Russian Towers want to expand its portfolio with MTS towers

Moscow. 9 December. INTERFAX-TELECOM

Russian Towers Infrastructure Company is engaged in negotiations with Mobile TeleSystems PJSC (MTS) concerning the rent or management of the communications provider’s towers and placing of telecom equipment, as the President of Russian Towers Alexander Chub advised Interfax.

"When in April of this year MTS stated that it will rent its infrastructure facilities, we approached the company and offered it either to rent the towers or to exercise operation administration thereof", he said.

Reportedly, at the end of April MTS asserted that it will come into the tower infrastructure market and rent facilities at 5,500 of its towers. At the same time, the company advised that its rent rates will be 25-30% lower than the average market rates.
The representative of MTS Dmitry Solodovnikov confirmed that cooperation with Russian Towers is being discussed.

"MTS is open to cooperation with this company because we are interested in engagement of not only direct lessees but also agents who would rent their tower infrastructure to end users."

According to A. Chub, talks with MTS about Russian Towers’ proposal proceed. At the same time, both management and rent of MTS’ infrastructure look equally attractive for Russian Towers.

If the company takes control of the MTS’ tower portfolio, the infrastructure rental income will be gained by both management company and communications provider being the owner of the towers. A. Chub compared this scheme to network hotels. They are managed by famous brands but at the same time the buildings belong to other owners.

If Russian Towers rent the facilities of MTS, all the earnings from attracted clients will be gained by Russian Towers, and the communications provider will draw rent income.

"We have experience in working with Russian Railways and Megafon according to such schedule. It is potentially applicable for cooperating with all owners of the infrastructure", Alexander Chub advised.
At present Russian mobile phone providers establish their strategies with regard to tower infrastructure. Vympelcom PJSC (of which Russian Towers is a participant) put out a tender for sale of 10 thousand of its towers at the end of the last year. The assets are not sold yet, and the provider does not disclose the details of the process, however, a special subsidiary company has already been chosen, namely, National Tower Company JSC. Megafon has its own infrastructure company, First Tower Company JSC, but the decision on sale of the assets to the investor has not been made yet. T2 RTK Holding LLC also intends to form its own tower company out, as the company advised earlier.

MTS disassociated itself from this trend and asserted that it may become a tower company itself. Top managers of the company repeatedly stated that they were not going to share the same path with the competitors who analyze the saleability of their towers. "The idea is nice but we don’t believe in the case", Vasil Latsanich, Vice President of MTS, said.

In the meantime, Mikhail Shamolin, President of Sistema JSFC, major shareholder of MTS, said in his interview to Kommersant newspaper that the future of telecom companies depends solely on the efficiency of their infrastructure management. "We hear a lot of things about various schedules of rates, merchandise plans and trendy new products, but little we hear about telecommunication companies working on spending less money for their telecommunication infrastructure. There definitely is a huge potential there, considering just the fact that MTS only spent more than 90 billion rubles on capital investment last year. Can you imagine the amounts in question? Even if we save 10% of this amount, we will be able to talk about serious influence on the company’s money flow and its attractiveness for investors, respectively", Mr. Shamolin said.

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