Infrastructure for telecommunications

Service-Telecom

Service-Telecom Group of Companies is an independent telecom tower company which is set up through the merger of Service-Telecom LLC, one of the leaders of the tower market in the Moscow region, and Link Development LLC, the first Russian independent tower company in Russia.

Benefiting from over 10 years of in-house expertise in tower industry, Service-Telecom offers site leasing and site development services to key mobile network operators – Tele2, MTS, MegaFon, VimpelCom and others.

The company manages more than 18 000 sites (mast structures and steel poles of different height) located in the key markets of Russia including the Moscow region, Saint Petersburg and the Leningrad region, as well as regional markets of Pskov, Novgorod, Vologda, Arkhangelsk, Nizhny Novgorod and the Nizhny Novgorod region, Yekaterinburg and Krasnodar.

Service-Telecom is determined to become a market leader among independent tower companies in growth of tower portfolio and operational efficiency.

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Services

TOWER SITES DEVELOPMENT, TOWER CONSTRUCTION AND SITE LEASING SERVICES

We construct and acquire towers that accommodate multiple tenants. Our business model is based on “Build-to-Suit” arrangements with MNOs - we build towers at locations that they have identified. Our build-to-suit programmes meet both MNOs’ future rollout requirements and their network optimization requests.

We start by selecting optimum locations for the construction of towers. We enter into long-term leases for the land that underlies our towers to the extent available at commercially reasonable prices. Our personnel is responsible for completing all pre-construction procedures necessary to secure the site.

All civil work on sites is carried out diligently, in a good workmanlike manner and in accordance with applicable build-to-suite specifications or collocation specifications. We supervise and direct the construction and development of our sites using our most experienced and certified employees and sub-contractors. We do continuous checks, and can guarantee that our towers are of good quality and are free from material defects.

We generally will have at least one signed tenant lease for each new build tower structure on the day that it is completed and expect that many will have multiple tenants. We provide MNOs with continued use of the space for active radio equipment both the towers and the ground space on the sites.

We are carefully observing telecomindustry trends and do our best to evolve our tower network over time in response to changing demand, developing technologies and business conditions. 

PASSIVE AND ACTIVE EQUIPMENT: ENGINEERING AND INSTALLATION

We provide engineering, installation and integration of the telecommunication equipment for mobile operators (voice and data transmission in 3G / LTE standards).

SITE OPERATIONS & MAINTENANCE: SERVICE SUPPORT AND 24/7 ACCIDENT RESOLUTION

We provide full scope Operations & Maintenance (O&M) services for passive infrastructure elements in accordance with an agreed set of service level standards (specific KPIs for down times, equipment redundancies, power availability and allocation of resources to ensure maximum up time). We take on responsibility for the following O&M services:

  • maintenance and repair of passive infrastructure elements on-site including mast, fencing, generators, air conditioning units and related electrics (distribution board, meters and AVR, power lines);
  • general site maintenance services (e.g. cleaning, weeding, painting).

Our technical engineers and support staff respond to technical issues quickly on a 24/7 basis and resolve them according to the established standards (mean time to repair (MTTR), etc.).

We do everything so that our tower network operation and maintenances framework can guarantee maximum maintenance coverage and the shortest reaction and remedy times at the lowest possible cost.

Service support telephone number: +7 906 258 2006.  

Tower Sale and Leaseback

Service-Telecom offers to owners or other holders of towers and other high-rise structures cooperation through entering into a sale and lease back agreement which would allow the tower owner to improve both liquidity and operational efficiency and to reduce ongoing capital expenditure as well.

News

Service-Telecom closes the acquisition of VEON’s Russian tower assets

Moscow, 01 December 2021 – Group of companies "Service-Telecom", an independent operator of wireless telecommunications infrastructure, today announces the successful conclusion of the transaction with VEON Ltd. regarding the acquisition 100% of National Tower Company, a subsidiary of VEON, which owns a portfolio of approximately 15,400 mobile network towers in Russia.

Following VEON’s entry into an agreement to sell its mobile network towers in Russia to Service-Telecom as announced on 6 September 2021, regulatory approvals have been obtained by the parties and this transaction has now successfully completed.

