USD1bn hurdle for LTE consortium?

31 Aug 2011

According to Vedomosti, the future of Russia’s Long Term Evolution (LTE) consortium hangs in the balance after technical partner Scartel – which currently offers WiMAX under the ‘Yota’ brand – slapped a USD1 billion price-tag on its 4G network, which is integral to the functionality of the partnership. In July 2010 Scartel received regulatory approval from telecoms watchdog Roskomnadzor to abandon WiMAX for LTE, re-using its existing spectrum; the regulator had previously insisted that the frequencies allocated to Yota for WiMAX could not be used for other access types. In March 2011 the country’s sole LTE-suitable spectrum holder Rostelecom joined forces with the self-styled ‘big three’ cellcos, Vimpelcom, MegaFon and Mobile TeleSystems (MTS), to facilitate the rollout of a single national LTE network by 2014. The deal also included Scartel, which would become the consortium’s 4G network provider of choice. The firms will buy bandwidth from Yota and lease its LTE facilities. As part of the deal, the four Russian telecoms operators will each be given an option to take a 20% stake in Yota in 2014, at market prices. Telconet Capital Fund, which currently owns 74.9% of Scartel will be required to sell all of its shares, whilst co-owner Russian Technologies will reduce its 25.1% stake to 20%. However, Vedomosti has now indicated that Scartel’s would-be partners are unhappy with the exorbitant price-tag already being suggested by the WiMAX operator, casting doubts over the consortium’s future.

The situation was complicated further last week when it was revealed that the State Radio Frequency Commission (SRFC) was considering allowing MTS and MegaFon to effectively relinquish the WiMAX frequencies held by their respective subsidiaries Comstar UTS and Synterra in Moscow and in exchange for alternative LTE-suitable frequencies, ahead of a spectrum tender tentatively scheduled for 1 December 2011. Additional, higher-range frequencies — which are necessary to build an effective dual-band LTE network — would be made available further down the line, following their conversion from military use. The SRFC is expected to officially announce its findings on 8 September.