Russia: NSN offers a foreign infrastructure view of the Russian market

Editor’s Note: RCR Wireless News Editor Sylvie Barak delved deep into the Russian wireless landscape during a recent trip to the country. She delivered a feature report for RCR Wireless News that was included in our November Special Edition. Click here to read her report. But Barak still had more that couldn’t fit in that report. As such, here is Part 2 of our Feature Report: Russia: A Vibrant Powerhouse Straddling East and West.
To read a journalist’s perpsective of the Russian market, Click here.
To read about MTS, the largest Russian operator, Click here.
To read about Brightstar’s wireless distribution plans, Click here.
On a recent trip to Moscow, RCR Wireless News had the pleasure of meeting with reps from Nokia Siemens Networks (NSN), in its brand new offices in a leafy city suburb. NSN, which has around 700 people stationed in Russia, most centered in Moscow, with a smaller office in St. Petersburg and a few regional outposts, is rapidly expanding in the region and investing time, effort and resources to push further into the market.
We sat down with Kristina Tikhonova, head of NSN’s customer business team, to talk about the firm’s view of the Russian telecoms market.
“The market is pretty much consolidated in that there are just three national players,” Tikhonova said, adding that though there were a couple of smaller players, their absence of a national license stripped them of much real power in the space.
Like many of the analysts we spoke to, however, Tikhonova believes the Big three’s situation could well be in for a change in the not-so-distant future, especially when the time for doling out 4G LTE frequencies takes place.
“It’s probable that the new licenses for LTE frequencies will be given to new players, and that’s actually one of the features which currently makes the Russian market advantageous for infrastructure companies like us, because it will expand the market,” she explained.
WiMAX had already given Russian’s their first taste of 4G, but the technology she said was “limited” owing to the fact it’s a fixed technology. “You don’t have roaming on WiMAX and you don’t have hand-over from one cell to another, but it’s still a strong business case for the large cities,” she said.
“However strong the business case, the war for Russian 4G has already been waged and lost by WiMAX in favor of LTE, as is the case in much of the rest of the world. “It was in debate for some years,” Tikhonova told us adding that the decision had ultimately come down to LTE’s mainstream appeal.
“Still the existing WiMAX players are here [in Russia]. I think their destinies are not that clear. But currently they have a good business case,” she declared.
The LTE/WiMAX battles are not the only competitive struggles currently being waged in Russia, with infrastructure firms like NSN on the defensive as Asian players begin to move into the market.
“The Chinese are moving into this market very rapidly,” confirmed Tikhonova, but explained that she felt the incursion to be more helpful than hurtful to NSN’s business. “They keep us on our toes and render our business healthier,” she told us, adding that before the Chinese players moved in, big European firms had been moving all their facilities to cheaper locations anyway, so the process had somewhat been neutralized. “Overall, the Chinese are bringing a positive trend to the wireless infrastructure industry, and we’re seeing good cost decrease progress,” she affirmed.
“I wouldn’t really see them [the Chinese infrastructure players] as a disruptive, because NSN is very competitive on a cost level and indeed it’s more of a negative trend for them as they need to get bigger,” she noted.
Is Russia perhaps security conscious about letting Chinese infrastructure firms move in and set up shop on home soil? “I think in telecom Russia is still not so conscious about security but definitely the trend is there,” she replied adding that for future big projects, national projects like the Olympic Games for example, security of networks would most likely be prominent on the agenda.
But telecom, said Tikhonova, is truly becoming a strategic industry in Russia and the government is actually doing all it can to entice foreign investors into the market. “The government and stakeholders are very open to bringing in new partners for business and innovation. Innovation and modernization are the key words now in our economy.”
The Russian economy, said Tikhonova, had for too long been focused simply on natural resources, “but everybody understands that it won’t last forever and we should take this window of opportunity for pushing more towards knowledge based innovation economy and technologies.”
“This is a rewarding market because it is quite dynamic. It was very badly affected by the economic crisis but it also recovered from the crisis in remarkable speed, proving it very resilient.” There are also many new trends and developments occurring in the Russian market, she said, and NSN has been at the forefront of it.
Russia, she said, has “very strong higher and secondary education, one of the best in the world, so I think we have a lot of talented resources, the people are very talented and creative whilst our scientific base if very strong.”
NSN, said Tikhonova, was also mulling partnerships with certain local universities to tap straight into the scientific talent at the source. The firm is also very focused on its new outsourcing centers and its deal with MTS. NSN recently struck a deal with the Russian carrier MTS for the first full network outsourcing contract to be signed in that country. The five-year project will see MTS outsource the daily operation and maintenance of its entire mobile network across Central Russia to NSN.
NSN has more than 240 managed services contracts in mobile and fixed networks worldwide, servicing more than 300 million subscribers on its customers’ networks, so the firm certainly has plenty of experience to draw from. Indeed, NSN’s services business accounts for about 45% of the company’s overall sales.
Infrastructure is still the firm’s bread and butter, though and as smart phones begin to proliferate in Russia and as data usage starts to grow, NSN knows it has its work cut out for it. “Europe started to build 3G several years back,” Tikhonova mused. “I still remember the diagrams of it and everyone was talking about it, but here in Russia it just never seemed to arrive. Then, suddenly, last year it did.”
Data volume, said Tikhonova, suddenly increased 10-fold “because the channel was there and because fixed Internet penetration is still not very high so 3G is absolutely a driver for increased mobile web penetration. ”We felt a lot of challenge and saw a lot of problems on the networks, so what we did is begin to offer operators a special gold cluster program, where NSN analyzes their network,” she explained. The program is apparently easy to configure and makes it easy to plan and optimize for the sharp rise in data traffic. It also offers feedback on whether there are other features available on NSN’s radio network to support the traffic boom. ”With those operators we have already worked with, the results are very good,” she declared.
In terms of infrastructure coverage, Russia i
s not just about quality, however, it’s also about quantity and with a country stretching from Eastern Europe all the way out to Japan, that’s no small consideration. “We always have to build cost-conscious solutions,” Tikhonova told us, mentioning modular BTS interfaces/Flexi Node B.
“The same concept can be applied to LTE too down the line. So essentially it’s the same station, which is programmed in, transferred to LTE,” she added, saying she believed this to be the best solution for such cases. “You can just put it on the roof or on the wall.”
We asked Tikhonova to summarize why NSN was able to be so successful in Russia to date and how it had achieved such a respected status in the country. “It’s many years of being present in the country and building up our expertise over the years,” she said. “This is definitely where we are strong as well as our significant strength in the services area.”