"Megafon" Froze the Construction of the Arctic Connect
"We really decided to review the structure and economy of the Arctic Connect project, and it will take us some time to regroup – all the developments of the project will be used in the future, if we decide to continue it," MegaFon told the publication. Currently, the operator notifies its partners and suppliers of its decision. The company did not name the reasons for freezing the project.
According to Vedomosti, the decision is due to the delay in negotiations on the implementation of the project by the Japanese side. "The project involves the Japanese trade and investment company Sojitz Corporation and its partners, the cooperation agreement was signed last year. However, its structures, under various pretexts, are delaying negotiations on co-financing the project and providing services to connect to a new network of customers in Japan. Many of them seem frankly far-fetched, " the source said.
The project was announced in 2019. For its implementation, the company Arctic Link Development Oy was created – a joint venture of MegaFon and the Finnish Cinia Oy (each of the parties received a 50% stake in it). MegaFon was supposed to be engaged in the construction and operation of the network, and the Cinia Alliance division, specially created by the Finnish side – was to attract investment in the project outside of Russia. It was with him that Sojitz signed a cooperation agreement in 2020.
"One way or another, it is obvious that the investment plan of the project needs to be revised – in the year that has passed since the start of work on Arctic Connect, worldwide due to the COVID-19 epidemic, production stoppages and failures in the logistics chains, telecommunications equipment, building materials, and construction work have risen in price, and the rise in price is expressed in double digits, "explains Alexander Vengranovich, an analyst at Renaissance Capital.
According to the general director of Telecom Daily Denis Kuskov, there are no main channels on the coast of the Arctic Ocean, so people who live and work there use satellite communications. "Servicing a relatively small number of consumers will not allow you to pay for large-scale network construction. With the fallout from the project of Japan, plans to earn money on the transit of traffic become unworkable, and the feasibility of the entire project is in question, " - said Kuskov. In his opinion, it is still possible to restart the project – if Megafon agrees on its continuation with operators and investors from China or South Korea.