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networks) and old active equipment73. For example, eBezeq, a fixed and mobile operator in Israel, generated cumulative profits of ILS 214 million (USD 60.8 million)74 between 2009 and 2013 by de-commissioning its copper network. Another operator exploring this approach is MGTS, a fixed-line operator in Russia.Case study: MGTS, Russia This case study illustrates how MGTS, the fixed-line incumbent in the Moscow region, is funding its fibre network roll-out by decommissioning its legacy network. MGTS is aggressively rolling out a gigabit optical passive network (GPON), fibre-to-the-home (FTTH) network. MGTS’ existing telephone network consisted of 4.994 million lines at the end of 2012, and MGTS passed 2.6 million homes with FTTH at the end of 2013. The company’s ultimate objective was to pass 4.4 million homes with FTTH by 201575.In 2013, the operator agreed to sell its 49 per cent stake of CJSC Business Nedvizhimost, the owner of telephone exchanges in Moscow, to Russian investment company Sistema, retaining a portfolio of buildings in Moscow with a total capacity of about 1 million square metres. The value of the transactions was RUB 6.3 billion (USD 194 million), and the proceeds were to be reinvested to help fund the GPON roll-out, which MGTS estimated to cost about USD 2 billion or about USD 360 per home passed. The sale effectively would cover the costs of passing about 12.7 per cent of the total 4.4 million homes to be covered76.MGTS noted that it could generate even more revenue from exchange sales, and it expected to divest further assets. The first tranche of exchange sales was relatively profitable for MGTS, reflecting the high value of property in the Moscow region, Russia’s richest area. The operator also intended to generate revenue from selling copper and was working on removal of its copper lines – a project slated to begin in earnest in 2016. MGTS made good progress in transferring customers to its GPON network. At the end of 2012, 20 per cent of homes passed with FTTH were subscribing to a GPON voice service, a figure that increased to 30.4 per cent at the end of 2013. This transition allowed the company to improve its average revenue per user (ARPU); at the end of 2013, customers migrating to GPON had a 55 per cent higher ARPU than previously77.22 Trends in Telecommunication Reform 2016 Box 1.7: Key lessons: MGTS • MGTS commited to a GPON FTTH deployment strategy funded through divestment of key telecom assets, helping to improve the company's competitive position for the medium to long term.• MGTS demonstrated that investment in fibre can generate higher ARPUs through offering higher-layer services such as IPTV and video on demand.• De-commissioning the copper network can also result in losing voice-only customers who do not want to migrate to the new network. MGTS acknowledged that it would lose voice-only customers, but the company bet that its ARPU gains would outweigh those losses. • The regulator allowed MGTS to de-commission its copper network and divest the assets. The implementation of this approach may depend on whether there is local loop unbundling (LLU) or just bitstream services. • There is no LLU in Russia, so the process of de-commissioning an older copper network may be much faster and easier to achieve in such countries, where the local loop infrastructure is not shared with other operators.