4G Tariffs: Russia and the World

January 2013

Analytical Report (full version)

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Analytical Report (full version)

4G Tariffs: Russia and the World
4G Tariffs: Russia and the World
January 2013

4G Tariffs: Russia and the World

January 2013

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LTE technology is the mainstream of the global telecommunications industry. As of early 2013 145 operators in 66 countries have launched commercial LTE networks¹ (¹ Source: GSA), and the subscriber base increased by 7-times - from 13.2 million to 92.3 million in 2012² (² Source: IHS). Tariffication of mobile broadband Internet access is one of the most important topics in the telecommunication industry. Tariffs determine consumer demand and key economic indicators of LTE-projects - from ARPU to terms of payback. The company J'son & Partners Consulting presents the study of 4G tariffs in domestic and international markets, conducted in January 2013.


The main objective of this study is the analysis of the tariff policy of the largest LTE network operators, the basic principles of tariffication, cost of subscriber equipment, trends and prospects of operator’s tariff policy, as well as coverage and LTE subscriber base. Geography of the research includes Russia and developed countries such as the U.S., Japan, South Korea, Germany, Britain, France and Sweden.


The study examined nine foreign operators, - Verizon Wireless, AT&T (USA), SK Telecom (South Korea), NTT DoCoMo (Japan), T-Mobile, Vodafone (Germany), Everything Everywhere (UK), SFR (France) and TeliaSonera (Sweden ) and 3 Russian LTE operators, - Yota, MegaFon and MTS.


There are three basic principles of tariffication of data services based on LTE:


       no restrictions on the speed of data transmission, limited amount of traffic;
       unlimited traffic, limiting of the speed of data transmission;
       limited amount of traffic and speed of data transmission.


Making up the tariff offers, operators use the following key parameters:


       access rate in Mbit per second on the receipt and / or data transmission;
       amount of prepaid data traffic in Gb (Mb);
       amount of prepaid voice traffic in minutes (in mixed tariffs – of voice and data services);
       the cost of end equipment for the subscriber;
       minimum contract length in months.


At the initial stage of LTE development the operators had the opportunity to experiment in tariffs but to date, there is a well-developed tariff policy aimed mainly at reasonable limitation of mobile Internet traffic consumption. When comparing tariffs in Europe, U.S., Asia-Pacific, it was found that most of LTE tariffication models are similar to the existing tariff plans. However, there are some differences, for example, Vodafone Germany offers tiered tariffs, which are dependent on the speed of data transmission, and the Russian Yota prefers completely unlimited tariffs.


The model, commonly used by European operators, presupposes the tariff offers, independent of the used technology. Usually, the only maximum speed is advertised – 7.2 Mb/sec, 14.4 Mb/sec (HSPA), 42,2 Mbit /sec (HSPA +), and 100 Mbit /sec (LTE). Only a few known operators in their marketing offers provide more realistic speed rates than the theoretically achievable peak.


The world's largest LTE operator is Verizon Wireless, which in January 2013 covered with LTE networks over 470 cities in the U.S. with the total number of inhabitants of 273,500,000 people, or about 89% of the population (Figure 1). The number of registered devices in LTE-networks in late 2012 reached 21.6 million or 23.3% of contract subscribers.



The second place is taken by the South Korean operator SK Telecom with a subscriber base of over 7 million in 2012. LTE-network of the company covers the area with almost 99% of the population. In August 2012 the operator was first in the world to launch the service HD Voice on LTE networks. HD Voice technology significantly improves the audio quality, almost eliminates delays, and reduces the load on the network, freeing up resources for other services. The main limiting factor in the growth of popularity of the service is the limited range of available devices that support the technology.


Starting from 2013 the operator plans to begin the transition to the standard LTE-Advanced. LTE market in South Korea began its development from July 1, 2011, when two operators - SK-Telecom and LG U Plus - launched LTE networks in commercial use. For the six months (by the end of 2011) the share of LTE-subscribers in the total number of mobile users in South Korea reached 2% (for SK-Telecom - 3%). At the end of 2012, according to preliminary estimates, the figure of the LTE leader in the country has reached 26%, the predicted estimates at the end of 2013 and 2014 are 50% and 62%, respectively (Fig. 2).



