Yota is building out its LTE network in 180 cities within the next three years, a move that it believes will cover 70 million people, around half the country's population. That network will be used by the country's leading mobile carriers -- Mobile TeleSystems OJSC (MTS) (NYSE: MBT), MegaFon and VimpelCom Ltd. (NYSE: VIP) (Beeline) -- along with Rostelecom , the fixed-line giant that is branching into mobile services. Of the country's significant service providers, only Tele2 AB (Nasdaq: TLTO) is not currently involved.
The buildout will be financed by Russian banks and has the approval of the Russian government and Yota's investors, state-owned Russian Technologies (25 percent stake) and private equity firm Telconet Capital LP.
It's estimated that the rollout will cost US$2 billion, but this hasn't been confirmed. Yota had been planning to award technology deals for its own LTE plans late last year, but a spokesman for the company says the new developments mean the operator's original timetable and strategy have to be altered. (See WiMax Operator Issues LTE RFP.)
Why this matters
This move impacts Yota, the Russian market, the vendor community, and network strategists the world over.
Yota (the brand name of Scartel LLC) is propelled from being a wireless broadband competitive carrier to being the lynchpin of Russia's mobile broadband future. The company has already impressed with its quick decision making and clearly defined strategies, on which its mobile partners will now be depending. It'll also be interesting to see how (or if) Yota utilizes the plans and deployments that its partner operators have been making to prepare for LTE. (See VimpelCom Picks NEC's iPasolink .)
For the Russian market, this should mean that LTE services get to market more quickly and will be more affordable for end users, as the mobile operators, with lower overall costs, will be able to offer even more competitive prices and maintain a positive margin.
It's bad news for the vendors, though. Instead of five LTE networks being built, now there will only be one. Those involved with Yota's rollout will obviously get some Russian LTE action, but the overall value of the Russian LTE infrastructure market will now be much lower. It also means that the competition to win Yota's deals will be even more intense, and will increase the likelihood that Yota will get a great deal from its vendors.
It also marks the arrival of another shared network, along the lines of the national broadband networks in Australia and Singapore, and the open, shared LTE infrastructure that LightSquared is building in the U.S., though of course Yota's network already has service provider partners from the get-go while LightSquared is banking on the "build it and they will come" approach.
In principle, the shared network model should work and be more efficient. In practice, it may be a nightmare. All eyes will be on Russia now, as well as the other countries with emerging shared infrastructure projects, to see how the market plays out.
For more on Yota, Russia and shared networks, see:
- Yota: A Model WiMax Startup?
- AlcaLu Wins in Siberia
- Megafon Places LTE Call
- Tele2 Adds Customers
- MegaFon Raises Russian Backhaul Stakes
- NSN Manages MTS in Russia
- Vendors Close In on Singapore's NGN
- Australia Unveils $31B FTTP Plan