3 march 2011

Prime Minister Vladimir Putin meets with the representatives of leading Russian telecommunications companies in the Yota central office

Vladimir Putin

At a meeting with the representatives of leading Russian telecommunications companies in the Yota central office

“Communications is a field in which our companies, technical specialists, and managers occupy leading innovative and technological positions.”

Transcript of the beginning of the meeting:

Vladimir Putin: Ladies and gentlemen, good afternoon. It is a rare occasion when the top managers and major shareholders of our leading telecommunication companies got together at the same table. Modern technology is of major importance in today’s world, and it is growing every day. We maintain constant contact at the government level with our leading companies, including discussions on the issue of tariffs. You have adopted positive decisions on roaming, which directly affect the wallets of our people and will facilitate your development because the more accessible a service is, the more customers you acquire.

As the communications minister informed me, today’s meeting is devoted to pooling our efforts. It is only natural that customers all over the world want to use the most modern means of communications, and our customers are no exception. Fourth generation technology is just being introduced. I’m happy to admit that communications is a field in which our companies, technical specialists, and managers occupy leading innovative and technological positions.

Today, the heads of private companies and representatives of official, government structures have gathered here. I hope very much that the ideas that you discuss today will also be put into practice by your employees (and I’ve seen that they are young and talented people, captivated by their work). You may rely upon government resources to support your plans so that eventually this will improve the quality of services you are providing for the people of Russia.

Please, Minister of Communications, Mr Shchegolev, go ahead.

Igor Shchegolev: Thank you, Mr Putin. Indeed, the development of telecommunications has reached a point at which companies have to pay more and more for the construction of new networks, whereas customers are used to the reduction of costs for these technologies.

At the moment, it is of course difficult for some companies to develop the infrastructure because both capital investment and the costs of servicing this technology are growing. We should develop a new approach to the development of the infrastructure whereby major companies can pool their efforts and make use of it. This will help develop the network faster, and customers will receive new services sooner.

Since every company will save on capital and overhead costs, eventually these services will cost our customers a great deal less. The network will be built faster and will become more accessible not only in major cities, which is happening now, but also in small inhabited areas. We are hoping very much that as a result of our efforts we will manage to create a truly interesting business model that will make Russia one of the world’s leaders not only in cell phone coverage but also in technology. We hold the lead in this technology. Not many countries have built fourth generation commercial networks. This is a very interesting and notable event in this respect.

Vladimir Putin: Mr Chemezov, please, speak up (addressing Sergei Chemezov, general director of the Russian Technologies State Corporation).

Sergei Chemezov:  I understand that modern telecommunications are playing an exceptional role in the Russian economy. We have supported the ideas of the Scartel company, which is a relative newcomer to the field. Today it is represented by Sergei Adonyev and Denis Sverdlov. We have backed and jointly built the existing fourth generation network in St Petersburg and in Moscow (we have already completed and demonstrated it) and also in Kazan (it has been built but is not yet completely operational). We are now working to deploy this network in other cities – Krasnodar and Sochi.

Today, Scartel is poised to create a complete network that will cover the entire territory of Russia. As Mr Shchegolev said here, to reduce costs on infrastructure, we have agreed with our leading operators – MTS, Beeline, MegaFon and Rostelecom – that Scartel will create a common infrastructure that all operators represented here will use. We proposed that these operators sell equal portions of shares beginning at the end of 2014, which we agreed upon already today and we will sign off on later. I am inviting all the representatives present here: both operators and owners, to accept our proposal.

Vladimir Putin: What is the interest of private companies, our major operators? How will consumers benefit from the arrangement, Mr Aven? (turning to Pyotr Aven, President of Alfa-Bank)

Pyotr Aven: Mr. Putin, today's agreement seems to be the first example of implementing a really large-scale and meaningful project through public-private partnership – a synergy of government and private sector efforts. I would like to thank Igor Shchegolev personally because he played a major role in preparing the agreement. The main thing is that the common use (which is revolutionary in a way) of a single infrastructure by different companies reduces the cost of infrastructure development, as well as the cost of services, and improves their quality for the people who use them. Even more importantly, it helps deploy the necessary networks quicker, better, and more efficiently.

Vladimir Putin: You mean that the three to four towers, which have been or could have been constructed in one place, can now be replaced by only one. That cuts the cost of infrastructure and allows us to maintain lower prices of services because with lower expenditures, the loans will be smaller.

Pyotr Aven: This is not the only example. We had an experience of such cooperation in clearing and opening frequencies within the 700 MHz range, which, I think, will also allow us to improve the quality of services and reduce their price, and will benefit government organisations and the army. So, this movement toward public-private partnership seems very promising to me, in terms of prices, quality, etc.

