Deploying open and virtual RAN at a brownfield business necessitates an awkward accommodation with ageing tech. That has inevitably hindered the rollout of these new-look networks, designed to host multiple vendors in a cloud environment. But what if the brownfield had made no moves in 5G and seen parts of its network blown to smithereens by Russian rockets?
Kyivstar, as one of Ukraine's biggest mobile operators, sadly fits the bill. Many of its 14,000 sites are under constant threat of Russian bombardment, as described in this detailed Light Reading story from June. One site near the Russian and Belarusian borders had been destroyed and repaired ten times when Kyivstar CEO Oleksandr Komarov spoke with reporters back then.
It has prompted Kyivstar and parent company VEON to think about future reconstruction and development after unveiling details of a $600 million investment in the Ukrainian economy. It has now hired Rakuten Symphony, the telco vendor arm of Japan's Rakuten, as it plans for a future in which open RAN, 5G and so-called "digital services" are all set to figure. And Kyivstar is only the starting point for VEON. "We are very excited to partner with Rakuten to explore the opportunities in VEON's markets, with a combined population of 510 million," said Kaan Terzioglu, VEON's CEO, in prepared remarks.
A contract to supply VEON's numerous emerging markets would be a massive coup for Rakuten Symphony. It has struggled to find work in a stagnant 5G market where most brownfield operators have already signed contracts with traditional suppliers. And 1&1, its flagship customer in Germany, had only a smattering of sites in operation at the start of the year, having missed its end-2022 target of 1,000. It has blamed Vodafone's towerco unit, Vantage Towers, for the hold-up.
Foot in the door
Yet the arrangement does not mean Kyivstar is about to funnel $600 million into Rakuten's bank account, or that Rakuten's engineers are suddenly parachuting into Ukraine and scrambling to put up new basestations. This is a memorandum of understanding as opposed to a contract, and it appears to include no firm commitments whatsoever.
Still, it is a foot in a reasonably big door for Rakuten Symphony. Across its various markets, VEON invested $841 million in capital expenditure last year. Even a chunk of that could be transformative for Symphony, which made just $143 million in revenues for the first six months of this year.
What's more, unlike most of Rakuten's other brownfield customers, neither Kyivstar nor VEON's businesses outside Ukraine have made any substantial investments in 5G. Indeed, Terzioglu was sounding apathetic about the relatively new-generation mobile standard just a few months ago. "The vanity about 5G needs eradicating," he told Light Reading in May. "It is not a need today and I would rather focus on bringing 4G for all, not 5G for a few."
But at the end of the first quarter, 4G coverage had reached high levels of 94% in Ukraine, 66% in Pakistan, 88% in Kazakhstan, 82% in Bangladesh and 78% in Uzbekistan. Critical as Terzioglu has been of 5G, VEON is constantly exploring opportunities to launch new software applications, and it plays a much bigger role in their design than its developed-market telco peers. The standalone version of 5G now being rolled out in some European markets promises lower latency and other network features that application developers may prize.
Share price performance of Rakuten and VEON this year(Source: Google Finance)
An actual contract between VEON and Symphony could take various forms. If it did cover open RAN, it would come at the expense of traditional vendors – Ericsson, Huawei and Nokia – that have catered to VEON in the 4G era. At the same time, it would be a boost for other companies that have played in Symphony's ecosystem. Those include NEC, the Japanese manufacturer of radio units that supplies Rakuten's domestic network, and potentially chipmaker Qualcomm, which has been collaborating with both Rakuten and NEC on 5G equipment.
For Rakuten, a network deal could mean catering to VEON's 4G needs as well. During an investor presentation in May, it admitted to having had portfolio gaps in important areas such as carrier aggregation, multi-layer management, the Cat-M "Internet of Things" standard and energy savings. But it also insisted those gaps were closing fast and was expecting to have bridged them by the end of June.
The arrangement with VEON points to some confidence in Rakuten's overall network abilities. It comes after Tareq Amin, the CEO of both Symphony and the Rakuten Mobile telco business in Japan, hinted earlier this year that a major tie-up with a brownfield telco would be revealed in the summer. "Either brownfield use cases get validated or we become always a small niche business on greenfield," he told Light Reading.
Cloudy vision
But the initial arrangement could just as easily be about services and software applications. In the statement they issued today, the companies were eager to highlight the popularity in Ukraine of Viber, an instant messaging app owned by Rakuten. At first, a deal might simply look to build on this by offering Kyivstar additional features or Rakuten-developed apps.
Amin, meanwhile, has been eager to highlight Rakuten's expertise in automation and the telco cloud. That has included pitching Robin.io, a company Rakuten acquired last year, as a viable alternative to the likes of Red Hat, a containers-as-a-service (or CaaS) platform being used by numerous telcos.
The big question is how quickly any of this will happen. A mixture of inflation, unfavorable exchange rates and dollar-denominated debts might constrain VEON's ability to make substantial investments this year or next, and it notably pumped just $90 million into capital expenditure for the first quarter, down from $177 million the year before.
As regards Kyivstar specifically, Russia's invasion of Ukraine shows no sign of ending soon, and the most badly damaged infrastructure that could do with being replaced seems bound to be where the fighting is most fierce. No sane individual wants this war to drag on, but there is a danger the 5G era will have passed by the time reconstruction can truly begin.
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— Iain Morris, International Editor, Light Reading