Russian mobile operators unhappy with fixed-to-mobile tariff

Since July 1, 2006 Yakutians as well as all Russian residents should pay for fixed-to-mobile calls. If in country's other territory the tariff was set at 1.5 rubles per minute, the Sakha Republic (Yakutia) reveals exraordinary expensiveness. The rate varies from 1.9 rubles per minute if the distance is small, to up to 9.5 rubles per minute in the constituent republic of Sakha (Yakutia) if the distance exceeds 1,200 kilometers. In Yakutsk the tariff for fixed-to-mobile calls is 2.57 rubles.

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The tariff for fixed-to-mobile calls set last week by Russia's regulator has left mobile operators unhappy with the outcome after weeks of trying to negotiate higher tariffs. The maximum basic tariff for fixed-to-mobile calls, introduced to compensate mobile operators for their losses following the introduction of the Calling Party Pays (CPP) principle on July 1, was set at 1.5 rubles per minute, of which mobile operators will get 95 kopecks, lower than the compensation desired by mobile operators.

Government officials said that the set tariff was unlikely to result in major losses for mobile operators, adding that they do not expect mobile operators to significantly hike tariffs for outgoing mobile calls.

Major mobile operators, in turn, said that they were already preparing for tariff hikes, but did not specify the levels of possible increases.

Analysts believe that mobile operators may hike their tariffs for outgoing calls by 15%-25% through direct tariff increases and through indirect measures.

The Federal Tariff Service on June 19 set the minimum and maximum tariffs for most of Russia's regions at 0.75 rubles and 1.5 rubles per minute, respectively. The tariff for far northern regions was set between 0.85 rubles and 1.70 rubles, for the constituent republic of Sakha (Yakutia) at between 1.24 rubles and 2.47 rubles, and for the Chukotka Autonomous District at between 1.00 ruble and 2.00 rubles.

Mobile operators will get 95 kopecks of the set tariffs for fixed-to-mobile calls, the service said.

The tariffs take effect on July 1, following the introduction of the CPP principle and will be valid for fixed-line operators with a dominant position on the market, including seven major regional fixed-line operators, including subsidiaries of Russia's national telecom holding Svyazinvest as well as fixed-line operator Moscow City Telephone Network, or MGTS.

However, some fixed-to-mobile calls will remain free of charge. Tariffs for calls made from fixed-line telephones to mobile phones with so-called "direct numbers" will remain unchanged until January 1, 2007, the service said without specifying whether they would be changed later.

Direct numbers are numbers that can be accessed from fixed-line phones by dialing seven digits, compared with 10 digits for so-called "federal numbers." Tariff plans with direct numbers are usually more expensive than those with federal numbers.

Meanwhile, the regulator cannot set tariffs for most mobile operators, as their operations are not regulated by the government. However, governmental bodies have the right to regulate the operations of Russia's national telecom holding Svyazinvest's subsidiaries, which have mobile assets. Under the ruling on tariff regulation of dominant operators (mostly Svyazinvest's subsidiaries) if a non-dominant operator sets its tariff for a service higher than the tariff for a similar service provided by a dominant operator, the former must pay the difference to the latter. In this case, mobile operators that are not controlled by Svyazinvest have no chance to get over 95 kopecks per minute for incoming calls from fixed-line networks, analysts said.

Yevgeny Chechelnitsky, deputy director of the Federal Service for Communications Oversight, told a news conference June 20 that though some operators requested compensation of up to 1.35 rubles per minute, Svyazinvest's mobile subsidiaries estimated the fair compensation at between U.S. $0.010 and $0.025 per minute. "We think that (the 95 kopecks compensation) is the market approach to setting the price for call termination, which corresponds to international practices and, in the end, ensures a balance of interests between telecommunications operators," Chechelnitsky said.

Telecoms officials do not believe that subscribers will see a major rise in the cost of mobile services.

"The set fixed-to-mobile tariffs will bring additional revenues to fixed-line operators, while the losses of mobile operators (from CPP) will be marginal, according to preliminary calculations and negotiations with mobile operators," Boris Antonyuk, deputy IT and Telecommunications Minister, told the news conference. "To my mind, there will be no considerable hikes for (mobile) communications services following the introduction of the fixed-to-mobile tariffs," he said.

Russia's largest mobile operators MTS and VimpelCom do not consider the set tariff to be fair compensation for the abolishment of charges for incoming calls and plan to hike their tariffs for outgoing calls.