Vladimir Yevtushenkov (Chairman of JSFC Sistema Board of Directors): Mr Putin, frankly, we would come to this sooner or later. Although the sooner the better. There are still a lot of obstacles to overcome. Sergei Chemezov understands this, and all of us understand it, too, but we must keep on trying because (quite frankly) there aren't even enough alpha-frequencies for everyone to share. The main thing is that there are billions or tens of billions of dollars involved. If we managed to build a single transport infrastructure, it would be great, and, moreover, in a number of countries, such experiments have been a success. Infrastructure is the core component of an operator’s activity. It helps maintain low prices and inexpensive roaming, and operators can benefit from the profits. Otherwise (there are no miracles), if one has invested a great deal into quality, then one must make returns, which means raising prices. This is why I think that we should try and do it. I hope we will overcome everything. We will certainly try because it is a new field.

Vladimir Putin: Ms Shmatova, please.

Yelena Shatova (Vympelkom General Director): Thank you for the opportunity to express my opinion on behalf of the operators. In fact, it is a very interesting period in the business. As service providers to the population, it is important for us to accelerate new types of services. New communication speeds and internet access will make things absolutely different. And, of course, this will promote an all-around web development, which we so often discuss. It is a basis for further development. All workers in the infrastructural industry will try to do their best to provide top-quality services.

Vladimir Putin: Thank you. Mr Adonyev, what is new about it? And what it will give the consumers?

Sergei Adonyev (Chairman of Yota Board of Directors): The novelty of the model proper has already been described by my colleagues: a single infrastructure, instant access. Once the network is installed, it is accessible to a variety of operators. It is a breakthrough model, and for our subscribers, speed will grow by an order of magnitude, so that they will be able to receive online content as dense as video. It will happen very soon. This event is something of an ideal scenario, although it is happening now.  It is wonderful, and we are very proud that we are part of this process. We understand our responsibility and want to assure you that we have all the resources to deploy it quickly and provide Internet access to our subscribers at minimum price and in the best form that currently exists. We are ready.

Vladimir Putin: Mr Soldatenkov.

Sergei Soldatenkov (MegaFon General Director): As you know, the history of cellular communication in Russia, which is approaching its twentieth anniversary, started with the construction of networks intended for voice services, and when the consumption increased, the networks were supplemented. Today networks are built with a huge reserve capacity for data transmission. Broadband Internet access has gown tens of times over in the last two years. Russia is a large country, and wire technologies are not enough to cover it all. Naturally, wireless technology is needed. This is happening now, at this very table. It is very important that we can accomplish it with a large infrastructural reserve, good quality, and speed. We can quickly introduce wireless technology with a large data capacity and good quality. What happens at this table is, of course, very important. We can build the infrastructure for such services at a sufficient level of quality and efficiency because we recognise the huge demand of the people.

Vladimir Putin: Mr Streshinsky (turning to Ivan Streshinsky, General Director of Telecominvest), Mr Soldatenkov said that it can be done quickly enough. How quickly?

Ivan Streshinsky: To my mind, LTE services will be provided to the population within two years. I just wanted to say that the expansion of the Internet in Russia is still fairly low: 35–40%. Global experience shows for every 10% rise in Internet access, the GDP grows 1.5%. And, since Russia is a vast country, it is extremely important to develop mobile data transmission networks here.

Today’s deal is unique because it has brought together competitors in Russia. Competition in mobile communication is very tough. All companies understand the importance of the task so well that they got together to fulfill it and launch the LTE-service as soon as possible. I think we will do it.

Vladimir Putin: Thank you. Please, Mr Shamolin (Mikhail Shamolin, President of Mobile Telesystems).

Mikhail Shamolin: Mobile networks and data transmission services mean not only Internet access but also the expansion of many other industries that depend upon it – energy efficiency, for example. The point is that mobile transmission networks allow us to install relevant sensors in various power-supply systems and transport systems and control them in real time, which produces an effect of exponential growth in the economy in general.

Of course, the agreement that we will sign today and the principles that we apply will let us use the frequencies to the utmost efficiently. The 80 MHz frequency band, which is to be used jointly, will afford much more opportunity in terms of speed and capacity than if it were simply divided into 4–5 strips. For this reason, it is an efficient use of both capital and frequency resources, which are extremely limited not only in our country but in the world in general. Therefore, the decision is wise enough. Hopefully, we will be able to implement it effectively and reap all the advantages that my colleagues have mentioned.

Vladimir Putin: Mr Provorotov (Alexander Provorotov, President of Rostelecom).

Alexander Provorotov: Indeed, it is one of the more fast-growing areas in telecommunications right now. All the companies represented here are, no doubt, interested in launching the work on this market as soon as possible. This decision to consolidate infrastructure is most likely ideal because no one will have to catch up and no one will shoot ahead. Using a single infrastructure and the same frequency band, we will be able to start rendering services to our subscribers.

