Rostelecom targets mobile growth

Rostelecom is reportedly planning to sharpen its focus on the mobile market in what is being described as a "strategic change of direction" for the Russian operator.

According to a report by the Moscow Times, the state-controlled operator plans to set up a separate unit to manage its mobile business, build an LTE network based on existing 450 MHz mobile infrastructure used by its Sky Link subsidiary, and expand its 3G network.

The 3GPP recently deemed 450 MHz to be a suitable band for LTE networks, and this has opened up new possibilities for operators in markets such as Russia and Brazil. However, 450 MHz spectrum has yet to be approved by the Ministry for Communications and Mass Media for LTE use.

Rostelecom will focus on 3G for now because LTE services are still in an extremely nascent state in Russia. It will seek to win 3G subscribers through a low-cost strategy, Timur Nigmatullin, an analyst from Investcafe, told the Moscow Times. This strategy could eventually lead to it buying Tele2 Russia, which was recently acquired by Russian bank VTB.

Fitch Ratings recently said that any near-term consolidation on the Russian market would likely be a Tele2 Russia/Rostelecom tie-up. The ratings agency also noted that Rostelecom would face the biggest hurdles to launching a successful LTE network, particularly following the recent $1.2 billion (€900 million) acquisition of LTE operator Scartel/Yota by MegaFon.

Rostelecom has certainly struggled to achieve growth with mobile services and reportedly has just 0.6 per cent of the Moscow market: The Moscow Times said the operator saw a 5 per cent decline in mobile revenue in the first quarter of 2013, although its subscriber base grew by 3 per cent last year.

"It appears that the previous management was not interested in developing the mobile business," iKS Consulting mobile analyst Maxim Savvatin told the paper. "The company had frequency licences but didn't use them."

Earlier this year, Rostelecom President Sergei Kalugin said the goal was to eventually capture 10 per cent of Moscow's mobile market, the Moscow Times reported.

Separately, Russian media reported that Rostelecom has launched a $912 million share buyback offer for around 30 per cent of the shares held by minority investors. The company declined to comment on the report, according to Reuters.

For more:
- see this Moscow Times article
- see this Reuters article

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