Among the Russian operators Yota (At the end of 2012 there was a structural reorganization of “Scartel” (brand Yota). Ltd. "Scartel» (Yota Networks) is an infrastructure operator which owns frequency resources, deploys networks , can provide the networks for the third parties (virtual operators, MVNO), etc., and a new Company "Yota" operates as a service provider - provides services for the subscribers on its behalf, has a retail network, call-center, etc.) is the largest in terms of LTE subscribers, it has about 700 thousand at November 2012. By the end of January 2013 the company launched commercial LTE networks in 23 Russian cities (Regardless of the towns of the Moscow region). The cost of Yota subscriber equipment varies from 2900 to 5900 rubles (Excluding laptops with ноутбуков with built-in LTE module).


«MegaFon» operates as a virtual operator (MVNO) in the regions of Yota networks and has its own TD-LTE network in Moscow. The company offers a choice of 3 packages of unlimited Internet access through 4G LTE technology, depending on the needs of the subscriber: “Internet L”, “Internet XL” and “Internet XXL”. Among mobile devices that support 4G, there are three USB-modems which cost 1 990 rubles each and a router which costs 4 900 rubles.


MTS provides internet access through TD-LTE technology in the Moscow region (on their own frequencies) and in Kazan through FD-LTE technology (as a virtual operator on Yota Networks).


The most widespread LTE user equipments for the Russian operators are USB-modems (1990-2970 rubles), Wi-Fi routers (4800-4900 rubles), including the Internet center of Yota (5900 rubles) and the device “Yota Ready” (5090 rubles) (Table 1).



Average tariffs of Yota are higher than that of "MegaFon", however, the subscriber gets absolutely unlimited access to the Internet for this price. "MegaFon" and MTS restrict access with traffic quota, after which the speed rate of traffic consumption is reduced to a minimum. However, the maximum speed of MTS access is not limited and depends on various factors (Table 2). A specific feature of "MegaFon" tariff lines is the differentiation of fees according to the access speed, traffic volume and the region in which the subscriber signed the contract.


According to the study results key features of the tariff policy of the Russian and foreign operators were identified. For example, the key feature of Yota tariff policy is to offer unlimited calling plans and differentiated tariffs depending on the speed and the region of the subscriber. Foreign operators are more inclined to use the conditional unlimited tariffs with limited traffic, after which the access speed is reduced to minimum.

An important function of the operators facilitating the development of LTE-networks is the subsidization of subscriber equipment through the sale of consumer devices at a low cost. Subscriber equipment subsidy scheme is adopted in Europe and the U.S., where the legislation allows the operator to sell the devices and communication services in one package. The operator sells the phone for the cost below the prime when the subscriber signs a long term contract that provides guaranteed communication services for a fixed monthly fee for a certain time. In fact, with the conclusion of a long-term agreement the subscriber receives a top gadget for a small fee; in case of the contract termination the subscriber is obliged to pay a penalty, which offsets the costs of the operator.

According to J'son & Partners Consulting, implementation of the subsidization model of LTE subscriber equipment under long-term contracts with subscribers by the operators (similar to the Western practice) would significantly expand the subscriber base in Russia, facilitate the development of the market of basic and additional LTE services and guarantee to operators consistently high ARPU and low churn rate.

However, in order to implement this model in Russia, where it is actually prohibited by law, it is necessary to change the regulatory and legal acts. In the meantime, Russian operators are confined to the indirect subsidization of consumers.


