MegaFon Raises Russian Backhaul Stakes

Russian mobile operator MegaFon is set to raise the mobile broadband stakes in that country with the planned upgrade of its backhaul network to all-IP technology.

As the third largest operator in an increasingly competitive, fast-growing mobile broadband market, MegaFon -- in which Telia Company owns a minority stake -- is adding backhaul capacity at one of its regional subsidiaries to get ready for the wave of mobile data traffic that's coming to Russia. (See TeliaSonera, Altimo Combine Assets.)

MegaFon Far East, the MegaFon subsidiary, says it will upgrade its backhaul network with IP-based equipment from long-time supplier Celtro Inc.

MegaFon, which has used Celtro gear since 2004 across its subsidiary companies, will deploy the vendor's DynaMate family of multiservice access switches to aggregate backhaul traffic over satellite and microwave links as part of its transition to an all-IP network.

The main driver for the upgrade is data services, according to Ariel Shuper, associate VP for business development and marketing at Celtro. "Operators have to upgrade the network because there is more demand for more capacity," notes Shuper.

In addition to the Celtro switches, MegaFon also uses backhaul equipment from Huawei Technologies Co. Ltd. in its networks. (See MegaFon Picks NSN 3G Gear.)

A mobile data race is already underway for Russia's big three mobile operators -- Mobile TeleSystems OJSC (MTS) (NYSE: MBT), VimpelCom Ltd. (NYSE: VIP), and MegaFon -- which are rolling out 3G networks and launching services. In fact, Russian operators were only allowed to start offering outdoor 3G services in Moscow as of December last year.

According to Pyramid Research , Russian mobile data ARPU (average revenue per user) as a percentage of total mobile ARPU is expected to increase from 15 percent in 2009 to 22 percent in 2014. The research firm's recent "Country Intelligence Report" on Russia projects that more than half of the country's mobile subscribers will use 3G services in 2014.

And with competition coming from smaller challengers, such as Tele2 AB (Nasdaq: TLTO), established operators like MegaFon need to upgrade their networks to remain competitive.

"Aware of the upcoming boost in mobile data, the largest three mobile operators in Russia (MTS, Vimpelcom, and Megafon) are investing in 3G network upgrades across the nation," says Stela Bokun, analyst for Europe at Pyramid Research. "Being able to provide advanced data services, particularly mobile broadband, will be the differentiating factor for the Russian mobile operators."

— Michelle Donegan, European Editor, Light Reading Mobile

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