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Sky Link and DARS-IP pony up $10m for Ulyanovsk mobile virtual network

17 Mar '10
Oleg Kouzbit, Online News Managing Editor

Word came last week that Russia’s national mobile operator, Sky Link, was joining forces with Ulyanovsk-based Internet provider DARS-IP in an effort to launch an estimated $10m ‘mobile virtual network operator’ (MNVO) project in the Ulyanovsk region. Offering combined data broadcasting and voice t-com services in one package, MNVO is the new Holy Grail; but success has proved elusive. Some analysts doubt the economics of the new venture. Others feel Ulyanovsk is just a test market—and if successful, Sky Link has the legs to take it national.

Last week an MVNO (mobile virtual network operator) project was announced in Russia’s vast Volga area by mobile operator Sky Link and Ulyanovsk-based Internet provider DARS-IP. At first the plan is to provide data broadcasting services to predominantly corporate clients in the region’s largest cities of Ulyanovsk and Dimitrovgrad under the DARS Telecom brand. In the second half of the year, voice mobile communications will be offered to individuals.

MVNO provides services without owning frequencies or infrastructure—it uses other operators’ networks. For the Ulyanovsk project, Sky Link’s ‘last mile’ network and technology will reportedly be used.

The partners have declined to disclose any project financials, but according to Kommersant, it’s around $10m. DARS-IP is hoping for the investment to pay off fast—as quick as within a year. The firm is reportedly planning to have a fully packaged service ready for wide-scale marketing through DARS-IP’s network of mobile connection outlets by the end of the year.

The partners

Set up in 2003, DARS-IP is now part of the multi-sector DARS holding. The firm provides IP-telephony and broadband FttB- and pre-WiMax-based services to a thousand corporate and about 10,000 individual clients. With its cable TV diversification plans the company expects to double its client base later this year by shifting its focus to individuals.

The project is a way of re-inventing DARS-IP’s marketing strategy, according to DARS CEO Sergei Sabanov. We “already have solid broadband market share,” he told media, and now the focus will be enhanced and augmented by the mobile ‘last mile.’

Sky Link is one of Russia’s leading CDMA operators offering high-speed mobile Internet access and voice telecom services. Today, Sky Link-branded 3G solutions reportedly cover more than 6,000 cities and towns in Russia’s 36 regions. The company’s CDMA and GSM license territory comprises as many as 78 regions. As of late 2009 Sky Link’s national client base included 1.2 million users, BIT Prime-TASS reports.

As the ComNews portal says, Sky Link seems bent on spawning MVNO projects throughout the country. Last year it launched a similar project in 14 regions of the Central Federal District, and plans are to press on with as many as ten such projects from the South-West to the Far East.

Searching for the Holy Grail

Although the Ulyanovsk project will become, if successful, the first MVNO to actually be implemented in the Volga area, some experts doubt the cost-effectiveness and viability of the effort.

They point to the eventual disintegration in mid-2009 of another such project in this Federal District by mobile operator SMARTS and mobile phone retailer EuroSet.

The two inked a $20m MVNO deal in early 2007 to connect as many as 200,000 clients within the first year of operation. Two years later EuroSet announced it was bailing out because the consortium had only sold a reported 14,000 SIM-cards, of which just 3,971 remained active, the retailer said.

Megafon has also tried its hand with the technology in Moscow. The firm said it would also be looking at regions outside the Volga district because mobile prices there were reportedly too low for Megafon to compete.

Finam’s Eldar Vagabov believes the regional DARS-IP joint effort has a lot of traction. With no ‘last mile’ networks of its own to build, the company will be able to offer its clients a full set of up-to-date services at very competitive prices.

For Sky Link, the deal is less about generating sales than it is about getting an opportunity to test its MVNO capabilities for further and broader projects elsewhere in Russia rather at a very low entry price.

Many consider MNVO the next Holy Grail in telecom so the DARS-IP/Sky Link roll-out in Ulyanovsk is being closely watched. Success will do more than just make money; it will open the door for the big national and multi-national telecoms that are waiting on the sidelines.
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