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Russia ‘s Systema blames for UPA Government for its licenses cancelation

Russia ‘s Systema blames for UPA Government for its licenses cancelation
PC: Livemint

New Delhi: Sistema JSFC’s Chief Financer Vsevolod Rozanov has blamed former UPA government for not defending properly in the Apex Court which had led to the cancelation of 122 licenses in 2012 along with the company’s exit from the Indian economy.

In an email to ET, Vsevolod Rozanov had told: “This could have been avoided altogether had the government taken a stronger stance at the court during the initial hearing.”

Vsevolod Rozanov was India’s operation Head when the Apex Court canceled the company’s license in the country. He was also senior VP at the Russian oil-to-telecom Sistema JSFC company at the time of Russia’s exit from mobile phone business in India.

Reacting on recent 2G scam acquittal, Mr Rozanov said, “We were accused that we should have been doing more detailed due diligence. However, there is no point in doing the due diligence of a license issued by the government if you followed due process (which we did). We as a foreign investor rely on the government acts and laws.”

He said the acquittal of all the accused in the 2G case indicated that the company was penalized for no fault of its own, adding that this decision has clearly stated to why international investors are exiting or not entering business with India.

The company had to lose more than $1.2 billion of investment it made in India’s Shyam Teleservices Limited (SSTL) in 2007.

Supreme Court had earlier, observing irregularities in first come first serve the policy of allotting the licenses by the Government in 2012, had canceled nearly 122 licenses belonging to nine companies and ordered the issuance of fresh licenses through auctions.

Back then, Sistema asked the Government to secure its investment in the country, threatening to invoke bilateral treaties between the two countries but instead the Shyam Teleservices Limited (SSTL) had brought back its licenses in eight regions for Rs Rs 2,013 crore in 2013.

Rozanov said, “I am absolutely confident that the (apex court) decision was made without considering details and especially the nature of telecom business which requires significant capital investments before any profit is made,” adding, “Investments made by us and other operators were not taken into account at all.”

He said the court’s decision has led the company to exit Indian Market. “Our drive to be OIBDA (operating income before depreciation and amortization) positive was stopped artificially and we were not able to get back on track.”

SSTL had completed the sale of its operations to Reliance Communications for a 10% stake in the but RCom was not forced to its voice services in the country.

“Lack of confidence in regulatory framework and regulator’s inconsistency many times was mentioned as the key impediment for foreign investments into the country. The developments around 2G spectrum case is the most vivid example of that,” Rozanov said. “I know that many investors even from other sectors were watching the situation very carefully and either did not enter the market/put in later investments or exited India.”

He added that time spent to find a solution “could have been used more productively.” When asked if the Russian company would claim damages it incurred due to its licenses cancellation he said, the company has retained the rights to pursue the decision through the Bilateral Investment Treaty (BIT) mechanism. “Our final decision will depend on the outcome of proceedings of two court cases,” he said.