Russia's 4G plan may be splitting apart

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Russia's 4G plan may be splitting apart

MTS and Vimpelcom announce network sharing and fiber build-out deal, which seems to exclude their other LTE partners

By CAROLINE GABRIEL

Published: 27 September, 2011

READ MORE: Spectrum | Russia | LTE

A couple of months ago, Russia appeared to have come to an uncharacteristically tidy solution to its complicated 4G spectrum situation, and agreed that the four main operators would share a network run by former WiMAX start-up Yota, at least for the first phase of LTE. However, two of the quarter, MTS and Vimpelcom, now appear to have broken ranks to create their own venture.

The Yota plan was designed to provide a quickly available LTE platform using spectrum already allocated for mobile broadband, while the carriers went through the tortuous task of sorting out further frequencies, including vacating the military from some bands. It formed part of a broader plan, heavily backed by President Medvedev, to put Russia at the forefront of 4G, as it failed to be in 3G. As well as the shared network, there are plans for the participants to create a manufacturing joint venture with key infrastructure vendors, probably Huawei and Samsung.

But cracks had started to appear over the summer, particularly as MTS expressed resentment at having to give up its WiMAX network in Moscow, which is revenue generating, to free up the frequencies. Now that cellco, together with Vimpelcom, plans to create a shared mobile access and fiber backhaul network, which according to the Moscow Times is separate from the Yota venture. It will involve laying 4,500 kilometers of fiber by the end of next year, for backhaul and broadband, and sharing of wireless infrastructure. The Times says the deal is worth US$2bn.

"We believe that an infrastructure partnership is a reasonable approach which carries an evident bargain - the network is being built faster, costs are being optimized substantially, while there is more money left to invest into the core product," Vimpelcom spokesperson Anna Aibasheva told Reuters. She believes sharing the cost will speed build-out of the fiber from two years to nine months, while cutting the ROI period from seven to three years.

The project is not necessarily in conflict with the Yota plan. The fiber network could be leased to backhaul that network, and most of the initial wireless sharing seems to revolve around 3G upgrade. However, it does show MTS and Vimpelcom grasping the initiative rather than working within a quartet of equals - with the third cellco, Megafon, plus fixed line giant Rostelecom - as the Medvedev administration had envisaged. Under the terms of the Yota venture, each of the four operators will have the right to purchase a 20% stake once the network is completed.