FOCUS: Mobile operators may need more time to cancel intra-net roaming, may raise tariffs

By Yekaterina Yezhova

MOSCOW, Jan 22 (PRIME) -- The Russian antimonopoly service has allowed more time to abolish intra-network roaming, which contributes 4% to operators’ incomes and whose rise could trigger higher tariffs, and analysts do not rule out further delays.

“Most of the countries do not have intra-network roaming, when operators apply various tariffs to different regions in the country within its own network. Coming across the notion in Russia, the bulk of foreign specialists and guests see it as nonsense,” Finam analyst Alexei Korenev told PRIME.

The Federal Antimonopoly Service prolonged earlier in January the period of meeting its warrant on the abolition of intra-network roaming for the three major local mobile operators – MTS, MegaFon, and VimpelCom (Beeline) – till January 31 and May 31 for T2 RTK Holding (Tele2) from the previous deadline set on December 15, 2017.

“In general, the abolition of intra-network roaming will propel the Russian telecom market to a new level, as it was earlier done with the cancellation of payment for incoming calls and a caller ID option,” Zerich Capital Management senior analyst Viktor Markov said.

Korenev said that although intra-network roaming contributes a small amount to companies’ revenue, in absolute terms it is still impressive, for example, the figure is at about 12 billion rubles for MegaFon per year. The analyst has no doubts that the losses from its cancellation will be offset by higher tariffs.

“We think that the abolition of intra-network roaming will equally affect operating and financial results of all four major operators. Tele2 could be an exception since it still suffers losses and is granted preferences,” he said.

Markov expects cancellation of intra-network roaming to depress operators’ revenue only for a short period, but create better terms for its clients, “which will allow the operators to adapt to the new conditions, compensate losses and improve financial results.” “The operator with the higher number of clients will lose less and vice versa,” he said.

MTS serviced 78.5 million clients in the country as of the end of September 2017, MegaFon had 75.6 million, VimpelCom – 58.8 million, and T2 RTK Holding had 40.3 million.

The Finam analyst is less optimistic about the initiative’s impact on clients. “Subscribers would hardly win anything. Most likely, the potential decrease in expenses on connection between regions of the country will be compensated by an increase in tariffs and a refusal from a number of existing tariffs in favor of introducing new, more expensive ones,” Korenev said.

“We don’t rule out that certain categories of users will be at a disadvantage. The risk category includes residents of low-income regions, where local tariffs are much lower than in the country’s central area. If the operators apply a moderate tariff, the increase will not be dramatic, but we can’t exclude a scenario when the operators are tempted to make tariffs equal by ‘the upper margin’. Then a low-income user from a remote area is forced to make calls under Moscow tariffs not only to the capital city, but also to the nearest village.”

Matter of time

Unlike the bigger fellows, T2 RTK Holding was granted a longer period to abolish the roaming. “It is harder for Tele2 to fulfil the order at such a short notice. A longer period will enable Tele2 to respect the warrant with minimal financial losses and maintain the quality of services,” Markov at Zerich said.

Korenev at Finam attributed the preference given to T2 RTK Holding to the possibility that its 45%-owner, state-controlled telecom operator Rostelecom, could raise its stake in the mobile operator, or to the fact that Tele2, which has been bringing losses to the state-controlled operator, is expected to start making profit in 2018. Rostelecom, however, says that the matter of raising its stake in T2 RTK Holding will not be discussed in 2018.

“As to financial results of Tele2 and their impact on Rostelecom, according to the latter, losses from participation in associated companies in July–September 2017 were 660 million rubles, and the bulk was presented by Tele2 as the biggest unit. Tele2’s net loss was at about 1.47 billion rubles in July–September 2017,” Korenev said.

“Rostelecom’s management has outlined Tele2’s evident trends of narrowing losses and prospects of reaching a positive margin. It’s quite probable that some easing on intra-network roaming was given to Tele2 in the interests of Rostelecom.”

The analysts believe that the four operators could all ask the Federal Antimonopoly Service for a delay to get rid of intra-network roaming. “Previous experience has shown that such pressure on the antitrust service could be a success, and the operators do remember it. Reasons put forward to persuade the watchdog to meet them halfway could be the same: the lack of ability to follow the service’s requirements due to technical difficulties in transferring the operators to a single standard,” Korenev said.

Markov at Zerich said the given time can be not enough due to the vastness and special features of the Russian territory and the regulator understands this. “The operators are set a task rather not to respect strict deadlines in switching to new conditions, but to accelerate it. The process is on today, and extra month means nothing. At least by March, the big three should accomplish the work to void intra-network roaming,” the analyst said.

VimpelCom spokeswoman Anna Aybasheva said the company is working on technical issues and will unveil a final design of changes in the first half of 2018. “Alterations will involve several thousands of tariff plans, which requires significant changes in operators’ technical systems,” she told PRIME.

(56.5892 rubles – U.S. $1)

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