Suspicions high as Russia plans to award LTE spectrum to government-backed start-ups

Details: James Barton; Category: Trends & Forecasts; 27 August 2010; 8303 views

Two new entrants to the Russian telecoms market may be awarded LTE spectrum this week – a potentially controversial development since both Osnova Telecom and RusEnergoTelekom (RET) are backed by the Russian government...

The Russian Defence Ministry, which holds the majority of spectrum, will reportedly grant the LTE frequencies to the two operators without a tendering process. This has provoked outcry from the three largest operators in Russia – MTS, MegaFon and VimpelCom – as none have received the new bandwidth.

According to reports, Vladimir Yevtushenkov of AFK Sistema (a subsidiary of MTS) and Mikhail Friedman, the founder of Alfa Group (owner of VimpelCom) have held talks with Russia’s First Deputy Prime Minister, Igor Shuvalov, in an attempt to convince him to begin a tender process on the LTE frequencies rather than awarding them to the start-up operators.

The industry reaction appears to have triggered a response within the Russian government; Communications Minister Igor Shchegolev has reportedly been instructed by President Dmitry Medvedev to investigate the distribution of frequencies following a formal complaint – addressed to both the Minister and Prime Minister Vladimir Putin – lodged by the bosses of all three major Russian operators. Shchegolev has delayed a meeting which would have outlined details of the spectrum transfer amid suggestions that the allocation process has not been transparent enough.

The major operators claim that the build-out of a federal network would be too costly and time-consuming if LTE spectrum is awarded to the rookie companies, suggesting that it would take 5 years and US$5.7 billion. Osnova Telecom refutes these claims, stating that it would require only two years and US$2 billion.