Changing standards create Svyazinvest mobile opening through Skylink

The State is to enter Russia's mobile telephone market, after announcing the acquisition of operator Skylink, with experts doubting it can get a foothold against the country's Big 3.

Multimillion dollar rumors have been officially confirmed at the Sochi Forum, with Svyazinvest Head, Evgeny Yurchenko, saying that State wanted to have a piece of the mobile market.

“We are planning to strengthen Svyazinvest’s presence on the market of mobile services. This is why we are planning the Skylink acquisition.”

Skylink operates the CDMA standard which has proven to have little popularity amongst Russian users. With market leaders – MTS, Beeline and Megafon – having cemented their positions, and the dominant GSM technology, Metropol analyst, Philip Townsend, thinks Sky Link’s initiative has little chance in the Russia’s current mobile market.

“It’s too late to introduce, into this country, a fourth big operator – unless you manage it through mobile virtual operators, which is actually piggy backing off other people’s networks. It’s exceedingly unlikely in the current regulatory structure, that that will happen. So, the idea of Skylink, which is actually a CDMA operator, which is totally different from GSM, which is what everybody else is, of becoming a 4th major operator using a new technology is extremely unlikely.”

But Leonid Melamed, Head of AFK Sistema, which is part of the deal believes there is room for another major player, and that the introduction of new technical standards will open up more.

“The potential fourth player already has its niche with quite active operators like Tele-2 or Smartz, dealing with a lot of regions of the Russian Federation. The introduction of new standards will only open new opportunities for the players. That’s why I really believe that there is room for the fourth player.”

In Russia consumers associate Skylink with fast data transfer solutions, but making calls using CDMA isn’t popular, with CDMA handsets lagging in quality and style behind GSM models.

Melamed believes next years arrival of the CDMA compatible LTE standard may provide Skylink with another chance.

“Global competitors start the commercial usage of LTE networks in the States and in Japan later this year and we are positive on the forecast that LTE would become the leading standard in the next 3 or 4 years.”

Benefits of fast data transfer that LTE standard offers will be available to CDMA users worldwide in just months. From this perspective, the Government's purchase of the currently unpopular Skylink may be timely.