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September 28, 2012

Russia Indefinitely Postpones Its Decision on Mobile Technology Neutrality

Russia wants more tests to be conducted to confirm that recycling old frequencies by mobile operators to offer faster Internet on-the-go, would not affect the quality of the service.

A Russian daily, Vedomosti reported that Russia has postponed the decision on technology neutrality indefinitely, unless it has more data.

Tele2 AB subsidiaries in Russia are subdivisions of one of Europe’s leading telecommunications companies and for the past several years, have been installing new cellular networks all throughout Russia. In terms of subscribers, the company has become the fourth largest mobile operator in the country, with around 17.3 million customers in 37 regions.

The delay caused by this indefinite deference will hurt Sweden’s Tele2AB, Russia’s only foreign mobile operator. Tele2AB had been seeking to recycle its old spectrum for the new usage, the process known as technology neutrality in the current Russian debate.

This decision has already started affecting the Swedish giant as its shares were down three percent in the markets. The company Tele2AB had suffered a setback earlier when it lost a Russian tender for a fourth generation mobile license which was designed for data. It was crucial for the company’s future growth as revenue from voice calls has been steadily declining.

The participants at the meeting of the State’s Radio frequency Commission rejected the current proposal, as there wasn’t sufficient data and it wanted more tests to be conducted. It was due to discuss the issue of technology neutrality in coming weeks.

The representatives of Tele2AB said that they were indeed disappointed with the postponement of the decision but they believed that Radio Frequency Commission would reconsider its stand later when appropriate and necessary tests were conducted and enough data is analyzed to ensure that there would not be any sort of deterioration in the quality. They hoped that technology neutrality decision would be implemented in due course.

The Swedish company said last month that the firm could extend its current cooperation with its 2G roaming partners or could itself buy space to include data services on another operator’s network if Russia did not agree to technology neutrality.

Four LTE licenses were awarded by Russia in July to state controlled Russian operator Rostelecom and the other three big and dominant phone groups - MegaFon, VimpelCom and MTS. These companies will soon be building 4G service capability in their networks.

Tele2, as the only major foreign-controlled mobile operator in Russia, is unlikely to be handed a first-mover advantage to develop mass-market 4G, wrote analyst Ulrich Rathe at brokerage Jeffries. Rathe added that however, they see little reason to give up hope altogether that Tele2 will eventually get technology neutrality, as some key authorities have come out in favor already and a potential delay could be down to giving competitors time to sort out their own roadmap to 4G first.

Edited by Brooke Neuman

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