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Business Transformation

Mainly-Mobile VimpelCom Has Big Fixed Plans

LONDON -- Broadband World Forum 2016 -- VimpelCom's Tommy Ljunggren does not sound like he is overflowing with enthusiasm on the topic of 5G. "Most demonstrations are about high speeds and low latency and I'd really like to see more focus on providing decent speeds and wide-area coverage," says the operator's group director for architecture and security.

Considering VimpelCom Ltd. (NYSE: VIP)'s emerging-markets presence, that desire for a less zippy version of 5G than the millimeter-wave technology grabbing headlines is hardly surprising. Today headquartered in Amsterdam, the operator counts Russia as its biggest market but maintains subsidiaries across a diverse range of countries in central and Southeast Asia, North Africa and Europe, serving more than 200 million customers overall. Providing widespread connectivity for attractively priced mobile Internet offerings is a priority.

It is also forcing VimpelCom to take a hard look at its fixed-line business. A strategic objective is to be the biggest or second-biggest operator in each of its national markets. "To do that, we have to have the fixed assets and our own IP and fiber infrastructure -- we really can't live without it," Ljunggren tells Light Reading on the sidelines of this week's Broadband World Forum in London. "Our transformation includes putting more effort into the fixed line again -- we are actually heating up the fixed part all across our footprint."

Competition has evidently intensified while operating conditions have worsened. Several years ago, VimpelCom lost its number-two spot in Russia's mobile market to long-standing rival MegaFon , having already trailed market leader Mobile TeleSystems OJSC (MTS) (NYSE: MBT). With mounting economic and regulatory pressure, group revenues fell by 16% in the April-to-June quarter, to about $2.2 billion, compared with the year-earlier period (although VimpelCom insists they rose by 0.1% organically).

Can a fixed-line push fuel growth? The bundling of fixed and mobile services in so-called "quad-play" packages has already met with some success in Russia, says Ljunggren, and is a necessary churn-limitation measure in such a competitive environment. While VimpelCom does not have "the strongest position" in Russia's fixed-line market, its fiber network is already quite extensive. Major investments are not on the cards, and an eagerness to share infrastructure with rivals, and be "asset-light," could help to reduce capital expenditure in future (VimpelCom currently spends about 17% of revenues on capex).

That could prove increasingly important as VimpelCom looks for "backhaul" options to support rising volumes of mobile data traffic. Regardless of how quickly 5G takes off, Ljunggren sees a need for more fiber backhaul simply to cope with the adoption of high-speed 4G services. But he also reckons the line separating fixed from mobile is getting blurrier by the day. One 5G use case that does hold appeal is the fixed wireless access scenario that Verizon has publicized in the US. "That will be very suitable for our markets as well because of the difficulty of getting fiber connections to all customers," says Ljunggren. "5G could bring that connectivity to the last mile."

Outside Russia, plans will obviously be shaped by VimpelCom's existing presence. In Armenia, for example, where its Beeline-branded subsidiary is the former incumbent, the operator is now considering an investment in G.fast, which is designed to boost broadband speeds over copper lines. "It doesn't make sense to take fiber to customers," says Ljunggren. "G.fast will be a much cheaper solution for us and now it's mature enough to bring the speeds and capabilities we need." In rural parts of the country, meanwhile, VimpelCom has been rolling out 4G networks using 450MHz spectrum to provide broadband connectivity.

Next page: Virtualization holds the key

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MM1997 10/20/2016 | 11:39:42 AM
Great MainlyMobile is really impressing me lately, keep going this way!
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