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Megafon Company presented the results of 2015

Kommersant FM: Good afternoon, Yevgeny! The Megafon company presented the results of 2015, and the interesting point is that the volume of receipts from mobile data transmission increased by 19% and equaled 80 billion rubles, in addition, the receipts from mobile services increased only by 0.2%. Does this mean that voice communication is gradually passing, and mobile Internet is becoming the principle item of income?

Chermashentsev Y.: The quarter of our revenue comes from data transmission. In our plans for 2016 we see the increase of the data transmission consumption, which will compensate for the decrease of voice communication services consumption. In fact, this is what we see based on 2015, because messengers actually are taking over SMS, and data transmission is being taken over by “voice”. We believe, that in a little while, in a few years, there probably won’t be the traditional “voice” as we know it, at all. Everything will move to IP, step by step. Thus, it will be pointless to consider voice traffic and data transmission traffic, because the combination of video calls and voice calls, or something of the kind will take place. Overall, in prospects of 2016, we expect the data transmission to compensate for the voice traffic fall.

Kommersant FM: What regions were a priority for Megafon to construct its base stations that allow customers to use mobile internet, last year?

Chermashentsev Y.: Of course, the main thing that attracts us is traffic, meaning clients, i.e. the area with rapid growth, high network load, is, basically, where we try to place the main active radio-infrastructure. For example, we have an internal program “Top 16 regions”. These are the regions that are of importance for us from the point of view of the subscriber database. I mean, all regions are important, but these ones are the priority, they have major influence on our volumes of subscriber database and income. Krasnodar Krai and Rostov region, for example, are in the list of regions that received prior financing, including infrastructure purposes. We have very impressive numbers on Krasnodar Krai. The construction started since the Olympics preparation, when we worked on Sochi and the whole cluster, we did not restrict to Sochi and its resort area, so we carried out major construction works across the whole territory of Krasondar Krai. Of course, one of our biggest cases is Moscow and Moscow Region, we had a big project — the renovation of technological infrastructure in Saint Petersburg. The project is still on, it is to be completed this year, as a result, we will have a brand new, modernized network, which will be capable of operating the traffic we expect in the following years. Anyhow, all of this is being developed under the Top 16 case.

Kommersant FM. I would also like to cover the development of 4G and LTE-Advanced network that was recently launched in Moscow. How are these technologies developing now?

Chermashentsev Y.: It is a good question. Indeed, 4G is now the most high developing technology, it is obviously beneficial for operators, firstly, because it is using such limited resource as radio-frequency spectrum, i.e., roughly, one and the same line breadth allows us to get a greater volume of data transmission compared to the technologies of the second and third generations. A few years ago there was a linkup carried out under the Mobile World Congress where they demonstrated the speed close to 300 Mb/s. So, now, our aim is to develop this configuration. I want to make it clear, the point is, that this configuration is not only about the opportunity to load videos at such speed, but, more importantly, it is about providing more clients with better service. The second stage, thanks to the Government’s decision to allow the so-called technical neutrality, is to rollout 4G networks at the frequencies that were originally used for 2G. This range that we call LTE-1800, even being difficult to obtain in matters of frequencies, is, indeed, capable of providing a better network coverage in terms of territory. We are planning to build many base stations at this frequency range in 2016. The further development is quite obvious, because all operators are jointly working to clear the LTE-1800 spectrum, we consider the opportunity to use 900 range, so, we have a great deal of plans.

Kommersant FM: And where in Russia do you plan to develop this new generation networks?

Chermashentsev Y.: First of all, we consider million-cities, we are now working with Moscow, Saint Petersburg and Nizhniy Novgorod. This year we are developing the program of this technology implementation not only in million-cities, but also in big cities with the demand for traffic, where it is reasonable to carry out this program, because the use of 4G devices is increasing and the content consumed through these devices requires more and more capacity.

Kommersant FM: Still, how costly it is compared to the 3G networks, for example?

Chermashentsev Y.: If we speak about the utilization efficiency of the spectrum, 4G is more beneficial than 3G and 2G. However, there are a few problems, the first one being the currency exchange rate. It is clear that we shouldn’t be counting on ruble revenue under current conditions, because it becomes more expansive in terms of investments. The second constraint is the lack of ability to sell voice in 4G, i.e. provide voice communication services. Yes, as we said earlier, we managed to get approval documents for VoLTE in Moscow and Moscow region, but it should be understood, that the major problem is that subscribers’ devices must support LTE, and the second problem is to provide the ability to use this service across Russia. All of it demands a lot of time and resources.

Kommersant FM: Thank you for this interview, we had here on air at Kommersant FM the Megafon chief operating officer, Yevgeny Chermashentsev.

Chermashentsev Y.: Thank you.

Source: Kommersant FM