The purchase price for the transaction of RUB70.65bn (USD957mn equivalent) corresponds to an EV/EBITDA multiple of 11.7x based on the projected EBITDA of National Tower Company post-completion. VEON has received a payment of RUB64.4bn (USD872mn equivalent) at closing and the balance of certain deferred amounts will be due and payable over the next three years. The proceeds from this transaction will be used to reduce Group external debt.

The conclusion of this transaction paves the way for the establishment of a long-term partnership pursuant to a master tower agreement that has been entered into between PJSC Vimpelcom and Service-Telecom.  In connection with the transaction, J.P. Morgan and Allen & Overy acted as financial and legal advisors, respectively, to a wholly owned subsidiary of VEON. Aspring Capital and Freshfields Bruckhaus Deringer acted as financial and legal advisors to Service-Telecom, respectively.

Service-Telecom CEO Nikolay Berdin noted: “Following a highly competitive tender process, we completed this historical, first-ever, tower transaction in the Russian market. This highlighted the financial capabilities of the group and demonstrated the expertise of the Service-Telecom team both in its ability to manage the tower business and M&A. By entering this transaction with VimpelCom, we'll continue to successfully run the business to develop a national mobile network infrastructure that matches the country's ambitions.”

Kaan Terzioglu, VEON’s CEO, said: “I am encouraged by the successful conclusion of this transaction and look forward to building our partnership with Service-Telecom. This transaction unlocks the value of our infrastructure assets in Russia and allows the release of capital to further optimise VEON’s balance sheet while at the same time achieving more financial flexibility for the group”.    

TowerXchange: VEON agrees the sale of Russian tower portfolio to Service-Telecom

On 6 September 2021, VEON announced that it had reached a deal to sell its 15,400 site Russian tower portfolio to Service-Telecom for a total consideration of RUB70.65bn (EUR848mn). The deal marks the first major sale and leaseback transaction in Russia’s vast tower market and is the first big step in VEON realising the value of its 50,000 towers across Russia, and its European and Asian markets. TowerXchange examines the transaction, the Russian tower market, and the implications for VEON’s future tower strategy.

 

In their Q4 2020 results, VEON announced that it would create towerco business units in each of its markets, looking at ways to better realise the value of its 50,000 site strong tower portfolio. How the operator planned to realise the value remained open, with the rollup into a single towerco, the formation of joint ventures or the sale of a minority or majority stake all options under consideration.

Russia was always the most advanced of the markets in terms of formation of the towerco business unit, and was a top priority market in which the operator was looking to crystallise the value of its assets. VEON had carved its then 14,500 sites into National Tower Company back in 2016, reportedly reaching advanced discussions to sell the unit (with Russian Towers understood to be the front runner), before the plug was pulled on the sale. Interest however always remained in the portfolio, with a healthy towerco market already in place in the country.

Service-Telecom formed in 2015, headed by CEO Nikolay Berdin, and with the backing of the top three Russian banks. Within its first year of operations the company built 350 sites, and has continued to rollout new sites whilst also completing a handful of towerco acquisitions (Link Development in 2018, Technoresource in 2019 and Neva Telecom in 2021). The towerco’s portfolio currently stands at 2,851 sites, the majority of which are located in the investment attractive regions of Moscow and St Petersburg, although the company continues to expand nationally. Service Telecom’s sites are all ground based towers and have a tenancy ratio of 1.9x, with revenue deriving from each of Russia’s four MNOs equally.

The deal will add 15,400 sites to Service-Telecom’s portfolio, propelling the towerco to just outside the top 20 largest towercos in the world (21st place). The portfolio they are inheriting includes ground based towers and tall shareable rooftop sites (VEON’s smaller, non-shareable ones were not included in the deal). Currently the tenancy ratio of the inherited portfolio is 1.3x, although non VEON tenants have typically been agreed on a barter rather than commercial arrangement – Service-Telecom’s priority will be to commercialise the assets rapidly, leveraging the systems in place from their existing operations.

