re: Sonera's Pipe to Russia
>> Sonera Moves Ahead With 3G And Broadband
26th March 2002
3G
Finnish incumbent telco Sonera may be better known for its innovations in the wireless arena, but it is also making some interesting moves in the broadband arena. While wireless, and in particular 3G, will be the main priority for Sonera going forward, its broadband strategy is also gaining momentum.
The Backbone
Sonera's subsidiary, Sonera Carrier Networks announced on March 13 that it had opened a next generation broadband network linking Western Europe to Moscow. Sonera claims that it has "created the widest channel connecting Russia and the western world." Sonera already has a similar network linking St Petersburg to Finland and the western world.
Tuomo Kokkila, senior vice president of Sonera Carrier Networks told Broadband Networking News in an exclusive interview: "The competition is not as intense in Russia as it is in the West. Russia's economy is one of the few that is growing right now. The telecoms sector in Russia is growing very fast right now. The flow of investments from Western Europe into Russia is rapidly growing in this area."
Russia remains a key cornerstone in Sonera's international strategy and this deal will enable Sonera to offer a range of IP-based services such as global IP and IP-VPNs. The network is based on DWDM technology.
It plans to lease capacity to Russian and western operators. Sonera has now been in the Russian market almost ten years and is well-positioned to exploit the growing demand for broadband services in arguably one of the world's
biggest markets. It is also present in the Russian wireless market through its investment in cellular operator, Megafon.
Kokkila believes that Sonera's geographical focus is key to the operator's success. He added: "We have been quite an exception in this industry.
The international capacity business for Sonera Carrier Networks is profitable. The reason being is that we are operating in areas where other operators are not
so strongly involved. So, we are looking at the Baltic Sea region, Russia and Scandinavia. We plan to expand across the Baltic Sea area."
Kokkila is optimistic that Sonera will be able to increase its margins still further in this area. He added: "It is a turbulent market in this area, and a number of companies are in trouble. But, there are also opportunities for operators such as ourselves. Internet traffic is still growing. It is growing more than 100 percent than a year, so the capacity you will need in two years time will be much more than you need today."
Residential Broadband
Sonera's international broadband business may be growing at a healthy rate, but domestically it would like to see more growth in its residential broadband business. Sonera has around 30,000 ADSL subscribers in Finland. There are around 100,000 broadband users in Finland. Ari Harjula, vice president of development, Sonera Entrum (fixed networks) told BNN in an exclusive interview: "The broadband market is growing at more than 100 percent a year. We are the market leader in mobile so we can use this so we can sell our broadband services
to these customers. We are not able to bundle the services due to the regulatory environment, but, we can cross-sell these products."
Harjula is optimistic that Sonera can start to derive far greater revenues from this side of the business. He added, "Broadband is the fastest growing business in the Finnish consumer market. Mobile penetration is already mature. Internet penetration is much smaller so there is much larger potential."
Mass-market adoption is the next step for Sonera in this business. "The first users of broadband are those who need quick Internet access. That is the first target group. The big challenge is to move to the second target group, which is the mass market. Here, we need to offer more than just fast Internet," notes Harjula.
The prices for residential broadband are relatively low in Finland. The average price of broadband is around €50 a month and according Harjula is likely
to stay that way for the foreseeable future. He says: "I would say that prices will remain stable although there will be greater capacity. The competition is so intense that I don't think anybody will raise their prices."
Sonera, like most incumbents, leverages on quality of service when competing in the broadband arena. Harjula says: "Smaller players have started to
offer services but they have difficulties providing the services. Traditional operators such as ourselves have a competitive advantage in areas such as operational procedures."
But, despite the numbers of residential broadband users clearly rising, there are still obstacles. Harjula added: "It isn't so easy to install broadband. We have to develop the installation procedures to make it easier for customers to buy, install and to use. The main reason why broadband growth has been slower than expected generally is that there haven't been solutions that have appealed to customers. The Internet is important for some, but not for all." <<
- Eric - |
