Couch analytics #117. The cost of communication services for the operator - why it is not the same and how it can be calculated

This is an eternal topic and the eternal question of which of the operators is better and which is worse. The problem with this question is that everyone who discusses it knows exactly from their own experience what exactly works and what does not and why operator A is better than operator B, or, on the contrary, worse. Some time ago, we even released a series of articles on how to properly evaluate operators, the quality of their services, and you liked these articles. In order not to repeat myself, I suggest re-reading them. They fully reveal the question of what cellular communication is and what it can depend on.

In today's "Sofa Analytics" I would like to dwell on the cost of communication services for Russian operators and why it is not the same for different companies. If you take a look at the financial statements of operators, it turns out that ARPU, that is, the average monthly income per subscriber in Russia, plus or minus is the same for each company and amounts to about 300 rubles. From the first quarter of 2017, MTS decided not to disclose ARPU indicators, as well as the average number of minutes per subscriber (MOU), as well as a number of other parameters, for example, the outflow of the subscriber base.The reason is called the transformation of the business, but just six months before that, MTS said that this data was important and the company would publish it. The crisis is a time when each of the operators becomes less transparent, Tele2 has already gone exactly the same way, while we can say that Beeline and MegaFon are holding on, both operators do not remove standard figures from their reports. The reason that operators are starting to publish less and less data is banal, their numbers are deteriorating, and financiers are starting to comb them so that a good impression is created. The more data there is in the public domain, the more likely it is to destroy this impression.

In this article I will try to give you an idea of ​​what constitutes the cost of communication for an operator, but I want to warn you right away that some issues will be covered in very large strokes, some points are mentioned in passing, since within one it is impossible to consider them all in detail.

Important disclaimer about the general terms of business

To simplify the discussion of operators, let's start with a few assumptions that are ultimately not very far from the truth. I will list them in order:

  • Each operator operates in the largest number of regions, respectively, they are approximately the same in terms of penetration in different subjects of the Russian Federation;
  • The cost of electricity for operators is on average the same across the country;
  • Electrical Equipment in Greater Accra
  • The cost of labor for each operator is about the same, they are on par, equilibrium conditions;
  • Renting seats for base stations may vary locally, but the average cost per station is the same for each operator;
  • The cost of a base station, despite different providers, is the same for all operators and differs only by the standard, that is, 3G stations cost X for all operators, and 4G stations cost Y for them, and these prices are the same.

Like any deliberate simplification, this does not give us a real picture of the world, somewhere an operator achieves greater efficiency in the supply of equipment and gains a couple of percent, some operator knows how to attract people for less money and inspire them to work. But for a circle, their costs in the listed areas are plus or minus the same, the gain is somewhere compensated for by worse work in other aspects. For our story, these moments are not so important, you can learn them yourself.

Why 2G stations are not so important and why operators love smartphones

Each operator calculates the balance for each base station, this is, if you like, the simplest economic model that shows how profitable and profitable such a base station is. Ideally, each base station should be profitable, for example, this is the approach that operators in the US take, and they do not go to territories where there is no constant, predictable demand for their services. As a rule, everything is not very good along the roads in the USA with communication, and the same national parks are distinguished by an almost complete lack of communication, with the exception of tourist islands with hotels, where the balance of a single base station is always positive, as people exploit it to the fullest program. In Russia, operators were reluctant to set up stations along federal highways, as they had no connection to electricity, and the number of passing cars is such that it does not justify the installation of even one station for several tens of kilometers of the road. When the state forced the operators to resolve this issue, they found a way out in the joint construction of such stations and their joint operation, when all costs are shared in equal shares.

Unfortunately for operators, base stations are not equivalent to each other, BS in the 2G standard bring the least income, 3G stations give a little more, and 4G stations give the maximum income. It is clear that their cost is very different, but the benefits that 4G stations bring are obvious, this is the fattest piece of the market.

You can illustrate this from the opposite, look at the ARPU of the economy segment subscribers, in 2015 it was 120 rubles. At all operators, approximately 40-45% of subscribers today use only voice services, they have data transmission turned off. At the same time, they do not necessarily use push-button phones, there are also those who buy the latest Galaxy or iPhone models, but turn off data transfer as unnecessary, since they either use Wi-Fi or only call on their smartphones.

Please note that in the picture 44% of subscribers bring only 7% of the company's revenue, these subscribers are not very profitable. Of course, these subscribers can use any base stations, it cannot be said that they use only 2G stations, although this is mainly the case for those who use push-button devices (94% of all buttons are 2G phones). It is because of these subscribers that 2G base stations do not disappear in Russia, and operators are forced to maintain their existence, the second reason is M2M solutions, which are also focused on 2G networks. In the US, AT&T warned subscribers with 2G devices throughout 2016 that they would not be able to use them from December 31, 2016. And since January 2017, these devices do not work on the AT&T network.

