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June 19, 2012
Andrei Ushatskiy, Vice President and Chief Technology Officer for leading Russian carrier MTS, is tasked with balancing a network strategy for one of the world’s biggest geographic regions as well as several satellite markets.
The network organisation structure at MTS is based on a corporate centre for the group with a regional structure under the foreign subscribers unit. My role is more strategic and involved with governance, methodology, standards and innovation, but sometimes I need to deal with operational questions. In terms of our foreign subsidiaries, the CTOs of the Ukraine, Uzbekistan, Armenia and Belarus functionally report in to me. So I spend about 70 per cent of my time on more strategic matters and 30 per cent on more operational matters.
We have a strategy in place for three years but we review this strategy every year. This strategy addresses common points from a group perspective but we also have some specific elements for every market because there are some differences between individual markets. For example in the Ukraine we don’t have a 3G licence so we continue to provide data services over 2G and CDMA.
But we have already launched LTE commercially in Uzbekistan, Armenia and Russia, where we have frequencies for LTE only in Moscow. But because we have no 3G in Ukraine, we have to have different strategies for different countries. For Russia, of course, we changed our strategy completely because in July we plan to get a national LTE licence for the whole of Russia.
The LTE auction process in Russia started in mid-May, and we will get the results of the auction in mid-July. We expect to have a national license for LTE and so we have a preliminary timeline for deployment. But the situation with frequencies is quite difficult. Although we will get a license in July, it doesn’t mean we will be able to launch LTE everywhere because there are limitations to take into account. For example, the military is still occupying a lot of the digital dividend spectrum, which will take some time to evacuate.
The license will also have some requirements directing which regions we need to start deployments in first, the volume of deployments and so on. So our preliminary timeline will change after we know the licence requirements.
We will still continue to use GSM for the next ten years at least—but we hope that in the future we will have the opportunity to use our GSM frequencies for other technologies. We have already had our first experience of using 900MHz in the Moscow region and in the far east of Russia for UMTS. Spectrum re-farming will be a key part of the strategy for all Russian operators in the future. We need to establish technology neutrality and the ability to re-farm frequencies for new technologies.
Fortunately, our overall relationship with the regulator is quite good. We are discussing the possibilities and looking at a timeline for when we can start to re-farm our frequencies for a different technology standard. Based on our good relationship with the regulator we hope that we will be able to adopt a more technology neutral approach in the near future.
This will also apply to our 1800MHz frequency, too. At the moment we have some additional spectrum we can use. With 3G development in Russia starting two or three years ago, we are using only one or two carriers at the moment, but we actually have three available. So we have a good resource in 1800MHz which we plan to re-farm for LTE in the future.
At the moment traffic management is the biggest headache we have. We have needed more and more technologies that can help us increase the efficiency of our equipment and available capacity. Of course, the CMO wants to have high quality and unlimited capacity available, but the CFO wants to limit the capex and opex. I believe a good pricing structure for data is also needed to help decrease traffic at very busy hours.
Net neutrality is a difficult question to address. We would like to have subsidies from content providers of course, but the regulator has not made any firm decisions on this subject. We have a project with Google in place for Android apps at present, to address this situation via revenue sharing.
Within the framework of the agreement, MTS installs Android Market as the primary interface on all of the MTS-branded Android smartphones. Google has set up a special MTS section in the Android Market to promote MTS-branded applications as well as applications developed by MTS partners. Under the revenue-sharing agreement, MTS will get 25 per cent of the revenues from each paid mobile application bought from MTS-branded mobile devices. The parties are also working on making payment for applications directly from the MTS mobile account available for MTS subscribers. This project was launched in April.
But we also have a good understanding with other operators in Russia, which is looking at ways we can use sharing opportunities to be strong and competitively aggressive.
MTS was the first operator to outsource operation and maintenance services in Russia. We started with our deployment in one of Russia’s eight regions as a pilot and the biggest problem we had to address was that, in Russia, there was no market for outsourcing. But after we started this project our competitors joined in. This benefits everybody because MTS and VimpelCom were able to offer a joint tender to one vendor—in this case Nokia Siemens Networks—for operations outsourcing in this one region.
This is a very useful strategy for Russia where there is a very long distance between towns and different regions. It makes sense for operators to outsource operations in one geographic region and allows us to increase our efficiency especially when multiple operators outsource together.
We already share towers and fibre networks. We have a long history here. And we are now also investigating active network sharing and spectrum sharing also. We have a big fixed network too, especially in Moscow. Our daughter company, which runs the fixed line side is modernising this network and undertaking a huge project worth $2bn to upgrade to GPON for five million subscribers in Moscow. There are a lot of synergies between GPON on fixed line and 3G and LTE because we use the same transport and core elements.
Of course outsourcing does have risks but we can manage these through SLAs and contracts. With operations and maintenance outsourcing we still continue to monitor our own networks and get all the alarms and information about outages. We have no intention of just focusing on sales and forgetting about networks. We have strong and flexible SLAs in place and we control all KPIs.
We are looking at offload strategies. We are looking at using femtocells and also wifi. The wifi question is quite complicated, because while we are looking at using our own wifi network as we operate our own networks in many regions, we are also in the process of understanding our position better.
In our case we already have a fixed network, so it’s better to use our own network so we can retain control over everything. But I understand that for operators who have no fixed network, they need to look for some partners to offload with.
Our main equipment suppliers for mobile networks are NSN, Ericsson and Huawei. For every region we operate in we organise tenders and take into account our history with vendors and existing installed base. But we do not give any vendor exclusivity.
There are some differences between the equipment and services the providers offer but these are not very significant. Differences may depend on a particular technology or equipment, but this also changes very fast. One year a vendor may have issues with a particular technology, but a year later, this may have changed. Overall, our previous experience with the vendors as well as their technology roadmap and strategic vision all form part of a complex criteria for tenders.
Vendor finance is available and included in our contract but it’s only an option. It’s only there if we need to use it. But we don’t use it very often, only in specific circumstances. Typically we have the opportunity to invest our own money.
Of course, there is always a place for niche players that are more flexible and nimble. Especially now that technology is developing very fast, big vendors may not be able to understand all the requirements from an operator. However, we expect to see big vendors buy specialists, although this is a cyclical process and the specialists will always have opportunties.
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