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. Last Updated: 07/27/2016

Mystery Money Pushes Yota Expansion

MTSkartel, which owns the Yota brand, also has licenses in Belarus and Peru.

WiMax operator Skartel, 25.1 percent of which belongs to Russian Technologies, is building a federal network of 180 cities under its Yota brand, but the source of financing for the project remains a mystery.

Skartel, which has been providing high-speed wireless Internet service since this summer, expects to become a nationwide operator covering 180 cities in Russia within three years, spokeswoman Natalya Tsarevskaya-Dyakina told Vedomosti.

She declined to comment on the size of the investments. Konstantin Ankilov, an analyst at iKS-Consulting, estimated that the costs could reach $1.5 billion to $2 billion, depending on the density of the network.

Skartel, which was created in 2007 and bought several operators with rights to the frequencies between 2.5 and 2.7 gigahertz throughout Russia, spent $300 million last year building its network and developing user equipment. In 2009, it is spending $170 million for further development in Moscow, St. Petersburg and another six cities.

The investments came from the fund Telconet Capital, which owns 74.9 percent of Skartel, Tsarevskaya-Dyakina said. The company has not disclosed the fund’s owners.

When Telconet sold the blocking stake to Russian Technologies in November 2008, Skartel chief executive Denis Sverdlov disclosed plans to expand in 40 cities beyond Moscow and St. Petersburg, with investments of up to $1 billion from Telconet. Russian Technologies chief Sergei Chemezov said in an interview with Vedomosti in May that the state corporation joined the project “for an entirely small sum,” even though the initial investment had already been set at $300 million.

Sverdlov told Reuters on Wednesday that the company was already breaking even and that it could become profitable by the end of the year. Skartel, which launched its paid service in Moscow and St. Petersburg four months ago, already has more than 150,000 clients and is signing up about 2,000 new subscribers monthly, Tsarevskaya-Dyakina said.

Next week, commercial service will begin in Ufa and commercial testing will start in Sochi and Krasnodar. By the end of the year, the company will launch its networks in several other cities, she said.

Skartel also owns licenses in Belarus, Nicaragua and Peru.

Moscow’s only other mobile WiMax provider is Comstar, which invested $20 million in the project last year. Comstar does not disclose how many clients it has, since WiMax is treated as an additional service for fixed-line, broadband Internet subscribers, spokeswoman Yekaterina Nevskaya said.

This summer two companies began building national WiMax networks: Interproyekt, controlled by the fund Icon Private Equity, and Noviye Telekommunikatsii, controlled by former Senator Gleb Fetisov.

Icon promised to spend $300 million in 2009 ($200 million from shareholders and $100 million from China’s Huawei as a credit for goods) to build networks in 11 regions. Noviye Telekommunikatsii plans to invest just $25 million for 25 regions.