Why was it possible to turn off such a network in the USA, while Russian operators are in no hurry to do this? The reason is banal and easily explained: the first operator to turn off 2G base stations will cause a flow of the subscriber base to competitors, even if this does not greatly affect its income at the moment. But everyone understands that sooner or later 2G subscribers will use the mobile Internet and other benefits of civilization. Therefore, they are held on to and pushed in the right direction. This is a conscious movement.

Please note that for a third of today's subscribers it doesn't matter which base stations serve them either, the traditional market, which provides 43% of the operator's revenue, uses technical traffic, that is, their smartphones download the weather forecast, they use instant messengers and web services in limited quantities. They are characterized by an almost unconscious consumption of these services. The connection speed for such subscribers, as well as other parameters do not play a role, the very fact of having a connection is important. Finally, we still have a third of subscribers, which brings operators half of the revenue, and operators are guided by them, trying to turn the first two categories of subscribers into such consumers along the way. And this process is gradually going on.

And now let's take a look at how many base stations each of the operators has, hereinafter the data of Roskomnadzor at the end of 2016.

You already know that the cost of maintenance, and the cost of base stations of different standards, is different. Therefore, it is important to see which stations each company has and in what quantity, here are the corresponding graphs.

For example, we can compare Tele2 and Beeline, it turns out that in the 4G standard Tele2 has 11,000 stations against 18,600 stations for Beeline. It is easy to calculate that the cost of maintaining 4G stations at Beeline is higher, since there are simply more of them. In other standards, the number of stations for these two operators is approximately comparable. If we evaluate the cost of the service for these two operators, then Beeline spends more money on its network, this is not only the purchase of more stations, but also more electricity costs per station, more man-hours for maintenance and installation. The cost of a network consisting of a larger number of stations is noticeably higher, i.e. the operator incurs greater costs. All this is done with one single goal: to increase the likelihood that at two points (home and work) you will have a better connection and you will choose the operator that provided the best coverage and quality of services.

MegaFon has the largest number of base stations in Russia, the same MTS is noticeably smaller, and Tele2 and Beeline are behind by about 75,000 stations. It is easy to calculate that the cost of maintaining a network for MegaFon is noticeably higher than for these two operators. But the number of "heavy" subscribers, those who use expensive tariff plans for transferring large amounts of data, is also higher. In the same MTS, they are trying to maintain a certain balance, that is, to build a network and keep the cost at an optimal level, higher than that of Beeline and Tele2, but lower than that of MegaFon.

In this game, each operator chooses its own path, for example, MegaFon is trying to build the largest network, that is, to increase its chances of attracting the largest number of subscribers who will need high data transfer rates.

Please note that the average ARPU of 300 rubles tells us that the competition in the market is maximum and all operators are limited by the cost of services from their neighbors in the market. So, the same MegaFon receives less money from subscribers, since the costs of maintaining the network are higher. In theory, this means that subscribers get higher speed, better network coverage, but they either do not know about it or do not consider it important, because they compare prices with other operators and are glad that the service is cheaper, not realizing that it corresponds to the level operator costs. The uniqueness of the Russian telecom market is that such operators as Tele2 and Beeline formally win, they invest less in the infrastructure of their networks, but increase marketing costs and sell networks that are worse in size and coverage, as well as with lower access speeds for big money.

As you can see, there are two delimiters for operators. From above, this is the cost of services on the market, which cannot differ by several times or even tens of percent, otherwise subscribers will start fleeing to other operators. Below is the cost of maintaining the network, which directly depends on the number of modern base stations, as well as the total number of base stations (not to mention backbone networks between cities).

An increase in the size of the network always negatively affects the balance of an individual base station, calls and data transmission are distributed over a larger number of stations. On the other hand, this automatically means that the subscriber receives better network coverage and capacity. And if he can somehow evaluate the first factor, then the presence of other people in the network does not bother him much, he is only interested in what kind of connection he has.

We, as consumers, evaluate operators according to our subjective impressions, and we perceive the cost of services as the most important parameter, for some reason equating all operators to a common denominator and believing that they are the same. But that's not the case at all. When getting comparable rates, you need to be aware of differences in network sizes, which also affect your user experience. In this article, I tried to explain how the cost is formed for the operator and why each of them has a different strategy. Who squeezes everything possible out of a small network, and who tries in practice to give a connection in the maximum number of places.

