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VimpelCom CEO Calls for Regulatory Leadership in Mobile Sphere, Announces Spending Cuts

Published: 2/18/2009
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The case for further spectrum allocation—and regulatory assistance—for mobile players has been made at the high-profile Mobile World Congress.

IHS Global Insight Perspective

 

Significance

Russia's VimpelCom is one of many leading mobile players to call for additional spectrum to be freed up for use within the mobile sector.

Implications

Spectrum could be made available from various areas, including the switch from analogue to digital TV, unused 2G, and UMTS900, but various regulatory obstacles would need to be overcome.

Outlook

The mobile industry is one of the few not seeking economic bailouts at the moment, and its strength and benefits could encourage regulatory bodies to lend the assistance called for by VimpelCom.

Alexander Izosimov, the chief executive officer of Russian integrated operator VimpelCom, has lent his voice to broad international calls for regulatory assistance for the mobile sector, in his capacity as chairman of the GSM Association (GSMA), at the annual Mobile World Congress in Barcelona (Spain). He joined GSMA chief executive Rob Conway, as well as leading representatives of Ericsson, Telecom Italia, Telenor, and China Mobile, in supporting a call for additional spectrum, freed by the move from analogue to digital TV, to be assigned to mobile spheres. The mobile sector was described by Izosimov as the "new lifeblood of the global economy", according to vnunet.com, and the Vimpelcom chief added that new spectrum is a necessity rather than a luxury. In this context he called for stable and transparent regulatory environments. Although he acknowledged that Russia, in which VimpelCom is the second-largest mobile player, is one of the less heavily regulated mobile markets of the world, he suggested that a moratorium could be introduced on regulatory changes, as this would allow operators breathing space from the burden of new investments. As an example, he pointed to the issue of mobile number portability (MNP) in Russia.

Other areas in which Izosimov voiced his disapproval of the current regulatory environment included the taxation of payments for frequency bandwidths; the issue of GSM frequency allocation in Russia's Far-East, in which VimpelCom remains unable to gain GSM licences; and the issue of interconnection fees in Ukraine, which he considers too high and unequally distributed, and therefore disadvantageous to smaller players such as VimpelCom's Ukrainian unit Ukrainian RadioSystems (URS).

Izosimov has also indicated that VimpelCom will undertake cost-cutting measures in 2009, in light of the financial crisis. Interfax quotes Izosimov as saying that, specifically, construction of mobile networks in new cities and towns will be suspended, a move that will cover both 3G and broadband networks. Construction programmes already under way will be completed, but the suspension of construction of new networks could last up to six months, depending on how the economic situation develops. Izosimov also confirmed that jobs are being cut, without specifying numbers, in addition to job cuts being implemented as part of the consolidation of fixed-line operator Golden Telecom, which was purchased in 2008. While some of these cuts had already been planned, in accordance with overlapping functions, additional ones are now being planned because of the economic situation.

Outlook and Implications

Eagerness for Spectrum, from Various Areas: Some of the world's leading mobile players have used the platform of the Mobile World Conference to re-emphasise their quest for additional spectrum. Operators are keen for spectrum to be freed up to facilitate the provision of data services, and are eyeing spectrum from various areas. Spectrum from analogue TV is highly penetrative and long range, and could therefore be used in the provision of rural coverage, as well as improved in-building coverage in urban areas. Indeed, moves to re-allocate such spectrum to the mobile sphere are already under way in the United States and several European countries, including France and the United Kingdom (see United States: 7 January 2009: U.S. FCC Grants 700 MHz Licences). As well as this, "redundant" 2G frequencies currently unused by operators could be made available, but this raises the issues of compensation to the selling operator and the legality of re-selling licences for frequency already licensed. Wireless broadband deployed on the 900 MHz frequency (UMTS900) could also provide a solution to the problem of spectrum availability, but would again require regulatory contributions, as in Europe the European Union currently requires that national regulators reserve the frequency for digital telephony.

Economic Benefits of Flourishing Mobile Sectors: Despite the potential obstacles, national and international regulatory bodies could yet be encouraged to assist in these areas, given the potential economic benefits of healthy and flourishing mobile sectors. Conway pointed out that the mobile industry is one of the few not seeking bailout funds, and the recent licensing and deployment of 3G services in China have attracted a positive comment about the economic stimulus thereby provided to the country (see China: 4 September 2008: SWOT Analysis on Major Chinese Telcos Amid Industry Shakeup). The case for regulatory assistance in this area, as highlighted at the Mobile World Congress, is therefore growing.

Valid Calls, Despite VimpelCom's Own Interests: Izosimov's comments on the regulatory climates of Russia and Ukraine should be viewed in the context of VimpelCom's own interests in these countries. It is therefore no surprise that he has opposed MNP in Russia, is calling for frequency allocation to be resolved in Russia's Far-East, and is keen for more benign regulation towards smaller players in Ukraine. However, ignoring the natural interests of VimpelCom, such calls seem valid at a time of economic hardship. IHS Global Insight believes that it is reasonable to call for the regulatory status quo to be preserved until mobile operators have ridden out the economic storm.
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