Europe : After several years of anticipation, the Russian 3G licensing process started in February 2007. However, 3G implementation in Russia will be a lengthy and expensive process because of the country’s size and market conditions, says Analysys, the global advisers on telecoms, IT and media.

In less than 3 weeks it will be clear which of the 12 applicants will receive 1 of the 3 available national 3G licences. The three largest operators – MegaFon, Mobile TeleSystems (MTS) and VimpelCom – are the most likely candidates because of several key factors, including the number of licences they already hold, their previous experience and their network deployment plans. In addition, the ‘big three’ are the operators that are most likely to be able to meet the requirement of launching 3G networks within two years of the licence award.

According to Research Analyst, Raushan Sagalbayeva, deployment of a national 3G network in Russia will be a long process because of the country’s size and market structure, and take-up will be slow. “The operators will begin network roll-out in Moscow and St Petersburg, which have the highest market penetration rates in Russia. However, it will take a long time for 3G to reach the other Russian regions,” says Sagalbayeva.

3G licences would be beneficial to the big three operators’ long-term strategies. The fee for each licence is RUB 2.64 million (USD 102,825), but operators will have to make significant investments for radio frequency spectrum clearance, which can cost up to USD 200 million.

However, Sagalbayeva doubts that operators will be able to recoup their 3G investments quickly. “Operators might not have a sufficient number of subscribers that will be interested in 3G services and are willing to increase their mobile spending. Most of them will probably be business users in Moscow and St Petersburg,” Sagalbayeva says. “The market is already very competitive, and competition will intensify if the regulator adopts MVNO-favourable legislation. In general, ARPU levels in Russia are relatively low – operators will have to invest a lot of effort and financial resources to encourage rapid take-up of non-voice services and, as a result, yield additional revenue.”