The deal between VEON and Service-Telecom marks an important landmark for the Russian tower market. A handful of strong independent towercos (Russian Towers, Service Telecom and Vertical) as well as a long tail of smaller players (collectively owning around 3,000 sites) had emerged, and new build and M&A between towerco players had created decent growth opportunities, but a 15,000+ tower deal is a game changer.

Link to the full version of the article - https://www.towerxchange.com/veon-agrees-the-sale-of-russian-tower-portfolio-to-service-telecom/

Service-Telecom announces agreement to acquire VEON’s Russian tower assets for USD 970 million

Transaction reflects a total enterprise value of RUB70.65bn (approximately USD970 million) and an EV/EBITDA multiple of 11.7x 2021E

Moscow, 6 September 2021 Group of companies "Service-Telecom", an independent operator of wireless telecommunications infrastructure, announces today that it has reached an agreement to acquire mobile network towers in Russia of VEON Ltd. (NASDAQ: VEON, Euronext Amsterdam: VEON), a leading global provider of connectivity and internet services, for a total consideration of RUB70.65bn (USD970million equivalent).

 

The transaction involves the acquisition of 100% of National Tower Company (“NTC”), a subsidiary of VEON, which owns a portfolio of approximately 15,400 mobile network towers in Russia. As a result of the transaction, the total portfolio operated by Service-Telecom will be about 18,000 sites.

 

Under the terms of the deal, PJSC VimpelCom and Service-Telecom have entered into a long-term master agreement regarding the provision of tower infrastructure services for an initial period of 8 years, and multiple extensions of 8 years at the discretion of PJSC VimpelCom. Both parties will additionally enter into a new build-to-suit program comprising of up to 5,000 sites by 2029.

 

The purchase price for the transaction of RUB70.65bn (USD970m equivalent) corresponds to an EV/EBITDA multiple of 11.7x 2021 based on projected EBITDA of NTC post-completion.

The transaction is subject to customary regulatory approvals and closing is expected to take place in the fourth quarter of 2021.

 

Service-Telecom CEO Nikolay Berdin noted: “The agreement reached with VEON is a key achievement for Service-Telecom on its way to becoming the leading telecommunication infrastructure operator in Russia. With PJSC VimpelCom, as our partner, we expect to drive sustainable long-term growth in Russia while constructing the infrastructure backbone of the digital economy and helping to enhance mobile broadband connectivity for consumers. The transaction is financed with the support of Gazprombank whereas investment and legal advice are provided by Aspring Capital and Freshfields Bruckhaus Deringer LLP respectively”.

 

Commenting on the transaction, Kaan Terzioglu, VEON’s Chief Executive Officer, said: “Today’s transaction is a major step forward in realising the value of VEON’s infrastructure portfolio for our shareholders. By entering into a long-term partnership with a strong, experienced counterparty in Russia, Beeline will enjoy the operational and financial flexibility to serve its customers with market-leading services through one of the nation’s largest and most technologically-advanced mobile networks. Moreover, this transaction allows to release the capital to deleverage VEON’s balance sheet and invest in critical aspects of active network and digital opportunities while achieving more financial flexibility.”

 


Service-Telecom Group of Companies participated in Transport Infrastructure Forum

Moscow, 1 October 2019

‘Transport infrastructure of Russia – 2019’ Forum organized by Public-Private Partnership Development Center was held 1 October in Moscow.

The Forum brought together regulators and representatives of administrations, transport, infrastructure companies and other specialists of the public-private partnership.

Within the framework of the strategic session "PPP in the context of digital solutions in the field of transport and logistics", "Service-Telecom" took part in the discussion of the implementation of current public-private partnership projects, as well as the prospects for their development.

Service-Telecom Group of Companies participated in Huawei Russia Forum

Moscow, 24 April 2019

‘Ecosystem of infrastructure of Russian mobile networks – 2019’ Forum organized by Huawei Russia was held 24 April in Moscow.

The Forum brought together regulators and representatives of administrations, mobile network operators, infrastructure companies and other specialists of the mobile industry.

The main theme of the Forum was development of infrastructure and technologies to create a new generation network.

