Feb. 6 (Bloomberg) -- The Sochi Olympics will be the first to feature slopestyle snowboarding, team figure skating -- and hundreds of thousands of visitors trying out an ultrafast network on their smartphones and tablets.
President Vladimir Putin awarded contracts to two local phone companies that have forked over more than half a billion dollars wiring up the Winter Olympic sites. Spectators are promised plenty of network capacity and data speeds 10 times the Russian average, according to carrier OAO MegaFon.
The spending is yet another example of how Putin enlisted companies in his $50 billion Olympic project to brush up the country’s image. For billionaire Alisher Usmanov’s MegaFon and state-controlled OAO Rostelecom, the investments are aimed at raising visibility and adding a reputational boost, although financial return is far from guaranteed.
“This capacity will turn excessive after the games and may not pay back,” said Sergey Libin, an analyst at ZAO Raiffeisenbank in Moscow. “Operators may have overspent on the Olympics for image purposes.”
MegaFon installed 900 base stations and antennas on the two square kilometers (0.8 square mile) that will host most competitions. That’s the highest density of mobile equipment in the world, said Tigran Pogosyan, head of MegaFon’s Sochi project, citing San Diego-based wireless-technology company Qualcomm Inc., which advised the carrier.
While it’s typical to cover a stadium with as few as one base station -- the device which transmits mobile-phone calls and data -- the Sochi arenas have dozens. The 40,000-seat Fisht Olympic Stadium for the Feb. 7 opening ceremony alone has 30. The Olympic Park complex includes six arenas and a medals plaza.
To ensure the scenery isn’t spoiled by wireless towers and antennas, MegaFon camouflaged some of its base stations as palm trees fitting the natural landscape of subtropical Sochi.
MegaFon, which spent about $300 million for the games, used the latest fourth-generation network equipment to enable what it calls “the world’s first-ever data Olympics.” Rostelecom said it spent about $230 million.
“It is both a social and a commercial investment,” MegaFon Chief Executive Officer Ivan Tavrin said in an interview last month in Davos, Switzerland. He declined to discuss financial targets. “It’s a big contribution to the brand to be involved.”
MegaFon touts data speed of 35 megabits a second for Sochi. Verizon Wireless, the largest U.S. wireless carrier, advertises speeds of 5 to 12 megabits for its 4G connections.
Some early feedback has been less than encouraging. The Australian team plans to switch to older 3G connections in Sochi after finding the 4G network unreliable, said Ben Troy, who is in charge of technology for the group.
Since the previous Olympics, the popularity of smartphones and tablets has increased as prices have fallen and new services make it easier to surf the Web, share photos and watch videos. That means tourists will be uploading more pictures and clips to Facebook and Instagram than in previous events.
Since mobile phones became popular in the 1990s, congestion has hurt calling and data usage at large gatherings such as concerts and sports events. At the London Olympics in 2012, tourists had to settle for slower 3G connections as 4G wasn’t available in the city until later that year. Organizers warned against delays in downloading larger files and banned spectators from grouping smartphones and tablets to one wireless connection to preserve bandwidth.
For Sochi, MegaFon developed an application that lets tablet and smartphone users watch live broadcasts and repeats of the competitions. A tourist attending an Alpine event could at the same time live stream a hockey game on a tablet screen. Samsung Electronics Co., which sponsors the games, is handing out free Galaxy Note 3 tablets to athletes so they can stay in touch with fans, friends and family.
Putin is attempting to transform Sochi, 1,610 kilometers (1,000 miles) south of Moscow on the shore of the Black Sea, into a year-round destination. He has faced criticism from some of the companies involved in the construction for the Olympics, such as Russian Railways and Basic Element, which have suggested that the government pressured them into what may turn out to be unprofitable projects.
Deputy Prime Minister Dmitry Kozak, the country’s top Olympics official, dismisses suggestions of coercion, saying investors were invited to the project voluntarily.
For Moscow-based MegaFon, there is at least one concrete benefit for the Sochi spending. Russia gave it exclusive rights until 2016 to offer 4G services in the Krasnodar region, where Sochi is and which is lucrative because of its 5.4 million inhabitants. That will help MegaFon earn a return for some of its investment, said Raiffeisenbank’s Libin.
Rostelecom, in an e-mailed statement, said it aims to recoup its investment by providing services to local people and state entities. An example is using the cables laid for the Olympics to transmit TV signals to villages around Sochi.
“I am sure telecommunications will work great in Sochi,” said Mikhail Alexeev, a partner of AC&M Consulting in Moscow. “It’s not an issue whether the investment made into it will ever pay back -- it just needed to be done for Russia.”
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