NFV Strategies

VimpelCom Plans Global NFV Tender

VimpelCom is preparing to hold a global tender for the virtualization of its networks following preliminary work with China's ZTE in five of its central and south-east Asian markets, Light Reading has learned. (See ZTE Wins NFV Deal With VimpelCom .)

The Amsterdam-headquartered operator recently announced plans to roll out virtualized evolved packet core (vEPC) networks in Armenia, Laos, Kyrgyzstan, Tajikistan and Uzbekistan this year but now appears keen on accelerating its deployment of NFV-related technology.

"We are going to have a global tender, not only on vEPC but the whole virtualization concept," Yogesh Malik, VimpelCom Ltd. (NYSE: VIP)'s chief technology officer, told Light Reading.

Malik would not disclose firm details regarding the operator's virtualization targets but said that 2016 would be a "big year" for the operator and that NFV technologies would soon be introduced in Russia, VimpelCom's biggest geographical market.

One of the key NFV attractions for Malik in such a large country is the flexibility the technology would give VimpelCom when rolling out services. The launch of a particular product could be staggered, for instance, to take into account the number of different time zones across Russia. "Our Russian CEO and CTO are totally convinced by this," he says.

For similar reasons, Malik appears equally enthusiastic about deploying virtualized networks in the large emerging markets of Algeria and Pakistan.

VimpelCom decided to begin its virtualization journey with a vEPC partly because this function is more readily available on the market but also to cope with soaring levels of data traffic on 4G networks.

But the operator is eyeing the virtualization of a whole array of capabilities, including media gateways, the USSD (Unstructured Supplementary Service Data) mobile signaling function and what Malik calls the operator's "value-added services."

VimpelCom is also considering some major questions in advance of its tender, including whether it wants to have an OpenStack-based deployment and use a single vendor or a number of different suppliers.

However, the operator already appears to have decided against a single-vendor implementation, which Malik believes would hinder innovation: It also seems likely to embrace OpenStack.

Malik dismisses some of the concerns raised by other operators about the maturity of OpenStack and whether it is a carrier-grade technology. "We have to look at how user behavior is moving and that is on the Internet -- in my view, carrier-grade is an old expression," he says, noting the increasing irrelevance of a term coined before Internet communications were in widespread use. (See BT Says OpenStack Still Not Up to Spec.)

What's clear is that Chinese equipment supplier ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763) is involved in the NFV tender process after impressing VimpelCom with its vEPC product.

"They have done a very good job -- we've been able to provide traffic and scale up," says Malik. "It's been very enriching to see a company like ZTE at the forefront."

Those comments will add to the pressure on Ericsson AB (Nasdaq: ERIC) and Nokia Corp. (NYSE: NOK), the leading Western equipment vendors, which have been hoping that virtualization and other New IP technologies will help them reclaim the initiative from Chinese competitors.

Both Huawei Technologies Co. Ltd. and ZTE have continued to outperform the market on revenue growth from service provider business, with Huawei overtaking Ericsson to become the world's biggest vendor in the communications service provider (CSP) market by sales last year. (See Huawei: New King of the CSP Market.)

Elaborating on the benefits of virtualization, Malik sounds far more ebullient than other European service providers when discussing the cost-savings potential of NFV technologies. "My view is that the cost comes down dramatically because you can re-use elements across geographies," he says. (See Orange Sours on Cost Benefits of NFV.)

Although other operators originally cited cost savings as one of the main attractions of virtualization, most players now prefer to highlight the service-related advantages of the technology.

For more NFV-related coverage and insights, check out our dedicated NFV content channel here on Light Reading.

Malik reckons NFV could help to boost service provider revenues by improving the customer experience but emphasizes the need for transformation in other parts of the operator business.

Besides investing in NFV and SDN, for example, VimpelCom is also looking to improve its engagement with customers using new digital services. "Today customer engagement happens only via self-service apps and SMS and that needs to change," he says.

Through another related company initiative, the operator is investigating ways of using the data generated by back-office systems to provide more value to its subscribers.

Earlier this year VimpelCom appointed a chief digital officer in the form of Christopher Schlaeffer, who had previously spent 12 years with Germany's Deutsche Telekom AG (NYSE: DT) in a variety of senior roles and who worked at tech startups in Berlin and London immediately before joining VimpelCom.

Schlaeffer is setting up a new digital division in London as VimpelCom aims to shake off its reputation as an old-fashioned telco tarnished by charges of corruption and instead be recognized as a technology pioneer in the global communications industry.

Earlier this year, the operator agreed to pay a $795 million fine in a settlement with the US Department of Justice and Dutch regulators, which had accused the company of paying bribes in Uzbekistan. (See Eurobites: 'Uzbekgate' Costs VimpelCom $795M.)

Hit by currency devaluations and economic weakness in its emerging markets, VimpelCom last year reported a 29% drop in revenues, to $9.63 billion, and saw its net loss from continued operations widen to $851 million, from $223 million in 2014.

VimpelCom currently serves more than 200 million customers across the 14 markets of Algeria, Armenia, Bangladesh, Georgia, Italy, Laos, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan, Ukraine, Uzbekistan and Zimbabwe.

Russia remains by far the company's biggest market, accounting for about 48% of revenues last year.

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

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