MTS will compete with Airtel and Reliance Jio to offer 4G services

Its minority stakeholders may be urging it to get out of India altogether, but so far Russian telecom operator MTS shows no intention of doing so. Instead the company seems set to bet on providing fourth generation (4G) telecom services. MTS's President and CEO of its Indian operations, Vsevolod Rozanov, told a press meet at the Russian embassy that his company would "adopt and migrate" to deliver broadband over Long Term Evolution, or LTE technology.

Broadband is expected to be the big battleground of the future in telecom. Sunil Mittal's Bharti Airtel and Mukesh Ambani's Reliance Jio are currently the two big boys in the LTE game. MTS will be taking on these two.

The company recently bought fresh licences in the 800 MHz spectrum band, which Rozanov says is more efficient than the 2,300 MHz spectrum band, which Airtel and Reliance Jio have.  He maintains the 800 MHz band has greater penetration power through building walls.

MTS will invest an additional $200 million over the next six to seven years in India. Though it also plans to shift its existing subscriber base to the new technology, Rozanov says: "We cannot depend on existing customers for LTE." says Rozanov.

Reliance Jio and Bharti Airtel have chosen to offer LTE services on the Broadband Wireless Access licence. Reliance Jio and Airtel have 20 MHz of spectrum in each of their 22 and eight circles respectively. MTS has only 3.75 MHz of spectrum in each of its nine circles. The big two thus have an advantage.

For the last two years, MTS has focused on maximising its revenue from data. In the industry, the average contribution of data to a company's revenue is around 7 per cent, excluding revenue from SMS. But MTS has 27 per cent of its revenue coming from data. Mikhail Shamolin, President and CEO of MTS's parent company, Sistema JSFC, told analysts on April 9: "We originally built our network with this (LTE) in mind which means our future LTE rollouts are minimised both in terms of time and costs."

The company is working out tie-ups with device makers. "There will be an increased focus on smartphones," says Rozanov. Meanwhile market rumours claim Reliance Jio has already signed up Korean mobile phone maker Samsung for its devices.

Analysts believe the next few years will see a huge boom in data. Some estimates suggest data will grow at a compound annual growth rate of 30 per cent in the next couple of years. "Smartphones can help drive penetration and boost data consumption. New applications and uses of data are emerging," writes Himanshu Shah, in a recent HDFC Securities report.

MTS expects to reduce its debt in India by 55.5 per cent to $700 million in 2013. Cash requirement, for capital expense and restructuring cost (excluding investments in LTE) is also expected to come down to $250 million from $561 million in 2014 and 2015.

Referring to MTS's financial situation, Rozanov said he does not have the money to overspend. "We have money only to keep our pants on," he adds.