Tele2 further threatens Russia's shared LTE plan

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Tele2 further threatens Russia's shared LTE plan

Swedish operator applies to build its own 4G systems, having been excluded from Yota's collectivist scheme

By CAROLINE GABRIEL

Published: 28 October, 2011

READ MORE: Spectrum | Russia | Tele2 | LTE

Russia's plan to create a communal LTE network in the spectrum held by start-up Yota looks about to fall apart. Sweden's Tele2 has applied for regulatory clearance to test its own 4G network, following the news that two of the participants in the Yota partnership, VimpelCom and MTS, would also go it alone with a separate fiber and LTE joint venture.

The original plan was for Yota to build an LTE network in its spectrum, previously used for WiMAX, which would be shared by those two cellcos, chief rival Megafon, and fixed line giant Rostelecom. All four would then invest in the network. This would accelerate the availability of 4G by using already available frequencies rather than waiting for the tortuous process of vacating and auctioning Russia's 2.6GHz and digital dividend bands. Those frequencies would then be used for second generation roll-outs.

However, smaller players like Tele2 have been angry that they are excluded from the Yota scheme, while even participants like MTS have criticized the plan because they could be forced to relinquish their own WiMAX spectrum at an early stage - even though these licences currently support profitable services in key markets such as Moscow.

According to Russian business newspaper Kommersant, Tele2 has applied for permission to develop its own LTE network. It aims to build two test networks, one in the Pskov region and one in Omsk.

Meanwhile, VimpelCom and MTS have confirmed that they plan to invest about $2bn in their own venture by the end of next year, and seem to be gambling on an accelerated program to free up 2.6GHz and other frequencies from military use. Should auctions be held before the end of this year, as some believe, they are likely to see more benefits in controlling their own LTE destinies - and preserving their WiMAX businesses, with later migration to LTE - than taking part in the Yota plan.

Although that reduces initial risk and cost, it is liable to fall victim to in-fighting, especially since Rostelecom - seen as a threatening new rival by the big three cellcos as it moves into mobile services for the first time - gains major influence, since it is contributing some of the spectrum. The venture could tap into the licences it bought in broadband wireless auctions last year, as well as Yota's existing WiMAX spectrum (the Russian regulator recently gave permission for this to be reused for LTE, even though it had previously mandated WiMAX). However, MTS has publicly said the $1bn valuation put on the Yota venture is unrealistic, and the cellcos have also been encouraged by the possibility that the regulator will allow them to swap existing licences for LTE-suitable spectrum.

Yota's plan relies on support from as many guaranteed customers as possible. If MTS and VimpelCom go their own way, this will make it dangerously dependent on Rostelecom, plunging it into the kind of nightmare being endured by Clearwire as a result of Sprint's controlling position in its wholesale business. The future of the Yota grand plan hangs in the balance, despite firm support from president Medvedev - the memorandum of understanding signed in March has not yet been converted into a binding deal, and Medvedev is set to hand the reins to Vladimir Putin, who has been less enthusiastic about the collectivist approach to LTE, next year.