs 142.9 crore, up 11.5% QoQ and accounting for 35.1% of total revenue, which is probably the highest among telecom operators.

Competition: While SSTL has a significant ‘data-only’ subscriber base, we’re not sure if positioning itself as a data-only operator will help it in attaining growth, specially at a time when telcos that had won 4G spectrum have started deploying high-speed data services. Note that MTS does not have a 4G license or spectrum, and faces competition from CDMA/EVDO based data services from Tata Teleservices and Reliance Communications, and 3G/HSPA services from operators like Airtel, Vodafone, Idea, Aircel and others.

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