Service-Telecom made a presentation on the topic ‘Infrastructure business on the way to 5G: Challenges and implementation ways’ and participated in the panel discussion of infrastructure development.

Service-Telecom Group of Companies and Huawei Russia signed the Memorandum of understanding outlining the framework of strategic cooperation.

Press release: Service-Telecom Group of Companies acquires a tower company in the Volga region

22 April 2019

Service-Telecom Group of Companies, a federal telecom tower infrastructure company, acquired 100% stake in Technoresource LLC, Nizhny Novgorod.

Technoresource is an independent infrastructure operator focusing on telecom infrastructure construction on city street light infrastructure in Nizhny Novgorod.

As a part of the company's strategy for the development of telecom infrastructure in the regions of the Russian Federation, Service-Telecom Group of Companies is largely investing in the development of telecommunications in the Nizhny Novgorod region.

Nikolay Berdin, Service-Telecom CEO, on the acquisition:

‘We consistently implement the company's growth strategy through M&A activity which helps us enter the new regions and develop Russian telecom infrastructure. The acquisition of Technoresource allows our company to provide customers, primarily mobile operators, with a wider range of services for the placement of their equipment both in and outside the city. We plan to further develop the infrastructure in the Nizhny Novgorod region to digitalize the regional economy and provide high-quality communication services and mobile Internet.’

The combined company will manage more than 1 500 sites.

Service-Telecom participated in the Round table related to legislation on special zoning and public easements

Moscow, December 2018

Service-Telecom joined the Round table related to legislation on special zoning and public easements.

Organized by the Moscow regional technical inventory Bureau (BTI) with the support of the Agency for strategic initiatives and the Ministry of ecology and environmental management of the Moscow region, the event brought together more than 150 industry experts.

As a part of the discussion Service-Telecom delivered on overview of amendments to the Land Code on public easements and its impact on tower business.

For more information visit https://mobti.ru/press-tsentr/novosti/20181204_5/

TowerXchange: A tale of two cities: Service-Telecom acquires Link Development

April, 2018


A tale of two cities: Service-Telecom acquires Link Development

Moscow-based Service-Telecom gains both footprint and expertise with the acquisition of St Petersburg’s Link Development

 

Service-Telecom’s announcement of their acquisition of Link Development sees Russia’s number three and four towercos consolidate to offer sites in both of Russia’s major cities. As well as increasing their geographical footprint, the deal has also broadened the scope of Service-Telecom’s infrastructure expertise, with their own agile small cell and light pole experience being supplemented with Link Development’s background in macro towers and great tenancy ratios. TowerXchange caught up with Nikolai Berdin, CEO of Service-Telecom, to find out more about how the deal took place and their plans for the future.

 

TowerXchange: Congratulations on the acquisition of Link Development! Can you tell us about the acquisition and your motivations for the deal?

Nikolai Berdin, CEO, Service-Telecom: The tower market in Russia is growing and we’re on top of that market, the third independent big player by most accounts. We now have around 1,000 towers in our portfolio: 500 which we built through Service-telecom alone, approximately 400 which we acquired with Link Development and another 100 which will be finalised by the end of the year.

 

TowerXchange: Do you think there’s scope for further towerco consolidation in the Russian market?

Nikolai Berdin, CEO, Service-Telecom: At the moment the market is in two parts. As for the towers which the MNOs own, there’s no sign of an immediate deal but we haven’t ruled out the idea of acquiring one of their portfolios.

The second part of the market is the independent sector: Russian Towers, Vertical and Service-Telecom, plus new entrants in the Moscow region and also local companies who operate in each region of the Russian Federation. There are definitely opportunities for growth and for further M&A in this area, to improve and scale up what the independent sector can offer to their MNO tenants.

 

TowerXchange: Can you tell us about what attracted you to acquire Link Development?

Nikolai Berdin, CEO, Service-Telecom: If you look at the landscape of Russian independent towercos in early 2016, we saw only four reasonably active players and in local markets the main activity was in Moscow and St Petersburg.