Couch analytics #117. The cost of communication services for the operator - why it is not the same and how it can be calculated

This is an eternal topic and the eternal question of which of the operators is better and which is worse. The problem with this question is that everyone who discusses it knows exactly from their own experience what exactly works and what does not and why operator A is better than operator B, or, on the contrary, worse. Some time ago, we even released a series of articles on how to properly evaluate operators, the quality of their services, and you liked these articles. In order not to repeat myself, I suggest re-reading them. They fully reveal the question of what cellular communication is and what it can depend on.

In today's "Sofa Analytics" I would like to dwell on the cost of communication services for Russian operators and why it is not the same for different companies. If you take a look at the financial statements of operators, it turns out that ARPU, that is, the average monthly income per subscriber in Russia, plus or minus is the same for each company and amounts to about 300 rubles. From the first quarter of 2017, MTS decided not to disclose ARPU indicators, as well as the average number of minutes per subscriber (MOU), as well as a number of other parameters, for example, the outflow of the subscriber base.The reason is called the transformation of the business, but just six months before that, MTS said that this data was important and the company would publish it. The crisis is a time when each of the operators becomes less transparent, Tele2 has already gone exactly the same way, while we can say that Beeline and MegaFon are holding on, both operators do not remove standard figures from their reports. The reason that operators are starting to publish less and less data is banal, their numbers are deteriorating, and financiers are starting to comb them so that a good impression is created. The more data there is in the public domain, the more likely it is to destroy this impression.

In this article I will try to give you an idea of ​​what constitutes the cost of communication for an operator, but I want to warn you right away that some issues will be covered in very large strokes, some points are mentioned in passing, since within one it is impossible to consider them all in detail.

Important disclaimer about the general terms of business

To simplify the discussion of operators, let's start with a few assumptions that are ultimately not very far from the truth. I will list them in order:

  • Each operator operates in the largest number of regions, respectively, they are approximately the same in terms of penetration in different subjects of the Russian Federation;
  • The cost of electricity for operators is on average the same across the country;
  • Electrical Equipment in Greater Accra
  • The cost of labor for each operator is about the same, they are on par, equilibrium conditions;
  • Renting seats for base stations may vary locally, but the average cost per station is the same for each operator;
  • The cost of a base station, despite different providers, is the same for all operators and differs only by the standard, that is, 3G stations cost X for all operators, and 4G stations cost Y for them, and these prices are the same.

Like any deliberate simplification, this does not give us a real picture of the world, somewhere an operator achieves greater efficiency in the supply of equipment and gains a couple of percent, some operator knows how to attract people for less money and inspire them to work. But for a circle, their costs in the listed areas are plus or minus the same, the gain is somewhere compensated for by worse work in other aspects. For our story, these moments are not so important, you can learn them yourself.

Why 2G stations are not so important and why operators love smartphones

Each operator calculates the balance for each base station, this is, if you like, the simplest economic model that shows how profitable and profitable such a base station is. Ideally, each base station should be profitable, for example, this is the approach that operators in the US take, and they do not go to territories where there is no constant, predictable demand for their services. As a rule, everything is not very good along the roads in the USA with communication, and the same national parks are distinguished by an almost complete lack of communication, with the exception of tourist islands with hotels, where the balance of a single base station is always positive, as people exploit it to the fullest program. In Russia, operators were reluctant to set up stations along federal highways, as they had no connection to electricity, and the number of passing cars is such that it does not justify the installation of even one station for several tens of kilometers of the road. When the state forced the operators to resolve this issue, they found a way out in the joint construction of such stations and their joint operation, when all costs are shared in equal shares.

Unfortunately for operators, base stations are not equivalent to each other, BS in the 2G standard bring the least income, 3G stations give a little more, and 4G stations give the maximum income. It is clear that their cost is very different, but the benefits that 4G stations bring are obvious, this is the fattest piece of the market.

You can illustrate this from the opposite, look at the ARPU of the economy segment subscribers, in 2015 it was 120 rubles. At all operators, approximately 40-45% of subscribers today use only voice services, they have data transmission turned off. At the same time, they do not necessarily use push-button phones, there are also those who buy the latest Galaxy or iPhone models, but turn off data transfer as unnecessary, since they either use Wi-Fi or only call on their smartphones.

Please note that in the picture 44% of subscribers bring only 7% of the company's revenue, these subscribers are not very profitable. Of course, these subscribers can use any base stations, it cannot be said that they use only 2G stations, although this is mainly the case for those who use push-button devices (94% of all buttons are 2G phones). It is because of these subscribers that 2G base stations do not disappear in Russia, and operators are forced to maintain their existence, the second reason is M2M solutions, which are also focused on 2G networks. In the US, AT&T warned subscribers with 2G devices throughout 2016 that they would not be able to use them from December 31, 2016. And since January 2017, these devices do not work on the AT&T network.

