MTS blog


Wednesday, April 22, 2015

Arvidas Alutis was appointed the CEO of MTS’s retail network a year ago. Prior to his appointment, for three years, he oversaw MTS’s customer service department and began his career with MTS 15 years ago as a consultant in one of our retail stores.


Interfax spoke with Arvidas about the performance of MTS’s retail network, the company’s strategy in mobile retail, market trends and the outlook for 2015. See below the abridged and translated version of the interview.


What are the financial results for RTK (i.e. MTS’s retail division)? Is the retail business profitable?


Surprisingly we are. Usually any retail owned by a mobile operator is a money drain. Our profit resulted from two major factors. Firstly, we worked to improve efficiency throughout 2014 and will continue to do so in the future. For instance, we decreased our rental expenses by approximately 10% in 2014 over 2013.


The second factor is our impressive product line. Not only do we bring MTS new mobile subscribers, but we also develop segments, in which our competitors are not present, such as fixed-line broadband and financial products.


Our OIBDA remains positive and our net income almost doubled last year. We are the only retail business owned by a mobile operator staying above break-even. Everyone else is in the red.


What goals does the MTS retail business have?


I’ve set three major goals for our employees this year. First, we want to achieve significant growth in online sales. Sales through online channels allow us to decrease expenses, including rent and salaries. Besides, the Internet allows us to expand the products we offer indefinitely. For example, we will soon launch our own line of accessories, and customers will be able to customize these products online. For example, you will be able to simply upload any photo, edit and submit it and then receive a personalized phone case with an image of your dog or your family.


Our Internet sales have benefited a lot from our synergy with Ozon, in which MTS owns an 11% stake. Ozon has a great base of customers who already make purchases online and are accustomed to shopping online, while we offer products Ozon has not offered before. Recently we have launched a pilot project allowing customers to pick-up products ordered through Ozon in five MTS retail stores in Moscow and two stores in Saint Petersburg. We plan to open at least 50 Ozon delivery locations in all major Russian cities in 2015.


Our second largest goal is to become the most efficient retail business run by a mobile operator and offer the best quality of service. This is because clients who get used to high standards in customer service here and now are likely to return when they need to get a new phone or to purchase one as a gift. I see the future in improving quality of service, and I’m sure that this is the right path for every mobile operator. Clients no longer get in queues for products. Now we are the ones who get in queues for the clients.


The third goal is to develop our human resources. This is rarely emphasized in retail companies, where employee turnover may amount to 70-80% per year. Our goal is simple: we want to be the best employer in retail and reach the lowest possible level of employees turnover in this business. Our goal is to achieve employee turnover of less than 35%. Retail generally employs young adults, who are only testing the ice in adult life: we are the first employer for over 50% of our staff. We must make sure that they understand that they have an option to professionally develop within our company, to become a manager and to grow both vertically and horizontally within MTS Group.


Do you plan to diversify your product lines? Will we be able to buy a blender at a MTS store in the future?


I doubt you will be able to get a blender, but you will be able to buy a TV in our stores. That’s because MTS, unlike other players on the market, is developing other businesses besides mobile. We own a PSTN provider in Moscow, we are the second largest provider of fixed broadband in Russia, and we will soon launch our satellite TV service. Products which come as complimentary to these services, such as a TV with built-in IPTV or satellite TV options, are a logical purchase for the clients. And through our partnership with MTS Bank we are able to offer our clients a loan or an installment payment plan under our own brand.


Last year the number of mobile retail stores in Russia decreased from 28,500 to 28,000. But MTS retail chain increased its footprint by 3% up to 2,900 proprietary stores. Do you plan to increase or decrease the size of retail chain?


This year we are probably the only company to grow its retail presence rather than reduce it. MTS plans to increase both the number of its stores and number of employees per store. We plan to open 300-400 proprietary stores in 2015.


Where will you open new outlets: in Moscow or in regions? What is your priority: major cities or increasing availability of internet access in the regions?


There is no decisive answer here. We do realize that we need additional stores in specific locations. This depends on the dynamic of the operator’s client base in specific regions.  We know that Svyaznoy and Evroset reduced the number of their stores this year by closing unprofitable outlets. They are most likely focusing on large cities where there is money left. But we take into consideration not only sales of devices, but also developing the MTS client base. If clients used to top-up their accounts at a specific store that our competitors have closed and are not ready to go to another location, we will open a store there even if we don’t expect to make profit from selling devices there.


How have rent expenses changed? Do you expect the rent to grow?


We decreased rent expenses last year by almost 10% over 2013. Despite the fact that we expect to grow our number of stores by 10%, our rent expenses should remain the same as the last year. That’s possible even when you have many outlets.


