Expert in telecommunications
The One for All
Date: 22.03.2011

The One for All

When such persons meet at the table and even the prime minister is present, it means that the industry vector is set for the years coming.

Left to right: Mikhail Shamolin, President of AFK Sistema; Elena Shmatova, General Manager of VimpelCom; Sergei Chemezov, General Manager of Rostechnologii; Vladimir Putin, Russian Prime Minister; Sergei Adoniev, co-owner of Skartel; Alexander Provorotov, General Manager of Rostelecom; Sergei Soldatenkov, General Manager of Megaphone. Source: nag.ru

Moreover, it may mean that they were driven not by a constructive compromise or economical benefits but by the direct influence of the supreme authorities.

Consequently, one could suggest that the event does not comply with principles of market economy as the decision to take part in it was not totally voluntary.

On the other hand, the same people are known to strive for the soonest settlement of the frequencies deficit problem, which is critical for LTE development. The “Big Three” used to write letters addressing the president and the prime minister when Osnova Telecom and Rusenegrotelecom newcomers tried to put in their own claims for frequencies. After the spring tenders a year before, with their results well known in advance (38 licenses for Rostelecom and 1 for Sibirtelecom), Rostelecom failed to use its frequencies as the Ministry of Defense did not conform the company’s documents for testing a new communication standard in 2.3–2.4 GHz band. It should be also noted that, with Nikolai Tamoding having become a head of its subsidiary Voentelecom, the Ministry of Defense started to interfere actively with the industry processes monitoring commercial issues as well.

Earlier the Ministry dealt with its own needs mostly covering the questions of national safety but now, after having joined the capital of Osnova Telecom, network building and commercial services are being discussed. Osnova Telecom is certainly a commercial structure with its natural interest in profits as it has got enough reasons [meaning - licenses] to claim for them. At the same time, this commercial unit with 75% of its capital belonging to privates is involved in development of the infrastructure for militaries and intelligence. Still, what’s the use in appealing to such facts if the reforms in Rostelecom are managed by a person with double citizenship as though its relevance to state secrets and state contracts does not matter?

Even Skartel reported frequency problems earlier. First, Yota oriented at WIMAX but later it stamped with LTE instead due to rather obvious reasons. WiMAX2 is not finalized yet and the benefits of LTE seem overwhelming when compared to current speeds of mobile networks. This move was strongly opposed by Roskomnadzor, unready to meet principles of technological neutrality without a political will. As a result, Roskomnadzor succeeded in winding up the first Russian LTE network by Yota, launched in Kazan last year on August 30. And now the agency is trying to withdraw several licenses which it had earlier issued to Skartel. Using punctiliousness and legitimacy as a cover, the department cited certain violations revealed during administrative reviews but they turned out to be a fake. For Russia to return to the top of telecommunication gamers, it took more than a year of argues until the prime minister had to interfere. It is clear that not everyone is ready to take such a responsibility, especially when the problem implies overlapping of several powerful interests. Wide-scale introduction of innovations during the age of modernization can not yet exist without state support.

At the same time, this is not a common practice for conflict settlement. How about disputes in Megaphone? The prime minister is not an absolute authority for TeliaSoner but he is able to reconcile Alfa with AF Telecom. Apart from telecom, one could recall a situation in Nornikel. But the things go quite the other way there.

One could suggest that, having learnt about the problem on his own, the prime minister realized the importance of its settlement. Or someone might have asked him to do it. And the second variant seems more realistic now.

Sergei Chemezov (centre), head of Rostechnologii, could be a possible catalyst. His vast opportunities in problem settlement are often mentioned in media. Besides, judging by the list of assets that were transferred under the control of Rostechnologii during different periods, one may suggest that the tops consider Chemezov a competent manager and trust him completely. While the media chewed over the presentation of a new Russian prototype phone to Dmitry Medvedev, relishing the details ironically (only MTS’s GLONASS smartphone received a more negative response), industry experts realized that Chemezov started to promote Yota again.

A signed agreement between Rostelecom, Megaphone, MTS, VimpelCom and the founders of Skartel was a surprise announcement. But in fact, building a corporate network for others to use it in future sounds quite reasonable. Citing the example of foreign players, carriers used to complain that investments in the country’s network are 3-4 times larger than they could be with one robust system for several operators.

Judging by the faces of participants and all the accompanying rustling, for the present they are far from being jubilant about the fact that Skartel will develop the network and rent traffic capacities to them. Though rather puzzled, they still got purchase options for equal shares of stakes as their compensation. In 2014, every signer will get its own 20%.

According to Denis Sverdlov, General Manager of Skartel, the roll-out of LTE will cover 180 cities. Everything will be done entirely on the company’s own, without attracting financial resources or bank guarantees of the “Big Three” and Rostelecom. The construction will be financed completely by borrowing.

Insiders add that this agreement is not a final one and should be reviewed further. Still, with the stakeholders of participating companies taking part in the event, one may suggest that in general the agreement suits everyone.

And Skartel is not sold out, as one could think. After further commentaries on the situation, it became obvious that the founders of Yota will not give up carrier business as it was not covered by the agreement. As a result, there will be two companies. One will be involved in network building (Skartel, which will be divided by the parties in 2014) and another will be an Internet provider (OOO Yota).

As for the stakeholders, it should be noted that there is little to no information about final beneficiaries of Skartel. Media mentions only Rostechnologii and Sergei Adoniev, the former JFC co-owner.

Foreign press refers also to Albert Avdolian, mainly comparing him with the success of Roman Abramovich. InoSMI sometimes calls him “a golden boy of Russian telecom” and a founder of Expatel. The company specialises in network building and has got branch offices in Krasnodar, Moscow, and Sochi, where Yota is present (by the way, it is an official partner of Expatel).

Various sources say there are several shareholders but they are unable to name them. And why was a project, which is considered crucial for the country’s development, given to a company with 100% foreign capital? Why Yota Holdings, the only shareholder of Skartel? It seems like Chemezov was again able to persuade the government to make this move as a correct one. Besides, the company appeared in St. Petersburg and is known to have ties with other local structures, mainly Korus Consulting, Prostor Telecom, UK Teorema (the last two are in telecom business).

Close links in St. Petersburg and his authority helped Chemezov to gain a compromise with LTE frequencies but the control went to an offshore company.
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