The recent confirmation by Vimpelcom and MTS of a plan to collaborate on the building of an LTE network in Russia…raises serious doubts about the future of the planned wholesale LTE network to be led, built, and operated by Yota that was announced in March 2011.

 

Vimpelcom and MTS, two of the “big three” operators involved in the original Yota plan, confirmed their intentions by signing a memorandum of understanding (MoU) to invest approximately $2 billion (€1.4 billion) by the end of 2012. Given recent developments in the spectrum landscape in Russia and objections to the valuation of Yota, this latest development creates more confusion and uncertainty, and will ultimately delay the rollout of LTE in Russia.

 

Although there is as yet no official line on the future of the Yota-led consortium, this announcement is significant as it begins to tear apart the underlying framework of the March 2011 deal. At that time, the “big three” (MTS, Vimpelcom, and Megafon), along with state-owned Rostelecom, signed an MoU with Yota, a Russian WiMAX-turned-LTE player. The MoU called for Yota to build a wholesale, nationwide LTE network that would be shared by all the partners as service providers, with Yota acting as the sole LTE network operator in Russia.

 

In addition to receiving assured access to Yota’s proposed LTE network, the four operators would also have had the option of a future stake of 20% in Yota. Such an arrangement, though depriving the individual mobile operators of control, would have brought the benefit of nationwide LTE access without the difficulties of raising investment or future debt servicing in an economically challenging environment.

 

Despite the prospect of Yota rolling out a single LTE network, the spectrum landscape in Russia is far from clear. The Yota-led consortium was supposed to have used Rostelecom’s spectrum. However, in July 2010 Yota’s parent company, Scartel, reportedly received regulatory approval from the Russian telecoms regulator, Roskomnadzor, to re-use its WiMAX spectrum for LTE; an approval the regulator had previously declined to give.