You’ve mentioned that you plan to increase the number of employees per outlet. Will that result in increased expenses for the retail business?


Of course it will. But we understand that these expenses are necessary because, first of all, we don’t want clients and prospective customers queuing for services, and second, our employees should have sufficient time to serve every customer to not only help  them with purchase of a phone or a tablet, but also resolve any other problems they might have. That means spending money on training our employees, on professional development, on retaining our staff. Last year we increased our personnel cost per store by 10%, but this increase has already paid off. We saw an increase in sales per store which outweighed these expenses.


What percentage of MTS clients do you acquire through you retail chain?


Over 50% overall, and over 70% in some of the regions.  This is a lot, and you should also add up contribution from our franchising partners which generate up to additional 20% of SIM card sales in some regions.


You are experimenting with smartphone only format of the stores where you sell smartphones almost exclusively. When will MTS retail transition to this model?


Smartphones account for almost 60% of our sales, the latest monthly figure was 65%. We are once again ahead of the market here, by 3-4%. That’s only natural as the market follows the demand. Our goal as a retail business owned by a mobile operator is to shape this demand. That’s why we are ahead, and I believe that feature phones will become a thing of a past even without forcing it. However, a decrease in supply could also work.  We opened the first smartphone only outlet last year in Moscow, this year we plan to open around 40 such outlets in every city with population of over one million.


What product range will be available at these stores?

We will still offer mobile phones for senior citizens, with large buttons and a large screen. Also we will keep cheap phones you won’t mind giving to, say, a child. There will be only 1-3 models to choose from. Everything else will be smartphones.


What kind of smartphones? How many items?


There are three things customers pay attention to. First one is the price, especially now. Our goal is to either make a device affordable enough for instant purchase, or to provide customers with options for installment payment or taking a loan.


The second one is screen size. Tablet sales are in stagnation and will soon dwindle as modern large-screen smartphones are yesterday’s tablets. Why should you carry around two devices when you can have everything you need in one?


The third one is specifications: OS, support of LTE standard, camera resolution, memory size. I refer to the majority of the clients as there are also customers who will buy only Apple or other brands like Samsung, who would never choose anything else. But for most of the customers, these three things matter. 40 smartphone models meet set requirements of 80% of the customers. Those who want an exclusive device can order it either from our online store at home, or online at our outlet.


What are your Q1 2015 results? Did the forecasted decrease in sales following market saturation in December actually occur?


As of Q1 we slightly increased sales over the same period in 2014. Our revenue was stable, but sales of smartphones in units increased by roughly 4% despite the economic difficulties and lower customer demand. Sales of budget LTE smartphones increased 30x year-over-year and constituted one of the key drivers of growth. At the same time, we do see the demand shifting to a lower price segment. But we were prepared for that. In Q4, we aimed to smooth any increase in prices and didn’t let our prices skyrocket as would have been expected. On April 1 we lowered prices on 70 devices even further.


Did you lower the prices at the expense of markup? Or did your suppliers lower theirs?


We did it at the expense of the markup. We won’t end up in red ink though. Our negotiations with suppliers led to some interesting offers. We saw a significant decrease in sales of high-end devices priced over 30,000 rubles, because these devices were sold out before the New Year. But we never aimed to maintain strong presence in this segment.


Why is that?  IPhone users generate higher ARPU than average clients.


MTS has more Apple owners among its clients than its competitors.  But over 40% of them purchase their iPhones and iPads abroad. They order the devices from global online stores or they just purchase devices while they are on a business trip or travelling. There is no point in trying to win this segment.


What was share of your sales did LTE devices account for in Q1? What do you expect from the LTE segment going forward? Could these devices be getting too expensive for customers?


Last quarter LTE devices accounted for 25% of total devices sold. In Moscow we are ahead of the market in sales of LTE smartphones as we are focused on this region as the quality of our LTE network here is superb.


Customers do spend less now and the demand is probably bound to decrease. However, our prices for LTE devices are also declining. 4G chips still cost twice as much as 3G chips. Manufacturers promise that the prices will decrease by summer and that the prices depend on how many devices have been sold. It is the assembly line principle: the more units that are produced, the cheaper every single unit is. More than 1 million LTE devices are sold in Russia every quarter and penetration of LTE devices grows much faster than in many of the European markets.


Do you sell less LTE smartphones in the regions where the average income is lower?


It’s not a matter of income, it’s a matter of client experience. If the LTE network is there, if one’s friends start using LTE, a transition to LTE becomes enjoyable. Considering the fact that we are lowering our prices, money is not an obstacle. In some regions, LTE devices account for almost 20% of total sales. The difference from Moscow is not drastic by any means.