Why was it possible to turn off such a network in the USA, while Russian operators are in no hurry to do this? The reason is banal and easily explained: the first operator to turn off 2G base stations will cause a flow of the subscriber base to competitors, even if this does not greatly affect its income at the moment. But everyone understands that sooner or later 2G subscribers will use the mobile Internet and other benefits of civilization. Therefore, they are held on to and pushed in the right direction. This is a conscious movement.

Please note that for a third of today's subscribers it doesn't matter which base stations serve them either, the traditional market, which provides 43% of the operator's revenue, uses technical traffic, that is, their smartphones download the weather forecast, they use instant messengers and web services in limited quantities. They are characterized by an almost unconscious consumption of these services. The connection speed for such subscribers, as well as other parameters do not play a role, the very fact of having a connection is important. Finally, we still have a third of subscribers, which brings operators half of the revenue, and operators are guided by them, trying to turn the first two categories of subscribers into such consumers along the way. And this process is gradually going on.

And now let's take a look at how many base stations each of the operators has, hereinafter the data of Roskomnadzor at the end of 2016.

You already know that the cost of maintenance, and the cost of base stations of different standards, is different. Therefore, it is important to see which stations each company has and in what quantity, here are the corresponding graphs.

For example, we can compare Tele2 and Beeline, it turns out that in the 4G standard Tele2 has 11,000 stations against 18,600 stations for Beeline. It is easy to calculate that the cost of maintaining 4G stations at Beeline is higher, since there are simply more of them. In other standards, the number of stations for these two operators is approximately comparable. If we evaluate the cost of the service for these two operators, then Beeline spends more money on its network, this is not only the purchase of more stations, but also more electricity costs per station, more man-hours for maintenance and installation. The cost of a network consisting of a larger number of stations is noticeably higher, i.e. the operator incurs greater costs. All this is done with one single goal: to increase the likelihood that at two points (home and work) you will have a better connection and you will choose the operator that provided the best coverage and quality of services.

MegaFon has the largest number of base stations in Russia, the same MTS is noticeably smaller, and Tele2 and Beeline are behind by about 75,000 stations. It is easy to calculate that the cost of maintaining a network for MegaFon is noticeably higher than for these two operators. But the number of "heavy" subscribers, those who use expensive tariff plans for transferring large amounts of data, is also higher. In the same MTS, they are trying to maintain a certain balance, that is, to build a network and keep the cost at an optimal level, higher than that of Beeline and Tele2, but lower than that of MegaFon.

In this game, each operator chooses its own path, for example, MegaFon is trying to build the largest network, that is, to increase its chances of attracting the largest number of subscribers who will need high data transfer rates.

Please note that the average ARPU of 300 rubles tells us that the competition in the market is maximum and all operators are limited by the cost of services from their neighbors in the market. So, the same MegaFon receives less money from subscribers, since the costs of maintaining the network are higher. In theory, this means that subscribers get higher speed, better network coverage, but they either do not know about it or do not consider it important, because they compare prices with other operators and are glad that the service is cheaper, not realizing that it corresponds to the level operator costs. The uniqueness of the Russian telecom market is that such operators as Tele2 and Beeline formally win, they invest less in the infrastructure of their networks, but increase marketing costs and sell networks that are worse in size and coverage, as well as with lower access speeds for big money.

As you can see, there are two delimiters for operators. From above, this is the cost of services on the market, which cannot differ by several times or even tens of percent, otherwise subscribers will start fleeing to other operators. Below is the cost of maintaining the network, which directly depends on the number of modern base stations, as well as the total number of base stations (not to mention backbone networks between cities).

An increase in the size of the network always negatively affects the balance of an individual base station, calls and data transmission are distributed over a larger number of stations. On the other hand, this automatically means that the subscriber receives better network coverage and capacity. And if he can somehow evaluate the first factor, then the presence of other people in the network does not bother him much, he is only interested in what kind of connection he has.

We, as consumers, evaluate operators according to our subjective impressions, and we perceive the cost of services as the most important parameter, for some reason equating all operators to a common denominator and believing that they are the same. But that's not the case at all. When getting comparable rates, you need to be aware of differences in network sizes, which also affect your user experience. In this article, I tried to explain how the cost is formed for the operator and why each of them has a different strategy. Who squeezes everything possible out of a small network, and who tries in practice to give a connection in the maximum number of places.

Couch analytics #117. The cost of communication services for the operator - why it is not the same and how it can be calculated

This is an eternal topic and the eternal question of which of the operators is better and which is worse. The problem with this question is that everyone who discusses it knows exactly from their own experience what exactly works and what does not and why operator A is better than operator B, or, on the contrary, worse. Some time ago, we even released a series of articles on how to properly evaluate operators, the quality of their services, and you liked these articles. In order not to repeat myself, I suggest re-reading them. They fully reveal the question of what cellular communication is and what it can depend on.

