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. Last Updated: 07/27/2016

AMPS Operators to Get GSM Licenses

In a move that could save dozens of cellular operators and hundreds of millions of dollars in telecoms investments, the Communications Ministry plans to issue GSM 1800 cellular licenses to AMPS operators in Russia, according to the ministry and an industry group of AMPS license holders.

The two parties, along with the Anti-Monopoly Ministry, signed a "memorandum of mutual understanding" Monday that AMPS license holders would receive the new GSM licenses for corresponding regions. The licenses and frequencies will be issued in one or two months, said Yury Dombrovsky, president of Association-800, which has 54 members.

The Communications Ministry had in May 2000 announced that the AMPS standard would quit working by 2010, favoring the GSM standard.

That would leave some 800,000 AMPS subscribers throughout the country without a connection — and hundreds of millions of dollars in investment headed for the trash can.

Immediately after the announcement, AMPS operators started petitioning the government for an exit strategy.

"The Communications Ministry, taking into account the interests of the network's users, operators and investors, and also the necessity of developing the communications infrastructure in the regions, considers it expedient to allocate AMPS operators frequencies in the 1800 bandwidth and also give corresponding licenses," the memorandum reads.

"We are satisfied [with the decision], since we consider it an opportunity to invest into new networks," said Dombrovsky, who is head of Millicom, a Luxembourg-based company that has majority stakes in 12 AMPS operators in Russia.

Two months ago, Millicom sent a letter to the Communications Ministry saying that issuing GSM licenses would mean a potential $300 million investment from that company to transfer its operators to the GSM standard.

Another heavy AMPS investor is MCT Corp., 24 percent owned by Golden Telecom, which itself is 44 percent owned by Alfa Bank. MCT has significant stakes in 14 operators and is prepared to spend $3 million to $5 million per regional operator in the first year.

The country's leading cellular providers, Mobile TeleSystems and Vimpelcom, operate on GSM. Vimpelcom also operates on AMPS and is a member of Association-800.

Anton Pogrebinsky of J'son & Partners consultancy said the ruling likely won't benefit many AMPS operators that lack the funds or are located in areas with cellular potential too low to justify spending heavily on a GSM network.

Building an 1800 network is 15 percent to 30 percent more expensive than building a GSM 900 network, analysts say. An "1800 [network] is a costly solution and actually requires highly populated territories for technical reasons," Pogrebinsky said.

What the competition will do to present GSM operators remains to be seen.

Pogrebinsky said 900/1800 GSM operators have a leg up on AMPS companies because they have an established customer base.

"It will depend on how much money present AMPS operators can get and how fast they can provide services."