UPDATE 1-Sistema scales back Indian mobile ops ahead of auction

Thu Feb 21, 2013 6:06am EST

* Halting operations in 10 of its 22 telecoms zones

* Was stripped of all but one of the licences

* Confirms will bid in March re-run of spectrum auction

NEW DELHI/MOSCOW, Feb 21 (Reuters) - Russian conglomerate Sistema said on Thursday that its Indian mobile phone unit would cease operations in almost half its regions as it prepares to bid in a spectrum auctions re-run.

All but one of 22 zonal permits held by Sistema Shyam TeleServices (SSTL) were ordered to be revoked by India's Supreme Court last year. The company is required to win back airwaves in those zones to continue services.

Sistema confirmed on Thursday that Shyam would take part in the auctions starting on March 11, but it did not specify the number of zones it would bid for.

The company said in a statement that it needs to conserve resources because of uncertainties resulting from the cancellations and that it will start to inform customers in 10 zones to shift to other carriers.

Its subscriber base, which stood at 14.88 million at the end of 2012, will decline by 15 percent, a company spokeswoman said.

"We believe that in the remaining circles there are strong opportunities for developing data services," Yulia Belous told Reuters.

The company added that it is allowed to set off previous licence costs - which stood at about $300 million - against the new auction prices.

Last month India approved a 50 percent cut in the auction reserve price for CDMA airwaves, used by Sistema, after an auction in November attracted no bidders, with Sistema saying at the time that the price was too high.

The auction followed a court order to revoke several cellular carriers' permits awarded in a scandal-tainted 2008 state grant process and redistribute airwaves through open bidding.

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