In today's "Sofa Analytics" I would like to dwell on the cost of communication services for Russian operators and why it is not the same for different companies. If you take a look at the financial statements of operators, it turns out that ARPU, that is, the average monthly income per subscriber in Russia, plus or minus is the same for each company and amounts to about 300 rubles. From the first quarter of 2017, MTS decided not to disclose ARPU indicators, as well as the average number of minutes per subscriber (MOU), as well as a number of other parameters, for example, the outflow of the subscriber base.The reason is called the transformation of the business, but just six months before that, MTS said that this data was important and the company would publish it. The crisis is a time when each of the operators becomes less transparent, Tele2 has already gone exactly the same way, while we can say that Beeline and MegaFon are holding on, both operators do not remove standard figures from their reports. The reason that operators are starting to publish less and less data is banal, their numbers are deteriorating, and financiers are starting to comb them so that a good impression is created. The more data there is in the public domain, the more likely it is to destroy this impression.

In this article I will try to give you an idea of ​​what constitutes the cost of communication for an operator, but I want to warn you right away that some issues will be covered in very large strokes, some points are mentioned in passing, since within one it is impossible to consider them all in detail.

Important disclaimer about the general terms of business

To simplify the discussion of operators, let's start with a few assumptions that are ultimately not very far from the truth. I will list them in order:

  • Each operator operates in the largest number of regions, respectively, they are approximately the same in terms of penetration in different subjects of the Russian Federation;
  • The cost of electricity for operators is on average the same across the country;
  • Electrical Equipment in Greater Accra
  • The cost of labor for each operator is about the same, they are on par, equilibrium conditions;
  • Renting seats for base stations may vary locally, but the average cost per station is the same for each operator;
  • The cost of a base station, despite different providers, is the same for all operators and differs only by the standard, that is, 3G stations cost X for all operators, and 4G stations cost Y for them, and these prices are the same.

Like any deliberate simplification, this does not give us a real picture of the world, somewhere an operator achieves greater efficiency in the supply of equipment and gains a couple of percent, some operator knows how to attract people for less money and inspire them to work. But for a circle, their costs in the listed areas are plus or minus the same, the gain is somewhere compensated for by worse work in other aspects. For our story, these moments are not so important, you can learn them yourself.

Why 2G stations are not so important and why operators love smartphones

Each operator calculates the balance for each base station, this is, if you like, the simplest economic model that shows how profitable and profitable such a base station is. Ideally, each base station should be profitable, for example, this is the approach that operators in the US take, and they do not go to territories where there is no constant, predictable demand for their services. As a rule, everything is not very good along the roads in the USA with communication, and the same national parks are distinguished by an almost complete lack of communication, with the exception of tourist islands with hotels, where the balance of a single base station is always positive, as people exploit it to the fullest program. In Russia, operators were reluctant to set up stations along federal highways, as they had no connection to electricity, and the number of passing cars is such that it does not justify the installation of even one station for several tens of kilometers of the road. When the state forced the operators to resolve this issue, they found a way out in the joint construction of such stations and their joint operation, when all costs are shared in equal shares.

Unfortunately for operators, base stations are not equivalent to each other, BS in the 2G standard bring the least income, 3G stations give a little more, and 4G stations give the maximum income. It is clear that their cost is very different, but the benefits that 4G stations bring are obvious, this is the fattest piece of the market.

You can illustrate this from the opposite, look at the ARPU of the economy segment subscribers, in 2015 it was 120 rubles. At all operators, approximately 40-45% of subscribers today use only voice services, they have data transmission turned off. At the same time, they do not necessarily use push-button phones, there are also those who buy the latest Galaxy or iPhone models, but turn off data transfer as unnecessary, since they either use Wi-Fi or only call on their smartphones.

Please note that in the picture 44% of subscribers bring only 7% of the company's revenue, these subscribers are not very profitable. Of course, these subscribers can use any base stations, it cannot be said that they use only 2G stations, although this is mainly the case for those who use push-button devices (94% of all buttons are 2G phones). It is because of these subscribers that 2G base stations do not disappear in Russia, and operators are forced to maintain their existence, the second reason is M2M solutions, which are also focused on 2G networks. In the US, AT&T warned subscribers with 2G devices throughout 2016 that they would not be able to use them from December 31, 2016. And since January 2017, these devices do not work on the AT&T network.

