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Russia telecoms firms sign agreement with Russian government to build next generation of mobile networks

Four of the biggest telecoms firms in Russia, together with Scartel, which trades under the Yota brand, signed an agreement Thursday with the Russian government for the construction of next generation mobile networks in the country. The companies will establish a joint venture to work together for the creation of the networks. The agreements were signed between the companies and Russian Prime Minister Vladimir Putin, together with the country’s Communications and Press Minister Igor Shchyogolev.

Mobile TeleSystems, MegaFon, VimpelCom and Rostelecom — which became a significant mobile player thanks to its acquisition of SkyLink and merger with Svyazinvest — agreed to create a joint venture to develop a 4G network on the basis of Yota's initial 4G infrastructure. The deal foresees Yota Group eventually being divided in five parts, giving each stakeholder an equal share in the company.

In a statement to the Moscow Times, Scartel said the four firms will be allowed to use Scartel's 4G Long Term Evolution technology, or LTE, as well as network resources, and will have an option to buy out shares at market value in 2014.

According to Scartel, 4G Long Term Evolution technology services will be available in Russia as early as this year, with the network expanding to 180 cities by 2014. Because of the country's size, the cutting-edge nature of the technology, and the volume of investment required to roll out the new network, analysts are skeptical about the timetable — especially in light of the current absence of any LTE handsets, said the firm.

Commenting on the venture, Prime Minister Putin said he expects the companies to achieve what was agreed on with the help of the state and their combined resources. However, the move has left most pundits in shock, as most telecoms players didn’t expect Yota to compete for LTE. The Russian government has a stake in Yota through state firm Russian Technologies.

However, analysts said the deals are yet to be finalized. Tele2, the Swedish operator that has invested $2.5 billion in its Russian operation and has 18 million mobile subscribers here, was not involved in Thursday's agreement. The company, which says it has extensive experience building 4G networks in Europe and has offered to share its experience locally, has not lost hope of being included.

Analysts believe, however, that Thursday's agreement seems to put a government seal of approval on the final list of 4G market players.

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