Chinese equipment raised questions among Russian telecom operators

Russian telecom operators lack about 50 thousand base stations for the full construction of networks, Skoltech estimated. To close the deficit, market participants have been testing “third-tier” Chinese equipment (produced by more than two major manufacturers) since the beginning of the year. So far it does not meet the necessary criteria for stability and functionality, operators say. Some Chinese suppliers are expressing their readiness to modify the equipment. However, experts doubt that this technology will be able to fully replace Huawei, Nokia and Ericsson.

To develop mobile communication networks in Russia in 2023 alone, operators lack about 50 thousand base stations (BS), Deputy Head of the Skoltech-based NTI Competence Center for wireless communications and Internet of Things technologies Alexander Sivolobov told Kommersant. According to him, now the Big Four (MTS, MegaFon, VimpelCom, Tele2) have about 20-30 thousand stations at their disposal for the whole year, while at least 80 thousand are needed.

“The main reasons for the shortage remain the sharp increase in the cost of equipment and the cessation of official supplies. At the same time, a decrease in the share of capital expenditures (CAPEX) in operators’ revenue indicates a long-term deterioration in the economic efficiency of their business,” noted Mr. Sivolobov. Based on the results of the first half of the year, operators reduced investments in networks (see Kommersant on August 23).

The expert notes that over the past year, operators have been testing equipment from third-tier manufacturers from China (besides the main suppliers represented by ZTE and Huawei) and other countries (see Kommersant on February 9), but the results are unsatisfactory. “This is due to the closed nature of the systems of Chinese vendors – they are incompatible with solutions from other companies, and operators are also not satisfied with the stability of operation and functionality,” says Mr. Sivolobov.

After the outbreak of hostilities in Ukraine, the world’s main manufacturers of telecommunications equipment stopped official supplies to the Russian Federation, including Huawei, Nokia and Ericsson. A year later, it became known that telecom operators had reduced the installation of new base stations by more than 60%. (see “Kommersant” dated February 6). A Kommersant source in a large telecom operator confirmed that the companies are considering the option of purchasing Chinese “third-tier” BSs, but “there were a number of complaints about all the tested stations” regarding functionality.

Some suppliers decided to adapt equipment for Russian networks, Kommersant’s interlocutor adds. A Kommersant source among suppliers of electronic products clarified that some Russian operators are considering the option, together with Chinese manufacturers, to modify the BS for existing networks.

The Ministry of Digital Development told Kommersant that “operators currently have enough stock of base stations to provide citizens with stable and high-quality communications.” MegaFon also says that the operator has “an adequate supply of equipment.” But, the company admitted, they “mandatorily test samples of all new vendors, both Russian and foreign.” Tele2, VimpelCom and MTS declined to comment.

The import of equipment through parallel import cannot cover the needs of operators at the usual pace, said Alexey Slukin, editor of the Telekommunalka Telegram channel: “According to official statistics from the Ministry of Digital Development, the number of new stations in 2022 decreased by 58% compared to the increase in 2021. This is despite the fact that in 2022 plans approved back in 2021 were implemented.” The expert also says that “operators are exploring the capabilities of BS providers with whom they have not worked before.”

Alexey Boyko, an analyst at the specialized Telegram channel Abloud62, emphasizes that with a massive transition of operators to “third-tier” stations, failures in communication networks may occur, and the costs of equipment repairs will also increase, since such BSs are more likely to fail. Small manufacturers, as a rule, are not able to provide the necessary level of support and software updates, he adds: “Also, their equipment may have a small set of functionality and a higher price due to the small volume of stations produced.”

Timofey Kornev