Why was it possible to turn off such a network in the USA, while Russian operators are in no hurry to do this? The reason is banal and easily explained: the first operator to turn off 2G base stations will cause a flow of the subscriber base to competitors, even if this does not greatly affect its income at the moment. But everyone understands that sooner or later 2G subscribers will use the mobile Internet and other benefits of civilization. Therefore, they are held on to and pushed in the right direction. This is a conscious movement.

Please note that a third of today's subscribers also do not care which base stations serve them, the traditional market, which provides 43% of the operator's revenue, uses technical traffic, that is, their smartphones download weather forecasts, they use instant messengers and web services in limited quantities. They are characterized by an almost unconscious consumption of these services. The connection speed for such subscribers, as well as other parameters do not play a role, the very fact of having a connection is important. Finally, we still have a third of subscribers, which brings operators half of the revenue, and operators are guided by them, trying to turn the first two categories of subscribers into such consumers along the way. And this process is gradually going on.

And now let's take a look at how many base stations each of the operators has, hereinafter the data of Roskomnadzor at the end of 2016.

You already know that the cost of maintenance, and the cost of base stations of different standards, is different. Therefore, it is important to see which stations each company has and in what quantity, here are the corresponding graphs.

For example, we can compare Tele2 and Beeline, it turns out that in the 4G standard Tele2 has 11,000 stations against 18,600 stations for Beeline. It is easy to calculate that the cost of maintaining 4G stations at Beeline is higher, since there are simply more of them. In other standards, the number of stations for these two operators is approximately comparable. If we evaluate the cost of the service for these two operators, then Beeline spends more money on its network, this is not only the purchase of more stations, but also more electricity costs per station, more man-hours for maintenance and installation. The cost of a network consisting of a larger number of stations is noticeably higher, i.e. the operator incurs greater costs. All this is done with one single goal: to increase the likelihood that at two points (home and work) you will have a better connection and you will choose the operator that provided the best coverage and quality of services.

MegaFon has the largest number of base stations in Russia, the same MTS is noticeably smaller, and Tele2 and Beeline are behind by about 75,000 stations. It is easy to calculate that the cost of maintaining a network for MegaFon is noticeably higher than for these two operators. But the number of "heavy" subscribers, those who use expensive tariff plans for transferring large amounts of data, is also higher. In the same MTS, they are trying to maintain a certain balance, that is, to build a network and keep the cost at an optimal level, higher than that of Beeline and Tele2, but lower than that of MegaFon.

In this game, each operator chooses its own path, for example, MegaFon is trying to build the largest network, that is, to increase its chances of attracting the largest number of subscribers who will need high data transfer rates.

Please note that the average ARPU of 300 rubles tells us that the competition in the market is maximum and all operators are limited by the cost of services from their neighbors in the market. So, the same MegaFon receives less money from subscribers, since the costs of maintaining the network are higher. In theory, this means that subscribers get higher speed, better network coverage, but they either do not know about it or do not consider it important, because they compare prices with other operators and are glad that the service is cheaper, not realizing that it corresponds to the level operator costs. The uniqueness of the Russian telecom market is that such operators as Tele2 and Beeline formally win, they invest less in the infrastructure of their networks, but increase marketing costs and sell networks that are worse in size and coverage, as well as with lower access speeds for big money.

As you can see, there are two delimiters for operators. From above, this is the cost of services on the market, which cannot differ by several times or even tens of percent, otherwise subscribers will start fleeing to other operators. Below is the cost of maintaining the network, which directly depends on the number of modern base stations, as well as the total number of base stations (not to mention backbone networks between cities).

An increase in the size of the network always negatively affects the balance of an individual base station, calls and data transmission are distributed over a larger number of stations. On the other hand, this automatically means that the subscriber receives better network coverage and capacity. And if he can somehow evaluate the first factor, then the presence of other people in the network does not bother him much, he is only interested in what kind of connection he has.

We, as consumers, evaluate operators according to our subjective impressions, and we perceive the cost of services as the most important parameter, for some reason equating all operators to a common denominator and believing that they are the same. But that's not the case at all. When getting comparable rates, you need to be aware of differences in network sizes, which also affect your user experience. In this article, I tried to explain how the cost is formed for the operator and why each of them has a different strategy. Who squeezes everything possible out of a small network, and who tries in practice to give a connection in the maximum number of places.

Couch analytics #117. The cost of communication services for the operator - why it is not the same and how it can be calculated

This is an eternal topic and the eternal question of which of the operators is better and which is worse. The problem with this question is that everyone who discusses it knows exactly from their own experience what exactly works and what does not and why operator A is better than operator B, or, on the contrary, worse. Some time ago, we even released a series of articles on how to properly evaluate operators, the quality of their services, and you liked these articles. In order not to repeat myself, I suggest re-reading them. They fully reveal the question of what cellular communication is and what it can depend on.

