No surprises in Russia’s auction of 800MHz spectrum for LTE services, with the big four operators claiming the spoils. There were eight bidders, but the winners were the three national cellcos ‘ MTS, MegaFon and VimpelCom ‘ plus national wireline operator Rostelecom, which is expanding into wireless services.
The losers were TTK, Summa Telecom, and two divisions of Nordic player Tele2 (its Voronezh and Omsk subsidiaries). The winners must launch LTE services in the 791-862MHz spectrum by June 1 next year and six regional markets must be live by 2013, and then there is a series of further coverage milestones, reaching national availability by the end of 2019.
Each of the four gained spectrum in the 800MHz band and will later get capacity in the 700MHz, 2.5GHz and 2.6GHz bands. They do not pay a fee, as the government wants them to invest their resources in speedy roll-out instead, hence a series of build-out mandates. Full national coverage (offering services in every town of more than 50,000 people) must be achieved by the end of 2019. Each carrier must invest at least RUB15bn ($459m) every year in their LTE networks until that coverage is achieved, which adds up to a total of $12.9bn over the next seven years.
It now seems likely that Russia’s first LTE services will run on these 800MHz networks, in a band which will be effective for its vast rural reaches, though could quickly run out of capacity in its dense city centers. Last year, the government heavily backed a scheme to get 4G services to market even more quickly, at least in those cities, via the 2.5GHz spectrum held by former WiMAX operator, Scartel’s Yota unit.
Yota was to build an LTE network in this spectrum, with the four main operators taking stakes in the company to fund the project, and running their initial 4G services on the infrastructure. However, that joint venture has run into various problems over spectrum rights and other conflicts, and only MegaFon and Rostelecom have made a firm commitment.
Alisher Usmanov, the Russian billionaire and majority owner of MegaFon, has closed a deal to merge MegaFon’s assets with those of Scartel and some expect this to lead to Usmanov taking sole control of the Yota project. Usmanov has created a new holding company that will own 100% of Scartel and 50% of MegaFon. This will be 82% owned by Usmanov’s telecoms investment vehicle AF Telecom – with the remainder held by Scartel’s current shareholders, Telconet Capital and state-backed Russian Technologies.
MegaFon made its commitment to use the Yota spectrum in February, and also granted Scartel rights to use its networks. The larger firm then switched on LTE networks in Moscow, Krasnodar and Novosibirsk and Sochi, the venue for the Winter Olympics in 2014. It plans to go live in at least four more cities by the end of this year.
Yota itself is now live in Moscow, Sochi (the Winter Olympics venue for 2014) and Samara. MTS may still do a deal with the firm, although its first 4G activities will take place in Moscow, where it has a TD-LTE licence in the 2.6GHz band. Rostelecom is due to launch as a Yota MVNO in Moscow in September.
VimpelCom is likely to concentrate its efforts on its new 800MHz spectrum, and on getting more extensive coverage than its city-focused 4G rivals. Its CEO Anton Kudryashov said after the results of the auction: “We are very happy with our victory in the LTE licence contest. We have already commenced modernizing our network and making it LTE-compatible.”
Yota has faced one setback in the past week. Another operator, Summa Telecom, has won a claim in a Moscow court that it is entitled to over half of Yota’s bandwidth, as well as some of the frequencies distributed in the recent LTE tenders. The court decided that the barring of Summa from the bid for 2.5GHz-2.7GHz licences was illegal, which could raise problems for Yota and the new LTE licence owners.