Russia's MTS Strikes Revenue-Sharing Deal With Google

Russian mobile operator MTS is hoping a new deal with Google will provide a spur to its mobile data business as it looks to attract more consumers to its range of smartphone offerings.

Under a new partnership, the operator will include the "OK, Google" voice-activated search application on Android smartphones it sells through its retail stores. Mobile TeleSystems OJSC (MTS) (NYSE: MBT) says it will also showcase the technology during advertising campaigns and in its stores.

Like other major service providers, MTS once tried competing against so-called over-the-top players in the market for content and mobile applications, but is now emphasizing the need for closer collaboration as it focuses on increasing revenues from data connectivity.

"We believe that only close cooperation between operators and Internet companies will lead to efficient and dynamic development of telecommunications," said Vasyl Latsanych, the chief marketing officer of MTS, in a company statement.

The Google (Nasdaq: GOOG) app allows customers to search the Internet, make calls and send messages through voice commands and could hold particular appeal in Russia's smartphone market, where 70% of devices use the Android operating system.

The smartphone partnership between MTS and Google dates back to 2012, while MTS has been offering Google's Apps for Business suite of cloud solutions to its enterprise customers since 2013.

Responding to questions from Light Reading, an MTS spokesperson confirmed that Google would split advertising sales with MTS under the new agreement.

"We have a revenue-sharing agreement with regards to the revenues generated by OK Google voice search," he told Light Reading. "Personnel in our shops will educate customers on how to use this service."

Google may be more willing to share advertising revenues with operators in countries like Russia where it has less understanding of the specific market environment than local players.

Unlike operators in many other markets, MTS has also been working on building up a strong retail presence in Russia, with 4,422 stores across the country, and claimed that 64% of its smartphone sales in the second quarter were through its own outlets -- up from just 20% in 2011.

For all the latest news from the wireless networking and services sector, check out our dedicated Mobile content channel here on Light Reading.

Despite economic turmoil in Russia and political instability in Ukraine -- its second-biggest market -- MTS recently reported a 3.9% year-on-year increase in revenues for the second quarter of the year, thanks to rising adoption of smartphones and growing usage of mobile data services, and it expects sales to rise by 2% this year. (See Russia's MTS Upbeat on Sales as Profits Dip.)

The operator is currently spending heavily on the rollout of 3G and 4G networks as it tries to boost revenues from mobile data services, investing 53.6 billion ($820 million) rubles in capital expenditure during the first six months of this year, up from just RUB28.8 billion ($440 million) in the same period of 2014.

In Russia, MTS claims to have grown data traffic revenues to RUB37 billion ($570 million) in the first six months of the year from RUB29.7 billion ($460 million) in the same period of 2014.

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

MikeP688 8/31/2015 | 4:44:01 AM
Re: RUB This is a question for @Joe Stanganelli:  What about the Sanctions?  Won't that present problems for Google with all that is going on on the political front--just was wondering....
Joe Stanganelli 8/29/2015 | 11:54:54 PM
RUB Question about the rubles-to-dollars figures: Is the older figure of rubles-to-dollars based upon present-day value, or upon the value of the ruble against the dollar in 2014?
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