Telen2 not planning to leave Russia, hoping for LTE opportunity
STOCKHOLM. Dec 14 (Interfax) - Sweden's Tele2, whose subsidiary has nearly a 10% share of the Russian mobile services market by number of subscribers, does not plan to leave Russia, and expects that it will eventually be able to offer its customers 4G wireless broadband services.
Tele2 has been in Russia for ten years already and wants to be there for the next ten years, Tele2 president Mats Granryd told Interfax.
He said that in the short-term, the launch of LTE networks by Tele2's Russian competitors will not worsen the position of the company, which has not received frequencies for the new 4G technology. The company's rivals have long had 3G, but this has not had a serious impact on Tele2, Granryd said.
Megafon , Scartel and Mobile TeleSystems (MTS) are already providing LTE services, while Vimpelcom and Rostelecom are building such networks.
Granryd said the share of mobile Internet users (EDGE and GPRS technology) at Tele2 is about the same as at Russian market leader MTS: 36% to 37%.
The lack of mobile broadband access will not be critical for Tele2 in the next 18 months to two years, as more than 90% of data traffic in its network is related to social networks, where high speed is not yet that important, the company said in a presentation.
Average monthly revenue per user (ARPU) from data services at Tele2 is more than 50 rubles, while the average for the Russian market is 125 rubles.
LTE technology will become critical for business in 3-4 years, and Tele2 is looking for opportunities to work in 4G, Granryd said, adding that "we are not naive."
Right now the company is not worried and it expects that opportunities will arise to provide wireless broadband services to its customers, he said. This could be done either through a partnership with Scartel (Yota) or if regulators decide on the technological neutrality of GSM-1800 frequencies.
The State Commission for Radio Frequencies (GKRCh) will on December 19 ask the Radio Research Institute to conduct additional testing of LTE in the 1800 MHz bandwidth until June 1, 2013.
The institute, jointly with Tele2 and regional provider SMARTS, already tested LTE-1800 this year and concluded that LTE networks are compatible with GSM, but GKRCh on October 2 postponed consideration of this issue.
Tele2 has been building LTE Ready networks in Russia since 2009, and 58% of its base stations and 67% of its transport network are now ready for implementation of LTE.
Tele2's negotiations with Scartel to work as a mobile virtual network operator (MVNO) on the latter's LTE networks are continuing, a source at the Swedish company told Interfax. He said Scartel has agreed to ease the terms of cooperation discussed with another potential MVNO, Vimpelcom, and Tele2 also expects progress in negotiations.
It is important for Tele2 that the model of cooperation with Yota does not push up the cost of the company's services and run counter to the concept of a discount provider.
Granryd did not comment on the reports of negotiations to sell Tele2's Russian assets or form an alliance between the Swedish company and a Russian player. It was reported that Rostelecom is holding talks with Tele2 on a possible merger of mobile assets. Ivan Streshinsky, head of USM Advisors, the company that manages the assets of Megafon principal shareholder Alisher Usmanov, has said that Megafon could potentially be interested in buying certain Tele2 subsidiaries.
Discount in Russia
Tele2 held a series of presentations for investors on Wednesday at which it announced that it would switch from a strategy of aggressive discounts to one of positioning itself as a value champion. The company plans to reduce its involvement in price wars that reduce margins, increase customer loyalty and boost return on investment.
On the Russian market, however, Tele2 will remain a discounter, Tele2 Russia vice president for strategy Svetlana Skvortsova said. In Russia, Tele2 will continue to keep prices lower than the top three providers.
Tele2 had a 9.7% share of the Russian market by subscribers and 7.1% by revenue in the third quarter of 2012. ARPU amounted to 234 rubles and APPM (average price per minute) was 0.91 rubles.
Tele2 had 22.3 million subscribers in 38 Russian regions in the third quarter, including about 15 million subscribers in 'old' regions and over 7 million in 'new' regions. The subscriber churn rate was 30% and 40%, respectively.
Tele2 is the leader in nine regions, with an average market share of 46% and EBITDA margin of 47%. In 21 regions the company has an average market share and EBITDA margin of 31%, while in eight regions that the company entered recently it has an average market share of 17% and a negative margin.
Tele2 Russia's overall EBITD A margin in the third quarter was 38%.