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Scartel held frequency distribution


Union of four LTE-operators, agreed by signing a contract in the presence of Vladimir Putin, has collapsed. However, "Megafon" and "Rostelecom", according to media reports, are prepared to sing with a single builder of LTE today, "Scartel" (brand "Yota") - a separate agreement. Under this agreement, according to "Kommersant", "Scartel" will use the infrastructure of "Rostelecom" and "Megafon" to build their own 4G networks 4G. Instead, "Megafon" and "Rostelecom" will have access to LTE-network of "Scartel" as virtual operators (MVNO). Thus, "Rostelecom" and "Megafon" will be able to provide its subscribers with 4G earlier than will build their own networks.

"Scartel" is the only Russian operator with a federal set of frequencies for the construction of LTE-networksin the range of 2.5-2.7 GHz and with the right to use them. This right was gained in September 2011 from the State Commission for Radio Frequencies (SCRF). The sole shareholder of "Scartel" –"Christiva Holdings Limited" is controlled by "Yota Holding". 74,9% of"Yota Holding" is owned by the fund "Telconet Capital", 25,1% - by "Russian Technologies". Revenues in the first quarter of 2011 - 1.09 billion rubles, EBITDA – 225.8 million rubles, EBITDA-margin - 20.7%.Subscriber base - 731.5 thousand people. The company originally planned to build a federal network of mobile Wimax, but later opted for a different 4G technology - LTE. In Russia, "Yota" network covers Moscow and Moscow region, St. Petersburg, Leningrad Oblast, Krasnodar, Sochi and Ufa.

In March 2011, "Rostelecom", "Megafone", "Vimpelcom" and MTS in the presence of Vladimir Putin signed a framework agreement with the shareholders of "Scartel": it will build a LTE network and "the big four" will get to use it. In 2014 they will have the right to buy back 20% of "Scartel." The term of the option agreement expired on June 1, but a binding agreement has not been signed: the shareholders of MTS and "Vimpelcom" had doubts about the adequacy of the conditions proposed by the "Scartel", told sources close to negotiations. The cost of the agreement was not disclosed. Media reported that the discussed amount was close to $1.5 billion, including $1 billion of the cost of "Scartel" in Moscow.

During the summer "Rostelecom" and "Megafone" began separate negotiations with "Scartel" and succeeded. Thus, "Megafone" has to offer to its subscribers 4G a year earlier than its competitors will have. "Rostelecom" will enter for the first time the Moscow market of mobile communications.

Scartel has already signed an agreement with "Rostelecom" and "Megafon" to use their infrastructure for the construction of networks of 4G, told "Kommersant" two participants of the telecommunications market. According to one of them, "Scartel" will get the access to the sites (areasfor future base stations), telecommunications infrastructure and data centers of "Rostelecom" and "Megafon".

Instead, the operator will allow these companies to provide services on its 4G network via MVNO scheme (model where operator sells mobile services under its brand through a network of cellular communications).

"Scartel", "Rostelecom" and "Megafon" declined to comment.

In the spring of this year, "Scartel" estimated construction cost of the federal LTE network at the level of $2 billion. "Scartel" in any case you will have to buy base stations for LTE, due to the use of infrastructure "Rostelecom" and "Megafon" company will get to save up to 30% of the expenses, estimated an analyst of "Troika Dialog" Anna Lepetukhina, noting that this is a rough estimate, because the companies did not disclose the structure of capital costs.

First LTE networks appeared in late 2009, but Russia has no such networks.

In addition to "Scartel", SCRF allowed to build the LTE network to "Osnova Telecom" (74.9% owned by the son of former Energy Minister Igor Yusufov, Vitali, another 25.1% - by "Voentelecom" controlled by Ministry of Defense) - in all regions in the range of 2.3 - 2.4 GHz. But "Osnova" so far is testing the equipment showing no signs of hurry about the construction of the network: user devices that support LTE at frequencies of 2.3-2.4 GHz,are very few, says a company representative.

The frequencies in the very same range were won in March 2010 by "Rostelecom", but only in 39 regions (Moscow was not among them), in addition, these frequencies were given for the construction of WiMax networks, not LTE. Therefore, "Rostelecom", as well as the cellular operators of 'big three' - MTS, "Megafon" and "Vimpelcom" - hopes to get rest on competitive tenders, which promised to distribute four sets of LTE-frequencies in the range of 791-862 MHz, and then allocate to the winners another 20 MHz in the range of 2.5-2.7 GHz.

Tenders are to be held in the I quarter of 2012, but, even winning them the operators will not be able to immediately start building the networks - at first they would have to free won frequencies occupied by other users (primarily by Russian military). The cost of conversion of frequencies in 791-862 MHz was 52 billion rubles, as estimated in the summer by consortium "Union LTE", established by "Rostelecom", MTS, "Vimpelcom" and "Megafon".

Realistic timing for frequency clearing and building a network LTE –a year after summing up the competitive tenders, evaluates a top manager of one of the operators of the "big three". It is true that in Moscow, MTS (and "Megafon") have 25 MHz in the 2.5-2.7 GHz range, which optionally can be run for LTE. |

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