We felt consolidation was the next logical step. Link Development was a leader in the St Petersburg market and the best target for us to expand our geographical footprint. No one else has had success in the St Petersburg market, and it has very good potential, so the logic was simple: by buying the leader in the market we consolidated our portfolio and clarified our vision as well as giving ourselves a strong presence in the two major markets in Russia. It hasn’t been an easy journey and we’ve had to work hard to align everyone’s expectations and get the full buy-in of our shareholders, but now the deal is completed, we all view it as viable and long term.

 

TowerXchange: Can you talk us through your plans to integrate the two organisations?

Nikolai Berdin, CEO, Service-Telecom: We decided that we’d like to create one big joint company with one team, present both in Moscow and St Petersburg. The idea of this is to enjoy the synergies which can be generated by two teams with expertise between them in constructing macro towers, achieving great tenancy ratios and using best practices in terms of monitoring towers. Resolving power issues when three or four tenants mean there’s a huge amount of equipment on a tower isn’t the same as maintaining street poles with only one or two tenants sitting on there. This is why Link can bring us some of the best expertise in the market. Link has been operating in the Russian market longer than any other independent player, and we’re confident that the results they’ve achieved in terms of colocation is much more significant.

At the same time the Moscow team is better positioned to work in a competitive environment, they’re more experienced in growing a portfolio rapidly and has experience in small cells and light poles which is where the market is going today. We envisage that tomorrow’s networks will comprise of several layers, and there will be a place for both macro and small cells in that infrastructure. By joining the companies, we get expertise in both sides as well as expanding our offering across Russia’s two biggest cities.

 

TowerXchange: Now the Veon deal seems to be off the table, what do you see as the routes for growth for independent towercos in the Russian market?

Nikolai Berdin, CEO, Service-Telecom: We’d like to continue to expand operations into new geographical regions. We are already starting up operations in the Urals and Krasnodar regions, plus we now have professionals in both Moscow and St Petersburg who will continue to grow business in these regions.

We’re also investigating options to acquire local players in regional markets and to continue to use M&A to grow our portfolio in these locations. But putting all this in place we’re aiming to create a platform which will be best positioned to acquire a bigger tower portfolio from an MNO in the coming few years.

There are four MNOs in Russia and each one has its own stance towards divesting towers. Some are rigidly intending to keep hold of their infrastructure and others are more open to working with independent players, so we will keep the lines of communication with them open in the hope that an opportunity will arise, possibly within the next couple of years.

 

The full version of the article published in TowerXchange Journal, Issue 22, p. 341, www.towerxchange.com

Service-Telecom participated in TowerXchange Meetup Europe 2018

London, April 2018

Service-Telecom joined the 3rd Annual TowerXchange Meetup Europe 2018 held 9-10 April in London.

Service-Telecom participated in a panel discussion on the development of urban infrastructure for 5G network in Moscow.

Service-Telecom participated in Huawei Russia Forum

Moscow, December 2017

‘Ecosystem of infrastructure of Russian mobile networks – 2017’ Forum organized by Huawei Russia was held 20 December in Moscow.

The Forum brought together mobile network operators, regulators and representatives of administrations, analysts, infrastructure companies and other organizations of the mobile industry.

The main theme of the Forum was cooperation and innovation for the development of communication services.

Service-Telecom made a presentation on the topic ‘Integrator of interests: the unifying role of the infrastructure operator in the creation of a new generation of communication networks’, and also participated in the discussion of the importance of maintaining a balance between the economic efficiency of networks and ensuring the quality of mobile services necessary for the implementation of the Russian digital economy. 

Press release: Service-Telecom acquires the leading tower company in the Northwest region of Russia

25 September 2017 

Service-Telecom LLC, a rapidly growing independent telecom tower infrastructure company, announced that it had completed the acquisition of 100% stake in Link Development LLC. Service-Telecom is one of the leaders of the tower infrastructure market in the Moscow region, and it is actively expanding its presence in the major regional markets. Link Development is a leading player in the Northwest region of Russia, focusing on Saint Petersburg and the Leningrad region.