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Retail, devices


Saturday, March 21, 2015

We are pleased to share results of measurements taken during 2014 by mobile subscribers throughout Russia using the popular application ‘Speedtest’, which was developed by Ookla.

Based on over 7.7 million measurements conducted from January to December 2014, MTS can demonstrate leadership in data transfer speeds across Russia. The average downlink speed recorded on MTS’s 2G/3G/LTE networks across Russia during 2014 was 8% higher than the average of its competitors.  In Moscow, MTS’s networks deliver speeds, which exceed the average of its competitors by 13%.

In 2014, MTS installed over 15,000 3G and LTE sites throughout Russia. By the end of the year, MTS offers LTE services in 76 regions of Russia, while over 85% of its 3G network was enabled by Dual-Carrier HSPA+. MTS’s fiber networks grew to 160,000 km as MTS continues its focus on developing data markets throughout the region.

See below the the full report.

_Speedtest 2014_ (6).pdf (122.64 kb)

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Tuesday, January 27, 2015

In 2014, we expanded our network by 20% through the installation of 15,000 3G and LTE base stations. By the end of the year, MTS launched LTE networks in 76 of Russia’s 85 regions. 


During the year, we continued to enhance our 2G and 3G networks and realized total population coverage of 98% by the end of the year. Over 80% of 3G base stations on our network now deliver speeds of 42 Mb/s, the fastest data transfer speed commercially available, through the deployment of Dual-Cell HSPA+. The remaining 3G base stations run on HSPA+ standard and deliver speeds up to 21 Mb/s.


In 2014, mobile data traffic on MTSs networks increased 1.7 times in Russia. The highest growth in the mobile traffic consumption was registered in the North-West and Moscow regions, where traffic grew 2.2 and 2 times respectively. In Moscow, the volume of the LTE traffic increased 13 times year-over-year due to network development and growing penetration of LTE-enabled smartphones, tablets and dongles. The traffic growth was also aided by Apples decision to enable LTE-TDD network for the new iPhone 6 and iPhone 6 Plus models, as well as older iPhone 5S and 5C models.


The total length of our fiber-optic lines reached 160,000 km in 2014. The increase was driven by the construction of long distance lines in the regions and the aggressive build-out of the Gigabit-capable Passive Optic Network (GPON) in Moscow, where the total length of the lines increased to 40,000 km. GPON is capable of delivering high-speed broadband and digital TV to 3.5 million Moscow households. During the year the number of the households passed doubled while the volume of internet traffic on our network increased by 45%.

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Tuesday, December 09, 2014

We are pleased to share recently published results of measurements taken by mobile subscribers throughout Russia using the popular application ‘Speedtest’, which was developed by Ookla. Based on over 1.8 million measurements conducted from July to September 2014, MTS has once again demonstrated its leadership in network speeds across Russia. The average downlink speed registered on MTS’s 2G/3G/LTE networks across Russia during Q3 2014 was 20% higher than the average of its competitors.  The results further demonstrate that MTS operates the fastest LTE networks in Moscow with an average downlink speed of 20.3 MB/s, while MTS subscribers in areas ranging from St Petersburg to the Urals and the Far East enjoy faster network speeds relative to their peers on other networks.


You can download the Q3 report below and see a link to our previous report on Speedtest measurements in this post.

Speedtest_v1_14-III (3).pdf (142.17 kb)

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Monday, October 20, 2014

We are pleased to share with you a new report on the structure of the mobile traffic we produced using MTS’s proprietary data for the first nine months of 2014. Some of the findings include: 

Over the last year, the share of traffic generated by smartphones in the total traffic increased from 25% to 33%, while the share of traffic generated by USB modems declined from 50% to 42%;

Social networks account for 11% of the traffic on mobile networks; 

MTS customers consume traffic in a way very similar to European users.

Click below to read the full report.

141020_Mobile_Traffic.pdf (836.49 kb)

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Monday, October 20, 2014

MTS recently launched an initiative to dramatically increase speeds of our networks in major cities through the deployment of small cells.

Small cells are low powered short range base stations which complement service from larger macrocells and are used to offload traffic from 3G and LTE networks. We plan to install thousands of small cells in areas where demand is strongest for mobile Internet, including business centers, shopping malls, airports, railway stations, parks, pedestrian areas, and even busy crossroads. This will enable us to enhance the capacity of our LTE networks and ramp up data transfer speeds. Small cells with an operating range of 100-150 meters active in the 2.6 Ghz range will connect to MTS’s fiber-optic lines and offload traffic from LTE networks.

