Sistema’s Indian operation targets breakeven within two years

Sistema’s Indian operation targets breakeven within two years

10 APR 2013

Sistema Shyam TeleServices Limited (SSTL), the loss-making Indian subsidiary of Russian conglomerate Sistema, is aiming to break even by the end of 2014 or first half of 2015.

SSTL, which was affected by the Supreme Court’s decision last year to cancel a swathe of 2G licences India awarded in 2008, racked up an OIBDA (operating income before depreciation and amortisation) loss of INR2.78 billion ($51 million) in the three months ended 31 December 2012.

That was a drastic improvement, however, on the INR5.69 billion OIBDA loss during the same quarter the year previously. The full-year OIBDA loss for 2012, at INR14.46 billion, was SSTL’s lowest in three years.

“During the quarter SSTL continued to take steps to reduce its cash outgo,” said Sergey Savchenko, SSTL’s chief financial officer. “The initiatives have resulted in further improvement in OIBDA margins, by 16 percentage points, during Q4 2012.”

More encouragingly for SSTL, full-year revenue grew by 31 per cent to INR16.2 billion.

SSTL also expects operational costs and capital spending – along with interest rates and one-off restructuring costs – to fall from $561 million in 2012 to $415 million this year. Annual cash requirements are then expected to drop below $250 million in 2014 and 2015, which, in turn, should then boost OIBDA.

SSTL reports its operations in West Bengal broke even during the 4Q 2012, but it will not be until the end of 2014 or beginning of 2015 that the Indian operator expects to reach an OIBDA breakeven point across all the 9 circles, or regions, in which it operates.

Operating under the MTS brand name, SSTL has been affected by the cancellation of 21 of its 2G licences, resulting in a loss of some customers to other operators. SSTL’s mobile subscriber base declined by 10.5 per cent, quarter-on-quarter, to reach 14.89 million as of 31 December 2012.

SSTL has since bought back some of its lost wireless frequencies, acquiring 800MHz spectrum in eight circles in an auction held in March. Committed to paying $665 million for 20-year licences, Sistema was the auction’s only bidder.

The $297 million paid by Sistema in 2008 for the same licences counts toward the total, while the outstanding balance can be paid over ten years starting 2016.

“SSTL secured spectrum in 8 of its core circles,” said Vsevolod Rozanov, SSTL’s chief executive. “With Rajasthan circle also a part of SSTL’s footprint, we will be able to potentially service 40 per cent of the country’s population, address around 60 per cent of data business potential, safeguard 75 per cent of our current revenues and significantly optimise our losses.

“We now look forward to turning the page on last year’s uncertainties and building an even stronger business in India through continued focus on our data centric-voice enabled strategy,” he said.

Author

Ken Wieland

Ken has been part of the MWC Mobile World Daily editorial team for the last three years, and is now contributing regularly to Mobile World Live. He has been a telecoms journalist for over 15 years, which includes eight...More

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