The combined company will manage more than 1 000 sites (mast structures and steel poles of different height) in the key markets of Russia. It enjoys a portfolio of diversified long-term contracts with all federal mobile network operators; average tenancy ratio of 1.8 is one of the highest in the industry.

Nikolay Berdin, Service-Telecom CEO, on the acquisition:

‘Being the first strategic acquisition of a tower company in the Russian telecom market, this transaction is a very important step in the implementation of Service-Telecom’s strategy to become a leader on a national scale in the Russian telecom market.

We join efforts of our teams in the key markets to provide our clients and partners with high quality services, to offer more competitive proposition for the further construction of LTE networks, and to build foundation for future development of 5G networks.

We will continue to improve our operational efficiency and will follow the growth strategy combining M&A activities with proactive organic regional expansion.‘

About Service-Telecom

Service-Telecom was established in 2015 to provide site leasing and site development services to mobile network operators. In the end of 2Q 2017, the Company’s portfolio reached 500+ sites. Service-Telecom is currently present in the Moscow region, Saint Petersburg, Nizhny Novgorod, Krasnodar, Stavropol and the Urals (Sverdlovsk region).

About Link Development

Established in 2008, Link Development is the first Russian tower company that started building infrastructure for site sharing. The network of the company is developing and now reached the number of 350+ sites in Saint Petersburg, Leningrad, Pskov, Novgorod, Vologda and the Arkhangelsk region.

Advisors for the transaction

Aspring Capital, an independent Russian investment bank providing M&A, fund raising and other corporate finance services, acted as a financial advisor for the transaction. DLA Piper represented the interests of Service-Telecom in this transaction and Dentons advised the seller.  

TowerXchange: A towering ambition

June, 2017


Service-Telecom: A towering ambition

Founded only two years ago, Service-Telecom has major plans to shake up the Russian tower industry Russia has huge untapped potential for tower infrastructure – it has millions of mobile subscribers that are consuming data on platforms like WhatsApp, Facebook and Skype at an increasingly rapid pace. Nikolay Berdin, CEO of independent telecom tower infrastructure company Service-Telecom, explains why the

company is seeking to expand its operations from Moscow into the whole of Russia. He also outlines the reasons why MNOs are partnering with towercos and transferring ownership of their assets to third parties, and talks about how the Russian government is supporting the development of the towerco industry.

 

TowerXchange: Please introduce Service-Telecom and how the company has evolved.

Nikolay Berdin, CEO, Service-Telecom: We started operations in 2015 with the specific aim of becoming one of the leading national independent telecom tower infrastructure companies in Russia. We started from scratch with a structured business model, looked at international markets for reference, and came to the conclusion it was time to start with a BTS model in Russia. All four MNOs in Russia work with independent towercos to develop their networks.

The top three Russian bank came on board as a strategic partner, and once we were fully funded, we started construction. We secured contracts with Megafon and Tele2, and then started on construction at the end 2015. Just over one year, we have built 350 sites plus we have more than 100 in the pipeline under consruction, and we expect to expand our portfolio via M&A. As the results, we aim to have approximately 1,000 towers in place by the end of 1Q 2017.

We referred to international experience, and we agree that there are two ways for us to develop - organic growth through build to suit and inorganic growth through M&A. In the company’s early days, we explored M&A options in the Russian market and potential tower sales from VimpelCom, Tele2 and Megafon.

As you know, Russia is a huge country, with over 20 million people in the Moscow area alone. Moscow is our home region, but from the first year of our existence we embarked on an ambitious regional expansion. We are talking about Russia from St Petersburg to the Urals, focusing now on the hottest markets, which include St Petersburg, Sochi and Krasnodar, the Volga region and the Urals. But we are under no illusion that this will be easy – other Russian tower companies and local incumbents are active in these regions. Our strategy is to grow into a national player and develop a strong reputation in our market.

In spite of this, we are very pleased with the progress we have made this year. At the start of 2017, the MNOs started to announce their annual plans and place more orders with us compared to last year.

In terms of organic growth, we have earned credibility with MNOs in the Moscow region. At the same time, we are looking at additional opportunities on the markets like M&As and JVs and everything which can help us to grow further.