In the summer of 2014, MTS launched pilot projects for testing small cells in Moscow and St. Petersburg. Small cells installed in the areas of concentration of the subscribers delivered a 10% increase in coverage and a 20% increase in network capacity and consumed traffic. Following the success of the pilot projects, we decided to continue the roll-out of small cells in Moscow and St. Petersburg and deploy them in other big cities in Russia, including Novosibirsk, Yekaterinburg, Nizhniy Novgorod and Kazan.   

In order to further increase capacity and LTE speeds, MTS also is preparing to deploy carrier aggregation technology. Earlier this year, MTS became the first company in Russia and the third company globally to have completed testing of carrier aggregation technology over 30 MHz of bandwidth spanning the 1800 MHz and the 2600 MHz ranges.


Currently, MTS’s LTE networks are active in 56 regions throughout Russia. Through the end of this year, MTS will cover 600 population centers across Russia.

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Thursday, September 11, 2014

We are pleased to share recently published results regarding network performance in Russia.  Based on over 2.3 million measurements taken by mobile subscribers throughout Russia using the application ‘Speedtest’, which was developed by Ookla, MTS has once again outperformed its peers.  As in the previous report for the first nine months of 2013, MTS demonstrated higher average downlink and uplink speeds throughout Russia and in large cities like Moscow.  Overall, the report states that MTS operates the fastest LTE networks in Russia with an average downlink speed of 20.5 Mbs.


Please see below the link to the full report. 

Speedtest.pdf (136.52 kb)

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Wednesday, September 10, 2014

MTS has become the first company in Russia and the third globally to have completed testing of Carrier Aggregation Technology over 30 MHz of bandwidth spanning the 1800 MHz and the 2600 MHz ranges. 

Carrier Aggregation Technology is a key component of LTE-Advanced and used to increase bandwidth and in turn improve network speed and performance.  The tests demonstrated how MTS can increase mobile Internet speeds using existing spectrum in multiple bandwidths up to 225 mbps. The tests were conducted  in the region of Bashkortostan on a commercially launched LTE network constructed by Ericsson. USB modems from Huawei and smartphones from Samsung, which MTS sells throughout its retail chains, were used during the tests.

Using LTE at the 1800 MHz range gives MTS a number of advantages in terms of network planning and development: it increases network penetration and coverage and allows MTS to repurpose equipment and infrastructure already utilized for GSM networks. The launch of LTE networks over the 1800 MHz range will enable Company to provide high-speed Internet access to all of the population centers in Bashkortostan with population over 2,000 people.

MTS expects to launch LTE-Advanced technologies throughout Russia to more efficiently utilize its existing spectrum and optimize its future capital expenditures.



Tuesday, November 26, 2013

Today MTS launched sales of an MTS-branded smartphone and tablet designed to operate on MTS's LTE networks at speeds up to 100 MB/s. The MTS 1078 tablet and the MTS 978 smartphone are the most affordable LTE-enabled devices available on the Russian market. LTE-enabled devices from MTS come preinstalled with both popular MTS-branded apps, such as MTS Service, MTS TV, Easy Pay, Second Memory, MTS Locator, and MTS Good’OK, as well as leading apps from our partners, including Opera Mini, Facebook, Odnoklassniki, Vkontakte, Twitter, Shazam, OfficeSuite and Antivirus Pro.

Usage of the preinstalled applications has been shown to help drive data ARPU growth from MTS branded smartphones, which is on average by 20% hig her than average data ARPU of all of the smartphones on the MTS networks.

MTS’s LTE networks have been launched in ten of the Russia’s regions. MTS aims to cover 600 population centers with 4G networks by the end of 2014.


MTS 1078

Android 4.1

3G/4G, WiFi, Bluetooth

IPS HD 7” 1280*800

2*3 megapixel cameras

1.6 HHz processor

1GB op. memory/4GB inbuilt memory

Micro SD (32 GB)

4160 mAh


RUB 9 990 


MTS 978

Android 4.2 Jelly Bean

2G/3G/4G, WiFi, Bluetooth

8 megapixel camera

4.7” IPS HD, 1280х720

1.4 HHz

1 GB op. memory

2000 mAh

Price: RUB 9 490 

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Friday, July 26, 2013

Vyacheslav Nikolaev, MTS Director for B2C Marketing, recently spoke with Anne Morris from Fierce Wireless Europe, one of the leading telecom publications, about MTS's plans to launch convergent offerings, pace of LTE network deployment and hurdles with refamring of the 800 MHz range. Click here to read the interview. 

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