June 6, 2012 / 9:40 AM / 8 years ago

UPDATE 2-Russia's Summa has new ambitions in telecom auction

* Plans to take part in nationwide 4G licence allocation

* Analysts see small chances of Summa being awarded a licence

* MTS, MegaFon, Vimpelcom, Rostelecom seen as likely winners

* Network rollout would be too costly for Summa - analyst

By Maria Kiselyova

MOSCOW, June 6 (Reuters) - Russian investment group Summa has emerged as a surprise contender for a next-generation wireless licence, hoping to break the dominance of the country’s top telecoms after a previous attempt failed five years ago.

Analysts view Summa as a long shot, but the trading group run by Ziyavudin Magomedov has demonstrated a strong ability to close deals against the odds and is viewed as close to Prime Minister Dmitry Medvedev.

Russia launched a tender last month for licences allowing operators to provide wireless services using the LTE (Long Term Evolution) technology, which promises download speeds more than double that of the previous 3G standard and is designed for data, rather than voice.

“We have always expressed interest in wireless technologies. We believe that LTE broadband services will be a natural addition to our fixed-line access network,” Vladimir Androsik, the chairman of Summa’s telecom arm Summa Telecom, said in comments emailed to Reuters by the company’s press service.

Androsik added Summa Telecom would submit an application within the required time.

There is scepticism that Summa will prevail, however.

Observers say Russia’s Big Three mobile phone operators - MTS, MegaFon and Vimpelcom, as well as state-controlled Rostelecom, are the likely winners as they have the best chances of meeting the tender criteria.

“Based on the terms of the tender that were published we see that the Big Three and Rostelecom are the main contenders because infrastructure and financial resources are on their side. In our view, one should not expect any surprises here from smaller players,” said Viktor Klimovich, analyst at VTB Capital.

Klimovich added that there is a general view in the market that if any of the big players fail to get a 4G licence, it will be a destabilising factor for the industry.

“If we want to see a 4G network and want to see competition on this market, I think the four big operators should get these licenses,” said Anna Lepetukhina, analyst at Troika Dialog.


Summa, which trades oil and is branching into agricultural commodities, is looking to increase its position in Russia.

It recently won the right to acquire a near 50 percent stake in Russian state grain trader United Grain Company and is also expected to buy control of transport group FESCO.

It also spans engineering and construction, oil and gas, power utilities and metals and mining.

Lepetukhina at Troika said Summa Telecom could not compete with the big four operators based on the tender scoring criteria, such as experience in providing telecoms services and length of its backbone network.

Founded in 2005, Summa Telecom was removed from a list of contenders for 3G licenses in 2007 by Russia’s telecoms regulator as it lacked experience, while the licenses were awarded to the Big Three carriers.

There are only four nationwide lots up for grabs at the current tender, but the government is also considering awarding regional licences for spectrum in the 2,570-2,620 MHz band no later than nine months after summing up the results of the federal tender - expected on July 12.


Although operators will not have to pay for the acquisition of the 4G licenses, each applicant must commit to investing at least 15 billion roubles ($455 million) annually until 2019 in network rollout and incur additional costs clearing the spectrum, currently held by the military.

“It is very difficult to build a mobile network from scratch, it requires massive investments, and the return on this investment will be very low because it would have to compete with serious players on this market. Even Rostelecom will find it hard,” said Lepetukhina.

“Summa is just a (fixed) broadband internet player, and building such a network would be more costly for it than for any of the big four players. I don’t think it makes a big economic sense,” said Lepetukhina.

On June 5 the regulator said it had received applications from the Big Three operators - MTS, MegaFon and Vimpelcom.

Rostelecom, Nordic telecoms group Tele2 and TTK, the telecoms unit of railway monopoly Russian Railways, have said they also plan to take part in the tender. They have until June 14 to submit their applications.

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