"Taking into account the tariff, MTS is bound to revise upwards its current tariffs," Kirill Alyavdin, a spokesman for MTS, said. The company will decide on levels of tariff hikes with regard to specific tariffs and regions, he added.

VimpelCom said in a statement June 21 that it considered the level set by the regulator to be too low, adding that it plans to try to make regulators increase the amount of compensation. The company may also hike tariffs for outgoing calls. "According to our estimates, the increase of our tariffs, if it happens, will be lower than the decrease of users' spending on mobile services following the introduction of the CPP," VimpelCom said.

Both MTS and VimpelCom earlier asked the regulators to set the compensation for mobile operators at about 1.1 rubles starting July 1 and at 1.35 rubles starting July 1, 2007.

Neither of the two operators specified hikes for outgoing calls after the CPP introduction.

Russian mobile operator Utel, a subsidiary of Svyazinvest's unit Uralsvyazinform, said in early June that it planned to hike tariffs for outgoing calls from mobile phones by up to 14% following the CPP launch. Utel is the fifth largest operator in terms of subscribers, according to Advanced Communications & Media (AC&M).

Some analysts believe that the hikes may be even higher. "The hike of tariffs may amount to 25%, if the operators decide to compensate for their losses in full, and may be at about 15% if they want to make the transition softener," Yelena Bazhenova, telecoms analyst at Aton Capital, said.

Though July 1 has not come yet, mobile operators have already started taking measures in order to compensate for the projected losses.

Both MTS and VimpelCom moved their tariffs to rubles from dollars, pegging one dollar to 28.7 rubles, which is some 6% higher than the current official exchange rate set by the Central Bank of Russia (CBR). The two operators have also introduced tariff plans with free incoming calls, but people have to pay a fee of about $0.11 for each outgoing connection they make in addition to a per-minute tariff. Moreover, the new tariffs round calls per-minute, while earlier introduced tariff plans rounded calls per-second starting with the second minute of the call.

"These measures will help mobile operators to compensate (for the projected losses) to some extent," Mikhail Alexeyev, managing partner at AC&M, said, noting that it is not clear yet how traffic routing between fixed-line and mobile operators would change after July 1.

Though mobile operators seem to be unhappy with the tariffs, Svyazinvest said that it got the tariff it wanted. "When calculating the tariff we wanted to meet two goals: not to create social tensions and not to allow fixed-line users to migrate to mobile networks," Oleg Mikhailov, spokesperson with Svyazinvest, said.

Analysts still believe that it might be difficult for citizens, and especially for retirees, to get accustomed to paying for calls to mobiles from their home telephones.

"The 95 kopecks is not much for operators, but 1.5 rubles is high for users. It is psychologically difficult to get accustomed to it and it is likely to spur migration of fixed-to-mobile traffic to mobile-to-mobile," Konstantyn Chernyshev, analyst at UralSib, said.

The average monthly salary in Russia amounted to just under 10,000 rubles as of April, according to the Federal State Statistics Service.

However, some people may even have to pay more than 1.5 rubles per minute for fixed-to-mobile calls. The 1.5 ruble tariff is set for users in regional centers, while most other fixed-line users would have to pay according to tariffs for intrazonal calls, which vary from 1.9 rubles per minute if the distance is small to up to 9.5 rubles per minute in the constituent republic of Sakha (Yakutia) if the distance exceeds 1,200 kilometers.

Possible future changes to fixed-to-mobile tariffs are unclear, although tariffs could be increased or decreased after some period of time. "The issue has many aspects. The main problem facing the regulators is to create a fair tariff system in general for fixed-line communications. By the end of the year, the regulators have to introduce three tariff plans for fixed-line operators (instead of only one available now). If regional fixed-line operators make these tariffs well-balanced and the local fixed-line services stop being loss-making or marginally profitable, then the fixed-to-mobile tariff may be lowered, otherwise, it is likely to be increased," Chernyshev of UralSib said.

Though mobile operators still seek to get higher compensation at least in the future, the regulator noted that the tariffs and the compensation might be revised down. "Why should it be only an upward trend, I don't understand," Vitaly Yevdokimenko, deputy director of the Federal Tariff Service, told the news conference. "Under the (government's) social and economic plan, intrazonal and domestic long-service tariffs are to be lowered by 3.0%-4.5% annually by 2009. Fixed-to-mobile tariff is an intrazonal tariff," Yevdokimenko said.

(27.0431 rubles - U.S. $1)

Resource: Cellular-News.Com