Sistema Shyam TeleServices Limited (SSTL), the Indian telecom arm of Russian conglomerate Sistema JFSC, has been part of the Indian telecom industry for the past eight years. It is now beginning to gain a foothold in the market, focusing on data to achieve growth while continuing to remain a pure-play CDMA operator. This strategy seems to have paid off as the company broke even at the operating level in six out of its nine operational circles during the quarter ended March 2015. According to SSTL, this was due to the growing share of non-voice revenues and data services, with data contributing 51.1 per cent of its total revenue during the quarter. The company’s data card subscriber base, meanwhile, grew at 39 per cent year on year to reach 1.8 million during the quarter ended March 2015. SSTL also expanded its high-speed data services across 850 towns in its nine circles.

In addition, the company attained a positive operational income before depreciation and amortisation in the Tamil Nadu, Delhi, Kolkata, West Bengal, Rajasthan and Karnataka circles. It is now working towards the same in the Uttar Pradesh (West), Gujarat and Kerala circles. However, it continues to post net losses, recording a net loss of Rs 3.91 billion for the quarter ended March 2015 against a net loss of Rs 3.61 billion during the corresponding quarter in 2014.

Meanwhile, taking a clear stand on net neutrality, SSTL recently launched its OpenWeb data plans starting at Rs 299, which allow users to equally access all websites and services on SSTL’s network. Terming the plan as an “anti-zero rating” one, the company has affirmed its stance on the net neutrality debate that has been raging in the Indian telecom sector ever since Bharti Airtel decided to start charging its subscribers for using VoIP services. The debate intensified with the announcement of Mark Zuckerberg’s Internet.org partnership with Reliance Communications and the introduction of Airtel Zero. While zero rating allows consumers to access services without accruing data charges, its primary motive is to encourage the usage of a particular service, which, critics argue, unfairly favours larger service providers that can absorb the lost data revenue. On the other hand, SSTL’s OpenWeb plans have been designed to provide consumers with absolute freedom in terms of surfing the internet and availing of various internet-based services without discrimination.

In a strategic move, SSTL did not participate in the latest round of spectrum auctions that were held in February 2015. It felt that the reserve price of Rs 36.46 billion per MHz for 800 MHz was too high and did not merit a strong business case for buying additional spectrum. In addition, it felt that there was no point in acquiring additional spectrum if the existing spectrum it won during the latest auction was not made contiguous. The company has maintained that this should be done without any additional charges being levied as that would amount to changing the rules of the game and violating the principles of a level playing field.

The way forward

While SSTL stayed away from the February 2015 auctions, it is looking at participating in the 2020 auctions when a lot of spectrum is expected to come up for sale. Over the next two to three years, the company plans to carefully evaluate its current strategy in order to make a transition towards becoming a long term evolution (LTE) technology-based service provider. It is waiting for regulatory hurdles to ease, particularly with regard to spectrum sharing and trading as these are extremely critical factors for offering LTE services in the long term. While spectrum sharing has been approved by the Department of Telecommunications, a decision on spectrum trading is still awaited. The company has also been advocating partnerships and alliances with telecom companies for launching LTE-based services. In fact, it has been reported that SSTL is in talks with Reliance Communications to merge their Indian telecom businesses through a stock swap. If completed, the deal will be the first major consolidation activity in the highly competitive Indian market. Hence, the next few years are going to be crucial for SSTL as it tries to establish its position in the Indian telecom market.