MTS blog

ERICSSON SUPPORTING MTS IN 3G ROLL-OUT

Fri, 01 Jun 2012 15:09:00 +0800

We wanted to share with you a great movie Ericsson filmed about the role they played in MTS’s 3G roll-out. Ericsson was one of the vendors that MTS retained to ensure that the ambitious goal of covering 80% of Russia’s populated territory with 3G network is attained within the shortest possible timeframe. MTS obtained its 3G license in 2007, and launched services in major cities like St. Petersburg and Moscow in 2008-2009. Yet the large-scale, nationwide roll-out of our 3G network didn’t begin until the second half of 2010. MTS has since installed 23,000 base stations, covering 14,000 population centers across Russia. The project required mobilization of significant resources within the company since nearly 5,000 employees were actively involved in planning the roll-out, identifying locations for sites, ensuring that proper paperwork was completed, connecting base stations to transport networks and overseeing construction carried out both by our strategic vendors - Ericsson, NSN (Nokia Siemens Networks) and Huawei - as well as their network of subcontractors. NSN focused their efforts on Moscow and Central Russia, Huawei was hard at work in Russia’s Far East while Ericsson - as this video attests - delivered 9,000 base stations across Russia.

The 3G build out continues into 2012 as we aim to reach our goal of 28,000 base stations, but the deployment of the network has already translated into dramatic increases in data traffic - from 70 Mb per user month in Q1 2010 to 455 Mb in Q1 2012. Furthermore, data traffic revenues have doubled during this period.

Click here to view the video on our youtube channel.

MTS AT SVYAZEXPOCOM

Thu, 17 May 2012 19:34:00 +0800

Alexander Popovskiy, MTS Vice President and Chief Operating Officer, today met with analysts at MTS’s exhibitor stand at SvyazExpocom, a communications-themed trade exhibition in Moscow. Alexander demonstrated modems connected to the MTS’s LTE test zone, capacity of GPON network currently being deployed in Moscow, and PayPassTM, contactless NFC payment technology MTS has launched in partnership with MasterCard®. See below the slides he used in support of his discussion.

This vending machine is equipped with contactless NFC PayPassTM system from MasterCard®. Starting May 2012, SIM cards equipped with NFC antennas and MTS Dengi credit cards are distributed in the MTS retail network.

SvyazExpocom slides.pdf (599.21 kb)

SMALL CELL, BIG IMPACT

Sat, 05 May 2012 20:27:00 +0800

In Russia, mobile data traffic is projected to grow 18-fold from 2011 to 2016. This increase in demand requires cost effective solutions that improve not only capacity but coverage as well. For this, many operators are turning to femtocell technology. Femtocells are small low-power wireless base stations that connect to mobile networks using residential DSL or fiber connections and can support multiple standard mobile devices. Femtocells deliver a strong signal and high-quality voice service to standard mobile devices in homes, small and large offices, outdoor public spaces, metro hotspots and rural areas. While the market is still quite young it’s quickly gaining popularity. According to ABI Research, 37 operators launched femtocell services in 2011 globally.

The original target market for femtocells was residential, but now operators are focusing on enterprise femtocell solutions to boost indoor network coverage, mobile data capacity, and mobile voice call quality for business of all sizes. This is particularly relevant for MTS given that 80% of MTS network traffic is indoor traffic. In 2011, MTS installed around 130 femtocells for corporate clients in Moscow and St. Petersburg from which they are benefiting from ensured quality coverage and fast internet within buildings where mobile coverage is poor or lacking.

Most recently, MTS launched special tariff plans to promote femtocell usage. These pricing plans allow corporate clients to cut their mobile bill by up to 40%.

In addition to being cost-effective, femtocells offer flexible and powerful solutions. Flexible insofar that a number of femtocells can be combined in a mini-network, and handover between macro-network and mini-network is seamless. There is no need to obtain special permission from regulator or owners of the building, so installation is easy. And powerful insofar as one femtocell provides coverage of up to 1000 square miles with speeds up to 7.2 Mb/s. Given the range of benefits, we only expect the market for femtocells in Russia to grow in the coming years.

CONDITIONS FOR APPLICATION FOR AND AWARDING OF LTE LICENCES IN RUSSIA ANNOUNCED

Thu, 03 May 2012 22:33:00 +0800

The Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications (Roskomnadzor) today published the conditions for application for and subsequent awarding of LTE licenses in Russia. Conditions are in line with the decision of the State Committee for Radio Frequencies from September 8, 2011, which were previously made public. Full tender documents are available at the regulator’s website http://www.rsoc.ru/news/rsoc/news15162.htm

Highlights include:

- Four lots are to be made available, each of which consist of of two (2) 7.5 MHz blocks in the range of 791-862 MHz;
- Recipients of each of the lots will also be awarded two (2) 7.5 MHz blocks in the 720-791 MHz range and two (2) 10 MHz blocks in the 2500 – 2690 MHz range
- All of the licenses are nationwide;
- Applications will be evaluated based on a number of criteria, including but not limited to, the applicant’s experience in providing voice and data services; the existence of network infrastructure in regions throughout the Russian Federation, including fiber-optic networks, a commitment to deploy LTE networks in a number of regions in the given period of time, and a commitment to ensure uplink speeds;
- Each lot requires a minimum outlay of RUR 15 billion per year until the LTE network is fully deployed;
- Recipients of each of the lots are obligated to compensating MTS for vacating frequencies that are currently being utilized in Moscow and the Moscow region for the Company's WiMax business in ranges including: 2530-2540 MHz, 2540-2550 MHz, 2550-2560 MHz, and 2560-2570 MHz in the amount of RUR 126.8 million;
- Recipients are also obligated to compensate AFK Sistema for vacating frequencies currently used in Moscow and the Moscow region by Kosmos TV in the amount of RUR 274.1 million;
- Winners of each lot are committed to launching services no later than June 1, 2013;
- Winners of each lot are obligated to fully deploy networks by 2019; and
- Applications must be submitted before June 14, 2012, and results will be announced July 12, 2012.

SUBSCRIBER NUMBERS FOR Q1 2012

Wed, 02 May 2012 20:43:00 +0800

Subscribers (mln)	March 31, 2012	December 31, 2011	Growth Subs	Growth %
Total consolidated subscribers, mln	100.23	100.85	-0.6	-0.6%
Russia	69.38	69.95	-0.58	-0.8%
Ukraine	19.10	19.22	-0.12	-0.6%
Uzbekistan	9.53	9.30	0.23	2.5%
Armenia	2.23	2.38	-0.15	-6.2%
MTS Belarus ¹	4.96	4.93	0.03	0.6%

Subscriber data for Russian mobile operators is compiled by Advanced Communications and Media, a management consulting and research agency specializing in telecommunications and media. You can view their Q1 2012 subscriber report here.

¹ MTS owns a 49% stake in Mobile TeleSystems LLC, a mobile operator in Belarus, which is not consolidated.

REPORT ON MOBILE RETAIL IN RUSSIA, Q1 2012

Tue, 24 Apr 2012 18:54:00 +0800

Today we are issuing a report on mobile retail in Russia during Q1 2012, based on the estimates from our mobile retail network.

Highlights from the report:
- During Q1 2012, the number of phones sold in Russia increased by 10% compared to Q1 2011 with around 9.5 mln devices sold
- During Q1 2012, the mobile handset market in Russia expanded by 12% in sales compared to Q1 2011 to reach 44.0 bln rubles
- The average price of mobile phones during Q1 2012 increased by 2% compared to Q1 2011

- Share of smartphones in the sales mix in the MTS retail network during Q1 2012 reached 28%

- At the end of Q1 2012, MTS retail network comprised 4,050 stores, including franchised outlets. During the quarter MTS continued its optimization of its retail network and closed non-efficient points of sale

Please download the complete report

Retail Report Q1 2012.pdf (407.76 kb)

ALEXEY KORNYA SPOKE AT CITI'S TELECOMS CONFERENCE

Thu, 22 Mar 2012 22:49:00 +0800

Alexey Kornya, MTS Vice President and Chief Financial Officer, spoke today at Citi's 12th Annual European and Emerging Markets Telecoms Conference in London. You can download the slides below.

20120316 Citi Telecoms Conference.pdf (849.25 kb)

MICHAEL HECKER INTERVIEWED BY LIGHT READING

Wed, 07 Mar 2012 20:47:00 +0800

Michael Hecker, MTS Vice President for Strategy and Corporate Development, spoke with Light Reading at the Mobile World Congress in Barcelona. Click here to watch the video

VASYL LATSANYCH INTERVIEWED BY RBC DAILY

Wed, 07 Mar 2012 20:42:00 +0800

Vasyl Latsanych, MTS Vice President for Marketing, spoke with RBC Daily. See some of the highlights from the interview below. Click here to read the full article in Russian.

SIM cards sales. In the past in order to realize strong growth, operators simply needed to boost sales of SIMs. Today, with market penetration exceeding 150%, this model embraced by mobile operators no longer works. The high turnover of short-lived SIMs results in enormous dealer commissions. As dealers were interested in generating subscriber additions, this resulted in high churn rate. Around 70% of new SIM card sales are effectively subscribers of the same operators that were sold new SIMs with a new tariff plan. Revenues from such “new” subscribers are short-lived; effectively operators were reducing OIBDA to boost topline. This is merely a stimulation of expansion, not real growth. Hence, our decision to reduce new additions. As a result, in Q3 2011 we witnessed a year-over-year reduction of churn rate by 1.6 percentage points.

Our key objective is to ensure quality additions. Back in 2011 we abandoned the practice of paying fixed-bonuses to the regional dealers, shifting to a revenue-sharing basis. In 2012, we renegotiated agreements with all of the dealers, including Svyaznoy and Euroset, on the basis of revenue-sharing. This enabled us to eliminate fraud in SIM card sales and motivate dealers to attract quality subscribers. We are confident that by reducing turnover of low-quality subscribers, we will grow the bottom line. We consider greater penetration of smartphones as a real opportunity to increase ARPU. We are focusing on smartphones sales as we see from our experience that a subscriber who has bought a smartphone will spend 30% more as they will increase their consumption of data products. In addition to greater spending on data, we are also seeing greater spending on voice after switching to smartphones.

