Rostelecom, Russia’s largest integrated digital company, has entered into a joint venture with VEB Ventures to acquire a stake in Atlas and develop a fibre-optic backbone for TEA NEXT (Transit Europe – Asia). The new line will connect Russia’s western and eastern borders with the largest cities and link to Russian borders with Mongolia and China. The network will also be extended from the country borders with Europe to the main European traffic exchange centres in Frankfurt and Stockholm, and will link Vladivostok to Busan, Tokyo and Hong Kong via subsea cables.
With the corporate set-up stage of the project now completed, the construction phase of the TEA’s main segment is expected to start in 2022. The project will see Rostelecom and VEB Ventures each invest around RUB 6 billion in Atlas at the initial stage, while the strong interest expressed by financial partners signals the potential for external investor groups to join the project.
As noted by Russia’s Deputy Prime Minister, Dmitry Chernyshenko, TEA NEXT will be instrumental in shaping the national digital economy and boosting innovation in every sector. The state-of-the-art infrastructure developed by the joint partnership of Russia’s two digital leaders under a brand new business model is also a highly attractive investment project both in Russia and internationally.
TEA NEXT started in the summer of 2020 when Rostelecom founded the operating company Atlas and commenced the construction of the first segment running from Moscow via Saint-Petersburg through to the Latvian border.
The total investment is expected to reach around USD 650 million in the next few years with a view to finance the project up until 2025, partially by Atlas (through the JV fund) and a syndicated loan facility from VEB.RF, other Russian and international banks, many of which have already contractually committed to the development of the project. By 2025, the operating company plans to launch a set of fibre optic rental services to help Russian and international companies set up communications lines throughout the entire country geography and along the Europe-Asia transit.
Mikhail Oseevskiy, president of Rostelecom commented, “TEA NEXT will be instrumental in delivering our ambition to become the leader across all segments of the telecom ecosystem. With its technically advanced new generation features, the project will provide the critical foundation for the national backbone fibre optic infrastructure in the next thirty years. Atlas, in turn, is set to become the leader in fibre optic services for national companies, as well as the largest international operators and OTT players. The main feature of the project is the brand new advantageous route from West to East of Russia with stations in key cities along the way.”
Oleg Teplov, director general of VEB Ventures said, “With only the Chinese telecom export alone expected to reach USD 50 billion by 2025, it is critical that we deploy the full potential of Russia’s infrastructure as the key ISP transit point, to be able to accurately forecast the demand and customise our solutions to fulfil it. The sustainability impact in the communities and local economies throughout the entire span of TEA NEXT cannot be underestimated. The project will deliver significant social and economic benefits through local job creation, local SME supplier engagement and other economic contributions – effectively from Vladivostok to Saint-Petersburg. Moreover, the project design also entails the use of 100% of locally produced equipment, including the fibre optic cable.”
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