In today's "Sofa Analytics" I would like to dwell on the cost of communication services for Russian operators and why it is not the same for different companies. If you take a look at the financial statements of operators, it turns out that ARPU, that is, the average monthly income per subscriber in Russia, plus or minus is the same for each company and amounts to about 300 rubles. From the first quarter of 2017, MTS decided not to disclose ARPU indicators, as well as the average number of minutes per subscriber (MOU), as well as a number of other parameters, for example, the outflow of the subscriber base. The reason is called the transformation of the business, but just six months before that, MTS said that this data was important and the company would publish it. The crisis is a time when each of the operators becomes less transparent, Tele2 has already gone exactly the same way, while we can say that Beeline and MegaFon are holding on, both operators do not remove standard figures from their reports. The reason that operators are starting to publish less and less data is banal, their numbers are deteriorating, and financiers are starting to comb them so that a good impression is created. The more data there is in the public domain, the more likely it is to destroy this impression.

In this article I will try to give you an idea of ​​what constitutes the cost of communication for an operator, but I want to warn you right away that some issues will be covered in very large strokes, some points are mentioned in passing, since within one it is impossible to consider them all in detail.

Important disclaimer about the general terms of business

To simplify the discussion of operators, let's start with a few assumptions that are ultimately not very far from the truth. I will list them in order:

  • Each operator operates in the largest number of regions, respectively, they are approximately the same in terms of penetration in different subjects of the Russian Federation;
  • The cost of electricity for operators is on average the same across the country;
  • The cost of labor for each operator is approximately the same, they are in equal, equilibrium conditions;
  • Renting seats for base stations may vary locally, but the average cost per station is the same for each operator;
  • The cost of a base station, despite different providers, is the same for all operators and differs only by the standard, that is, 3G stations cost X for all operators, and 4G stations cost Y for them, and these prices are the same.
  • Each operator operates in the largest number of regions, respectively, they are approximately the same in terms of penetration in different subjects of the Russian Federation;
  • The cost of electricity for operators is on average the same across the country;
  • Electrical Equipment in Greater Accra Electrical Equipment in Greater Accra
  • The cost of labor for each operator is approximately the same, they are in equal, equilibrium conditions;
  • Renting seats for base stations may vary locally, but the average cost per station is the same for each operator;
  • The cost of a base station, despite different providers, is the same for all operators and differs only by the standard, that is, 3G stations cost X for all operators, and 4G stations cost Y for them, and these prices are the same.
  • Like any deliberate simplification, this does not give us a real picture of the world, somewhere an operator achieves greater efficiency in the supply of equipment and gains a couple of percent, some operator knows how to attract people for less money and inspire them to work. But for a circle, their costs in the listed areas are plus or minus the same, the gain is somewhere compensated for by worse work in other aspects. For our story, these moments are not so important, you can learn them yourself.

    Why 2G stations are not so important and why operators love smartphones

    Each operator calculates the balance for each base station, this is, if you like, the simplest economic model that shows how profitable and profitable such a base station is. Ideally, each base station should be profitable, for example, this is the approach that operators in the US take, and they do not go to territories where there is no constant, predictable demand for their services. As a rule, everything is not very good along the roads in the USA with communication, and the same national parks are distinguished by an almost complete lack of communication, with the exception of tourist islands with hotels, where the balance of a single base station is always positive, as people exploit it to the fullest program. In Russia, operators were reluctant to set up stations along federal highways, as they had no connection to electricity, and the number of passing cars is such that it does not justify the installation of even one station for several tens of kilometers of the road. When the state forced the operators to resolve this issue, they found a way out in the joint construction of such stations and their joint operation, when all costs are shared in equal shares.

    Unfortunately for operators, base stations are not equivalent to each other, BS in the 2G standard bring the least income, 3G stations give a little more, and 4G stations give the maximum income. It is clear that their cost is very different, but the benefits that 4G stations bring are obvious, this is the fattest piece of the market.

    You can illustrate this from the opposite, look at the ARPU of the economy segment subscribers, in 2015 it was 120 rubles. At all operators, approximately 40-45% of subscribers today use only voice services, they have data transmission turned off. At the same time, they do not necessarily use push-button phones, there are also those who buy the latest Galaxy or iPhone models, but turn off data transfer as unnecessary, since they either use Wi-Fi or only call on their smartphones.

