5G and Beyond

VimpelCom to Pioneer 'Multivendor' NFV; Downbeat on 5G

BARCELONA -- Mobile World Congress 2017 -- Russia's VimpelCom, which this week renamed itself Veon, is aiming to be one of the first operators to use NFV products and services from a multitude of different vendors in a commercial setting, but says there is still not yet a clear business case for 5G technology.

The multinational operator, which serves about 230 million customers in 13 countries, is overhauling its networks and IT systems in response to various business challenges, including the stagnation it sees in the telco business and the growing threat from so-called over-the-top (OTT) players.

Much like Deutsche Telekom AG (NYSE: DT) of Germany, VimpelCom Ltd. (NYSE: VIP) is aiming to realize huge efficiencies by replacing many of the systems that have catered to individual markets with more centralized technologies that can handle requirements across countries.

When it comes to virtualization, the company's early focus has been on the evolved packet core. Last year it teamed up with China's ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) on a virtualized EPC (vEPC) rollout covering the markets of Armenia, Laos, Kyrgyzstan, Tajikistan and Uzbekistan. It now claims to have selected a supplier for a vEPC rollout covering its other nine markets, as well as an NFV infrastructure supplier. (See Mainly-Mobile VimpelCom Has Big Fixed Plans.)

Light Reading has reason to believe that China's Huawei Technologies Co. Ltd. has landed a chunk of this work.

Given long-running concern about the NFV interoperability, the challenges for VimpelCom/Veon seem likely to grow as it introduces new vendors into the mix. Yet the ability to work in a "multivendor" environment has always been one of the main goals for service providers that are virtualizing their networks.

"We'll be one of the first ones to be multivendor," says Group CTO Yogesh Malik. "We definitely want to pioneer that space."

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Malik is far more circumspect when it comes to 5G, however, dismissing much of the recent bullish talk on 5G technology as "clear hype."

"What we are doing is going through relevant use cases -- it is clear that throughput is not going to be the use case because 4G is still not fully used," he says.

One concern for Malik is that some operators try to move too quickly on 5G rollout before standards have been locked down, risking the fragmentation of standardization efforts.

"We may fall into a spiral where one launches and then another launches before standards have been completely defined," he says.

Mobile Internet usage is still in its relative infancy in a number of the operator's markets, which may explain why it is less gung-ho about 5G than certain other players, but Malik hopes that digitalization initiatives will help to spur usage of data services in future.

Along with the name change to Veon came the launch of a new digital platform that relies heavily on innovations in the machine learning and artificial intelligence areas. The end product is said to be a more "personalized" offering for customers that better integrates the operator's own services with those of web partners.

"We've announced a few big partners -- Deezer for music, Vivendi for Studio Plus [mobile video services] and MasterCard [for mobile payments]," says Malik.

"The old telco model is not sustainable -- ARPU [average revenue per user] is not increasing, we are losing touch with end customers and OTT companies are gaining more traction," he explains. "The birth of Veon is about bringing us closer to the customer."

The investments the operator has been making in virtualization and digital transformation clearly underpin the Veon proposition, and as cost savings kick in the digital platform should get a further boost.

Malik says capital expenditure has been tracking at about 17.4% of revenues but should fall to about 15% in the "mid-term," freeing up resources for investment in the platform.

One of Veon's objectives is to reduce levels of churn through digital engagement with customers, and bolster margins accordingly.

"We can help to simplify product enquiries and there are multiple other ways in which costs will come down," says Malik.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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