 

TowerXchange: Are you only focused on Russia?

Nikolay Berdin, CEO, Service-Telecom: We’ve only just started so it is way too early to say. We are definitely interested in serving the Commonwealth of Independent States (CIS), but our focus for now is on Russia and we see it as a very interesting market.

 

TowerXchange: Can you summarise your opinion of the current tower market in Russia? For example, the split between MNO-owned, MNO carve outs and independent towercos. How do these players all relate to one another currently?

Nikolay Berdin, CEO, Service-Telecom: We believe that the Russian market has huge potential for tower infrastructure; it may be one of the biggest markets for tower infrastructure in Europe. The country has more than 250 million subscribers and at present people are migrating to data at a huge pace – everyone uses Skype, WhatsApp and Facebook. Russia has a lot of big cities with populations of over a million people, each creating high levels of traffic and high requirements for data.

In the quest to keep pace in the past MNOs wanted to do everything themselves, concerned about keeping their market share, they have however now started to consider independent towercos. Now, in a challenging economic environment they still need to invest funds into network expansion. An opportunity to fund the CAPEX with the help from independent towercos became a valid option to have.

There are four MNOs in the Russian market. Tele2, is aggressively growing and successfully entered the Moscow region a year ago. Vertical and Russian Towers helped them to grow and establish a network in Moscow – a good example of how the company successfully launched in the hottest city and largest market in the country. There is the same level of demand from other large cities all over the country. This was one of the reasons why St Petersburg was our first priority after Moscow, and we plan to grow from there with MNOs constructing their network.

In the case of MNO-owned towercos, these companies usually accumulate assets and don’t play an active role in the tower segment. For example, Megafon has very different ambitions to VimpelCom. VimpelCom set up a towerco for a carve-out; rumours say that they’re quite close to the end of the process. Megafon is more conservative, looking at market opportunities, and itis still not very active in terms of selling their towers. They are probably preparing for a carve-out or JV or something else. I expect they’ll be ready close to the middle of the year.

 

TowerXchange: In our conversations with Western European towercos, small cells and 5G rollout is a really hot topic. Can you give us any insight as to how close Russia is to 5G rollout and what the small cells/densification needs will be in Russia over the next few years?

Nikolay Berdin, CEO, Service-Telecom: I believe that all MNOs are deeply involved. Megafon and MTS have already announced trials with Huawei and Ericsson. Next year we have the World Cup and the trials will be introduced during the championship. In terms of network coverage, we don’t see much activity associated with this; it’s far too early for Russia. We asked several questions to technical heads, they have pilot projects, but are still in testing mode.

We do believe that there is a lot of potential in LTE, and MNOs continue to build these networks. They have started to introduce LTE Advanced in Moscow and a number of cities across the country, which allows consumers to browse the Internet at a speed from 150 to 450 Megabytes per second.

Small cells became a hot topic two years ago with Moscow having become the place where were trialled. There is still a demand for macro sites of 40m plus, but in towns it’s switched to small cells and steel poles 15m to 30m high. MNOs are also testing indoor technologies and with independent towercos it’s developing more rapidly. As a company, our focus mainly on small cells. We are putting in street poles 20 to 30m high which can share two to three small cell tenants and providing different solutions around that.

 

TowerXchange: What can you tell us about government initiatives in terms of Russian telecoms infrastructure? Is there anything in particular which is driving or inhibiting growth?

Nikolay Berdin, CEO, Service-Telecom: Certain initiatives are likely to lead to the growth of the towerco market, one of the most important one’s being the removal of the requirement to obtain a building permit for certain types of telecom towers. This has been introduced in a number of regions, including Moscow and St. Petersburg and region and as such, you can now construct a tower in those areas with fewer bureaucratic procedures. This really helped to develop the market in the Moscow region. It’s not the case for every region in Russia though, some regions are trying to do the same and others are lagging behind - we have also heard of instances where MNOs have struggling with the speed of network development.

 

The full version of the article published in TowerXchange Europe Dossier, p. 128, www.towerxchange.com