Vladimir Putin: Mr Sverdlov (Denis Sverdlov, General Director of Scartel, Yota).

Denis Sverdlov: You should know that we have been developing the 4G network for the past three years. We have amassed all the necessary expert analyses; we have all the necessary materials and intellectual resources …

Vladimir Putin: But why do you need it all, if you have it already?

Denis Sverdlov: I can answer this question. The point is that from the very first day we started building our company, we understood that the time of competition between operators in terms of infrastructure was drawing to a close. And it is very important to create an environment in which operators will compete in terms of servicing their clients and the products they offer. At the end of 2010, we restructured our company by dividing it into two businesses. I mean that we created a spin-off company named Yota NetWorks (it deals solely with the network) and a company that engages only in client services and products. This is our vision, and we are glad that it is shared by the operators currently present on the market – its major players. It is truly excellent.

We have accumulated the necessary intellectual talent to translate it all into life quite quickly indeed. We have made all the mistakes that could be made over the past three years while we were building today’s networks: 4G is not 3G. I mean that some principles that worked with 3G do not work with 4G any more. We know that for certain. So proceeding from this experience, everything can be accomplished much quicker, much more efficiently, and much cheaper. We will do it all.

Vladimir Putin: Our colleagues have already mentioned how unusual it is to see Russia’s leading companies, which used to compete with each other, gather here, sit at one table and discuss the common issues they have to resolve. I have a question for Minister of Communications Igor Shchegolev. Will there be any problems connected with anti-monopoly legislation?

Igor Shchegolev: No, because the companies do not claim to be getting any additional resources illegally. All of them will use the resources that were attained legally. Bearing in mind that from now on they will be using a common infrastructure, they will offer subscribers and clients new services, so they will compete with each other only in the provision of services. We believe that the offer will expand, to the contrary.

Vladimir Putin: The competition will subsist, will it not?

Igor Shchegolev: Absolutely. The fact that the companies unified their infrastructures does not mean that they mixed up their subscriber bases or agreed on their prices. Thus, competition will continue, and that’s exactly what the companies are interested in. They will have more funds, and they won’t have to worry about fighting with their rivals because they won’t have to think about building infrastructure.  

Vladimir Putin: But thoughts, ideas… are necessary…

Denis Sverdlov: Yes, I will you give you an example – airports. Because airports run on the same model. There are not so many airports, but there are a lot of air companies. And air companies are competing with each other.  We have a similar model here: we have the general infrastructure that is being used collectively, and a  number of providers who compete with each other in rendering their services to consumers.  

I think that this is a working model. It functions in many fields, and it will function here as well.

Vladimir Putin: I recently became aware that you have been providing services at social facilities.

Denis Sverdlov: Yes, we have been rendering these services. And, you know, let’s take schools for example: we need to make the Internet accessible not only at schools where teachers instruct pupils. Teachers should have access everywhere they go. For instance, they come home, check their students’ homework, and put grades in online grade books.

In order to achieve this, we must not only provide an Internet connection at schools but give devices to teachers, which would allow them to use the service in any place, no matter where they are. Such an approach definitely seems more efficient when addressing many social issues.

Vladimir Putin: So teachers won’t have to go to schools?

Denis Sverdlov: They will have to go to schools to teach children and to interact with them. Here is another example – hospitals. Patients can’t always get to hospitals to be consulted by a doctor, so they stay at home sick. And there are disabled children… It is difficult to provide separate Internet access in such cases. If we could build a network covering the entire area, we could provide some devices at special rates. And this measure would solve the task much more efficiently. 

Vladimir Putin: Where exactly are you working right now?

Denis Sverdlov: We are working in five cities: Moscow, St Petersburg, Sochi, Krasnodar, and Ufa. According to our special programme, we give away the devices and set special rates to make our services at hospitals and schools work.  

Vladimir Putin: At schools and hospitals of these cities?

Denis Sverdlov: We are covering all facilities, but we do not cooperate with all of them directly. But we have launched the projects in a number of cities and will demonstrate them to you during today’s meeting.

Vladimir Putin: You mean you are ready to show me everything today?

Denis Sverdlov: Yes, of course.

Vladimir Putin: Good. Ladies and gentlemen! Do you have any questions for me – perhaps requests concerning the present and future support of such projects by the government and the ministry? Do you see any difficulties that would require us to make additional decisions? 

Pyotr Aven: We have some legal issues, but I believe we will be able to solve them in due course. All providers get along well with the ministry, so we do not need any special support.  I think we’re making headway.

Vladimir Putin: Good.