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Sistema Gives Deadline To Indian Govt To Resolve Its License Issue

Sistema Shyam Teleservices (MTS India) has given a deadline to the Indian government to formulate a strategy to resolve the issue pertaining to the cancellation of its 2G license in the country, reports The Economic Times. While the company has not shared details with MediaNama, it has responded to our queries with the following note:

“Would like to confirm that communication exchange between the Indian Government and Sistema – the majority shareholder in Sistema Shyam Teleservices Ltd has indeed happened. This is to ensure protection of investments of over USD 3.2 billion made in Sistema Shyam Teleservices Ltd”

MTS along with other affected telcos in the 2G spectrum are expected to lose its licenses on January 18, due to the Supreme court judgement in February 2012, which had revoked 122 telecom licenses across 22 telcos. Following this, the telco will be forced to shut its operations and discontinue the service to its 16.64 million customers in India.

Citing a communication sent to the external affairs ministry and the telecom ministry, the report stated Sistema has warned the government that it would be initiating international arbitration proceedings against the government and seek billions of dollars worth damages if the government fails to restore its 2G licenses before the Indo-Russian summit expected to happen later this month on December 24.

In the communique, Anya Goldin, Sistema’s Global Vice-President & General Counsel stated that shutting down Sistema’s operations would be unjust to Sistema and its shareholders and could pave the way for serious repercussions for the country, as indicated by the report. He also pointed out that this development could affect the diplomatic interests with Russia as well as India’s position in the global business scenario.

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Its worth noting that the FDI (Foreign Direct investment) in the telecom sector had dropped to $43 million for the April-September period, as per the latest numbers from the Department of Industrial Policy and Promotion (DIPP), as pointed out by a Moneycontrol report.

Sistema, which had CDMA spectrum, and runs mobile services under the MTS brand, chose not to participate in the recently concluded 2G auctions for spectrum.

Previous Developments: Last month, Telecom Minister Kapil Sibal had instructed the Law Ministry to take necessary actions in anticipation of legal action from the Russian conglomerate Sistema. Sibal had reportedly written a letter to the Law Ministry to appoint an arbitrator for the government and finalize the government’s stand, in case Sistema decides to take legal action against the government.

Prior to this, the Russian Ambassador had stated that Sistema will go for International arbitration if the 2G license cancellation issue was not resolved in Indian courts while DoT had stated that it will be supporting Sistema’s curative petition, as indicated by a separate The Economic Times report. The Telecom secretary R Chandrasekhar had however pointed out that the government has no power in deciding the listing of curative petitions in courts.

In February 2012, 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, however the petition is yet to be heard on the Supreme Court.

MTS had also claimed that it would be discontinuing all its investments in its voice business until the spectrum auction commences in the country, and focus on its data services. The company had not participated in the recently concluded 2G spectrum auction, stating that TRAI had unfairly priced CDMA spectrum with the base price at 18,200 crore, about 1.3 times that of GSM base price and it believed it was unfairly punished by the Supreme Court’s judgement in February 2012.

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