FOCUS: Free connection idea splits Russian operators, seen implying pay options

By Yekaterina Yezhova

MOSCOW, Jun 14 (PRIME) -- A thing rarely heard from a leading mobile operator, Russia’s MTS put forward an initiative to make cellular connection free for subscribers in the middle-term and called on its colleagues to earn on partnerships or advertisements. Analysts said the idea is not as simple as users will have to buy other services to speak for free.

“We cannot call such connection absolutely free since subscribers have to participate in other programs to buy various services and goods. However, for active clients, consuming services in a large volume, connection could be actually charge-free. I think that free mobile connection could appear in Russia within the coming one–two years,” Viktor Markov, senior analyst at Zerich Capital Management, told PRIME.

“A trailblazer could be one of the country’s Big Three – MTS, MegaFon and VimpelCom, known as Beeline – with a wide infrastructure, maybe jointly with a venture partner. The idea could be realized in case of demand from clients. It’s still a kind of a startup so far.”

The tectonic shift was announced by MTS’ President Andrei Dubovskov in late May. “We should not live on the money the client pays for having their needs satisfied, including messengers, SMS, voice connection, streaming and video connection,” he said then.

The market has significantly transformed, and operators could earn on partnerships or advertisers. Vasil Latsanich, vice president for marketing at MTS, cited the example of Google, which offers its main services for free and gets money from advertisements and additional services.

MTS believes that it would be promising if the telecom industry gravitates toward commodity, and becomes a zone of common access, like it was done with the Internet, which is free and generates a huge turnover, Latsanich said then.

The statement followed a Facebook post from businessman Yevgeny Gordeyev, a managing partner of fund Russian Ventures, announcing a coming launch of free virtual mobile operator Atlas.

Subscribers have to download an Atlas application. The work is based on partnership: a client will receive virtual money, called “atlases,” for the use of services of the operator’s partners, to pay with it for connection, Gordeyev explained.

Atlas will start working by September in the city where it will get 100,000 applications. An operator-partner, whose network will be used, will be announced in June–August. Atlas will need no numbering capacity or a license, because it is actually only a service provider.

T2 RTK Holding, the country’s fourth leading operator half-owned by state-controlled Rostelecom, has no agreements with Atlas and denies any work of this virtual operator on its network, Konstantin Prokshin, head of the strategic communications department at T2 RTK Holding, working as Tele2, told PRIME.

Markov at Zerich said that there should be a certain number of clients consuming services and gaining points to launch the initiative of free connection. “These clients will later bring incomes allowing operators to attract free customers,” he said.

“Connection operators will earn commissions from transactions carried out by clients of online services. In this case, an operator acting as a link between a client and a trading service contributes to higher sales of trading chains and online services.”

VimpelCom said it already offers a similar product: 200 megabytes of traffic for free for tablets. “We see future in sales of services to corporate clients, tied to the knowledge of operators about clients, including real-time-bidding (RTB) advertisements. With a successful development of additional services, basic ones could be free,” the operator’s press secretary Anna Aybasheva said.

Free connection seems unfeasible for MegaFon and T2 RTK Holding due to heavy investments in infrastructure and new products.

“Tariffs of telecom services have significantly decreased in recent years, and services themselves have become a staple like lightning or gas. Many MegaFon subscribers choose bundle offers to save much money, and MegaFon cut roaming prices as well. However, it’s impossible to make mobile connection services absolutely free at present,” Yulia Dorokhina, head of MegaFon’s press office, said.

“To expand networks and improve quality of services, a connection operator has to invest a lot in infrastructure and creation of new products and services, which makes a refusal from payments impossible.”

Prokshin at T2 RTK Holding agreed, adding that Russia is already among the countries where mobile connection is the cheapest.

“Operators are forced to invest huge money to ensure high speeds of data transfer, wide coverage and high-quality voice connection. T2 RTK Holding continues to invest in the development of networks in 2016 to maintain sustainable growth rates,” Prokshin said.

“According to our estimates, it’s unreal to make connection services absolutely free for subscribers in the middle-term. We see a huge potential in the industry in the creation of mutually profitable partnerships with companies from other branches, like banking, transportation, IT and others.”

End