Russia’s main fixed line operator, Rostelecom, plans to cover the country with 3G next year as well as gain 4G services, potentially sparking a price war in a country long dominated by the three major cellcos.
According to Reuters, the state owned group plans to enter the Moscow market initially, offering prices as much as 20% below those of the big three. As seen in countries like France, where a wireline provider has disrupted a previously cosy trio of cellcos, Russia could experience its first real mobile price war, with impact on the profits of MTS, MegaFon and Vimpelcom.
Rostelecom was converted from a long distance telephone monopoly into a multiservice provider last year when it merged with seven regional operators, and now aims to balance the stagnation in fixed lines businesses with growth in mobile, pay-TV and broadband. Its target is to launch 3G services in Moscow and other major markets from early 2013 and gain about 10% share by 2015. Success in Moscow is critical in a country where population and wealth are heavily weighted to a few major cities ‘ the capital is thought to account for as much as one-third of the big three cellcos’ mobile revenues, which totalled $20bn in 2011.
Plans to introduce mobile number portability will aid Rostelecom’s cause, though it will have to invest very heavily to be competitive in Moscow and St Petersburg. The operator’s CEO Alexander Provotorov was not focusing on pricing at a press conference last week, instead emphasizing the quad play potential, with bundles of mobile, pay-TV, broadband and intrazone telephony services. “By combining these products we are planning to compete with existing operators,” he said.
Rostelecom should also gain a 4G licence in this year’s spectrum allocations. The LTE situation in Russia is confused. Former president Alexander Medvedev backed a scheme for WiMAX provider Yota to build an LTE network which would be shared by all four main operators, but so far only Vimpelcom and MTS are confirmed and there may be conflicts with the carriers’ own build-outs, once they gain 2.5GHz spectrum. However, this is complicated too by the need to pay for the transition of current military applications.
Yota itself last week revealed more detail about its move from WiMAX to LTE. Chief quality officer Vartan Khachaturov told the NGMN conference that the operator had faced such compressed timescales that it had been unable to optimize its new LTE network prior to its commercial launch, leading to low speeds at first. He added that it had proved impossible to run the two networks simultaneously and implement the transition gradually, the original plan, because of interference between the WiMAX and LTE signals. He commented: ‘Overnight we had to switch off WiMAX and switch on an LTE network that had never been switched on before. It actually somehow worked.’ The company’s 1,400 LTE base stations went live in Moscow on May, after the launch was postponed by several weeks. Around 300,000 of Yota’s 1m WiMAX subscribers were based in Moscow, though it has now also switched over in Krasnodar, Sochi and the Volga Region, and plans to do the same in St Petersburg, Samara, Vladivostok, Ufa and Kostroma by the end of this year.
Meanwhile, though most focus so far has been on spectrum around 2.5GHz, operators should also gain 800MHz spectrum this year. Regulator Roskomnadzor says eight firms have submitted applications to participate in next month’s auction, including the big four plus Summa Telecom, TransTeleCom (TTK), and two separate subsidiaries of Swedish operator Tele2, Tele2-Voronezh and Tele2-Omsk.
The auction process is scheduled to start on July 12, with Roskomnadzor offering four 2’7.5MHz blocks covering the entire Russian territory. Paired blocks will be limited to one operator apiece, and the tender will award extra ‘points’ to bidders which agree to open their networks up to MVNOs. Successful operators are obliged to complete their network rollouts within a seven-year time frame, offering services in all towns with at least 50,000 residents.