Data revenues. Focus on data generation is yet another way of increasing profitability. MTS has invested hundreds of millions of dollars in deployment of 3G networks – and covering nearly all of Russia at this point. However, the load on the networks is still quite low. This allows us to promote data services as our core business. That said, the growth of data revenues is limited as subscribers are not willing at this time to spend a lot on mobile internet – monthly data tariffs plans vary depending on speed from 200 rubles to 500 rubles. This is not a lot of money given that penetration of mobile internet is still low. To make a long story short, increasing efficiency of the business and building new drivers of growth is a long and tedious process which may result temporarily in a slower pace of growth, but in the long run it will create real value for the business.

Fixed-line business. In our fixed-line business we are focused on building networks and creating platforms for future growth. We have invested millions of dollars in upgrading our broadband network from which we see returns starting in 2013. By that time we will have deployed digital TV networks and will be able to offer our clients enhanced channel packages. Television in Russia is still very cheap and the prices are unlikely to go up. Still, on the basis of social package, we can create premium packages and offer our subscribers content that is in demand – sports, movies, and television series.

Roaming. Before the New Year holidays we launched an offering that allows subscribers to cut costs on international roaming. During the holidays we saw the number of roamers go up by 20% when compared to last year with voice traffic in roaming increasing on average by 40%. Users stopped switching off phones when going abroad, they no longer fear to take incoming calls, the length of the calls is going up, but APPM is decreasing. That’s exactly what we expected – to grow consumption of roaming services through more affordable pricing.

LTE. We don’t expect LTE to evolve into a mass market offering earlier than 2014-2015 for several reasons, one of which is the pace of development of end-user equipment. I can assure you that we are ready to switch on LTE network in Moscow in a week. But in the best case scenario LTE network will only start to generate stable returns in six months, probably even later. Moscow is far ahead of other regions in terms of demand for LTE service. In order to ensure LTE speeds available in laboratories, one needs to have a network with fiber backhaul networks. MTS has a competitive advantage in this respect, as our subsidiary, MGTS, is deploying a unique fully fiber - or GPON - network in Moscow- with total investments around 50 billion rubles - which will enable us to support quick mobile internet in 3G as well as LTE networks.

Retail. We are looking at the development of the retail chain as a part of the Group. Our retail subsidiary - RTK - has had two years of strong growth. During that period RTK has established itself as a major retailer, built a solid customer base and brought retail business to a break-even-level. In H2 2011 we adjusted our strategy and focused on sales of MTS services which was reflected in the change of KPIs for the management and in the incentive program for the retail division employees. This approach has resulted in declining RTK’s share in mobile retail market and lowering the sales of handsets. However, during the same period we increased the share of smartphones in the sales mix, which has enabled MTS to grow its number of mobile Internet users. Going forward, this will enable us to boost data traffic and grow ARPU.

MORE DATA THAN STARS

Fri, 10 Feb 2012 00:55:00 +0800

If you haven’t seen it yet The Economist put out a terrific videographic on the data deluge that we’re expecting over the next several years. To illustrate just what the study means by “deluge” – by 2015, "there will be three times more bits of information in our digital universe than stars in our physical universe". The data from the study is global, but the growth rates are in line with what we observing in Russia. Specifically, the data explosion in this country is being driven by:

- Greater penetration of smartphones. 12.4% of the phones on the MTS network were smartphones in Q3 2011. Smarthones accounted for 25% of handsets sold in the MTS retail network in Q4 2011.

- Booming mobile internet usage. 33.5% of the active MTS subscribers were using mobile internet in Q3 2011, up from 26.9% in Q3 2010.

- Rising mobile data traffic. In Q3 2011 the data traffic on the MTS networks increased 2.4 times year-over-year.

- Digitization of the fixed-line networks and growing broadband speed. According to Cisco VNI Forecast Highlights, in Russia the average broadband speed grew 114% from 2009 to 2010, from 2.5 Mbps to 5.3 Mbs.

- Greater consumption of video content. According to Cisco VNI Forecast Highlights, 8 billion minutes of video content crossed the Internet each month in 2010 in Russia, up from 4 billion in 2009.

Most of the data – both globally and in Russia – will be from video and huge amounts will come from connected sensors, among the more common are machine-to-machine (M2M) applications. Connecting computers to sensors (as opposed to manually inputting information) allows for unstructured data to be combined with structured data in a manner that gives us more than just more data, but insights that can used to make better decisions. For information on what MTS is doing in the M2M space see here.

The ability to process (beyond) astronomical levels of data (a projected 7,910 exabytes by 2015 according to The Economist) and tore it cheaply is where companies are going to find their fuel for innovation and improved operations in the coming years.