Contents of the full report (57 pages), containing the results of the research «4G tariffs: Russia and the World»


1. Commercial LTE networks in the world: main principles of tarrification and cost of subscriber equipment
       1.1. Verizon Wireless (USA)
       1.2. SK Telecom (South Korea)
       1.3. NTT DoCoMo (Japan)
       1.4. T-Mobile (Germany)
       1.5. Everything Everywhere (Great Britain)
       1.6. AT&T (USA)
       1.7. Vodafone (Germany)
       1.8. SFR (France)
       1.9. TeliaSonera (Sweden)
2. Tarrification and cost of subscriber equipment in the Russian LTE networks
       2.1. Yota
       2.2. «MegaFon»
       2.3. MTS
3. Trends and prospects of 4G operators’ tariff policy
       3.1. Subscriber equipment financing
       3.2. Refuse from unlimited tariffs
       3.3. Value-added services tarriffication (VAS)
       3.4. Other trends
4. Conclusion


List of Figures

Figure 1. LTE coverage map of the operator Verizon Wireless (USA)
Figure 2. LTE subscriber base dynamics of the company SK Telecom (South Korea)
Figure 3. LTE subscriber base of the company NTT DoCoMo, December 2010 - August 2012
Figure 4. Coverage map of T-Mobile (Deutsche Telekom) 4G networks in Germany
Figure 5. LTE equipment for laptop users
Figure 6. Coverage map of Everything Everywhere 4G networks in Great Britain
Figure 7. Coverage map of AT&T (USA) LTE and HSPA+ networks
Figure 8. Coverage map of Vodafone in Germany
Figure 9. Main financial indicators of the company SFR, autumn 2012.
Figure 10. Coverage map of TeliaSonera in Sweden


List of Tables

Table 1. LTE-tariffs of Verizon Wireless (USA), including unlimited voice and data traffic
Table 2. LTE-tariffs of Verizon Wireless (USA), oriented to data transmission
Table 3. Cost of LTE equipment of Verizon Wireless when signing a two-year contract with a subscriber
Table 4. LTE tariffs of SK Telecom for smartphone users
Table 5. LTE tariffs of SK Telecom for Tablet PC users
Table 6. LTE tariffs of SK Telecom for USB-modem users
Table 7. Tariffs of the company "NTT DoCoMo"
Table 8. Subscriber equipment of the company NTT DoCoMo supporting LTE
Table 9. Equipment of the company T-Mobile (Germany) supporting LTE
Table 10. Tariffs of the company T-Mobile for LTE smartphones users
Table 11. Tariffs of T-Mobile For the users of tablet PCs supporting LTE
Table 12. LTE-options of the company T-Mobile
Table 13. Tariffs of the company "EE" when purchasing the operator device
Table 14. Tariffs of the company "EE" in case of the refuse to purchase the operator device (SIM-only)
Table 15. Tariffs of the company AT&T (USA) for mobile Internet access
Table 16. Prepaid tariffs for mobile data of the company AT&T (USA)
Table 17. Tariffs of the company AT&T (USA) for smartphone users including unlimited voice and SMS-traffic
Table 18. Data-tariffs of AT&T (USA) excluding SMS-traffic
Table 19. AT&T equipment, supporting 4G LTE
Table 20. Conditionally unlimited LTE-tariffs of Vodafone for Internet access and mobile communication
Table 21. LTE Tariffs of the company Vodafone, including only Internet access
Table 22. Cost of Vodafone LTE-smartphones for contract subscribers
Table 23. Tariffs of the company SFR, including the services of 4G Internet access and mobile voice communication
Table 24. Tariffs, including only Internet access service
Table 25. SFR equipment supporting LTE
Table 26. Tariffs of the company TeliaSonera, including 4G Internet access and mobile voice communication *
Table 27. Tariffs of the company TeliaSonera, ncluding only Internet access service*
Table 28. LTE-smartphones of TeliaSonera
Table 29. Tariffs of the company Yota for 4G LTE service
Table 30. Yota devices supporting 4G LTE
Table 31. Tariffs of the company Megafon for 4G LTE
Table 32. Devices of the company Megafon supporting 4G LTE
Table 33. Tariffs of the company MTS for 4G LTE in the Moscow region
Table 34. Tariffs of the company MTS for 4G LTE in Kazan
Table 35. Tariffs for VAS services on LTE networks of major foreign operators



This Information Note is Prepared by J’son & Partners Consulting, We strive to provide factual and prognostic data that fully reflect the situation and are available to us before issuing the material. J’son & Partners Consulting reserves the right to revise the data after publication of new official information by the market players.



J'son & Partners Consulting presents the study of 4G tariffs in domestic and international markets, conducted in January 2013.