    Please note that in the picture 44% of subscribers bring only 7% of the company's revenue, these subscribers are not very profitable. Of course, these subscribers can use any base stations, it cannot be said that they use only 2G stations, although this is mainly the case for those who use push-button devices (94% of all buttons are 2G phones). It is because of these subscribers that 2G base stations do not disappear in Russia, and operators are forced to maintain their existence, the second reason is M2M solutions, which are also focused on 2G networks. In the US, AT&T warned subscribers with 2G devices throughout 2016 that they would not be able to use them from December 31, 2016. And since January 2017, these devices do not work on the AT&T network.

    Why was it possible to turn off such a network in the USA, while Russian operators are in no hurry to do this? The reason is banal and easily explained: the first operator to turn off 2G base stations will cause a flow of the subscriber base to competitors, even if this does not greatly affect its income at the moment. But everyone understands that sooner or later 2G subscribers will use the mobile Internet and other benefits of civilization. Therefore, they are held on to and pushed in the right direction. This is a conscious movement.

    Please note that for a third of today's subscribers it doesn't matter which base stations serve them either, the traditional market, which provides 43% of the operator's revenue, uses technical traffic, that is, their smartphones download the weather forecast, they use instant messengers and web services in limited quantities. They are characterized by an almost unconscious consumption of these services. The connection speed for such subscribers, as well as other parameters do not play a role, the very fact of having a connection is important. Finally, we still have a third of subscribers, which brings operators half of the revenue, and operators are guided by them, trying to turn the first two categories of subscribers into such consumers along the way. And this process is gradually going on.

    And now let's take a look at how many base stations each of the operators has, hereinafter the data of Roskomnadzor at the end of 2016.

    You already know that the cost of maintenance, and the cost of base stations of different standards, is different. Therefore, it is important to see which stations each company has and in what quantity, here are the corresponding graphs.

    For example, we can compare Tele2 and Beeline, it turns out that in the 4G standard Tele2 has 11,000 stations against 18,600 stations for Beeline. It is easy to calculate that the cost of maintaining 4G stations at Beeline is higher, since there are simply more of them. In other standards, the number of stations for these two operators is approximately comparable. If we evaluate the cost of the service for these two operators, then Beeline spends more money on its network, this is not only the purchase of more stations, but also more electricity costs per station, more man-hours for maintenance and installation. The cost of a network consisting of a larger number of stations is noticeably higher, i.e. the operator incurs greater costs. All this is done with one single goal: to increase the likelihood that at two points (home and work) you will have a better connection and you will choose the operator that provided the best coverage and quality of services.

    MegaFon has the largest number of base stations in Russia, the same MTS is noticeably smaller, and Tele2 and Beeline are behind by about 75,000 stations. It is easy to calculate that the cost of maintaining a network for MegaFon is noticeably higher than for these two operators. But the number of "heavy" subscribers, those who use expensive tariff plans for transferring large amounts of data, is also higher. In the same MTS, they are trying to maintain a certain balance, that is, to build a network and keep the cost at an optimal level, higher than that of Beeline and Tele2, but lower than that of MegaFon.

    In this game, each operator chooses its own path, for example, MegaFon is trying to build the largest network, that is, to increase its chances of attracting the largest number of subscribers who will need high data transfer rates.

    Please note that the average ARPU of 300 rubles tells us that the competition in the market is maximum and all operators are limited by the cost of services from their neighbors in the market. So, the same MegaFon receives less money from subscribers, since the costs of maintaining the network are higher. In theory, this means that subscribers get higher speed, better network coverage, but they either do not know about it or do not consider it important, because they compare prices with other operators and are glad that the service is cheaper, not realizing that it corresponds to the level operator costs. The uniqueness of the Russian telecom market is that such operators as Tele2 and Beeline formally win, they invest less in the infrastructure of their networks, but increase marketing costs and sell networks that are worse in size and coverage, as well as with lower access speeds for big money.

    As you can see, there are two delimiters for operators. From above, this is the cost of services on the market, which cannot differ by several times or even tens of percent, otherwise subscribers will start fleeing to other operators. Below is the cost of maintaining the network, which directly depends on the number of modern base stations, as well as the total number of base stations (not to mention backbone networks between cities).

    An increase in the size of the network always negatively affects the balance of an individual base station, calls and data transmission are distributed over a larger number of stations. On the other hand, this automatically means that the subscriber receives better network coverage and capacity. And if he can somehow evaluate the first factor, then the presence of other people in the network does not bother him much, he is only interested in what kind of connection he has.

    We, as consumers, evaluate operators according to our subjective impressions, and we perceive the cost of services as the most important parameter, for some reason equating all operators to a common denominator and believing that they are the same. But that's not the case at all. When getting comparable rates, you need to be aware of differences in network sizes, which also affect your user experience. In this article, I tried to explain how the cost is formed for the operator and why each of them has a different strategy. Who squeezes everything possible out of a small network, and who tries in practice to give a connection in the maximum number of places.