The Russian Telecommunication Market Development in March 2008

1. General Trends of the Market Development

1.1. Major Statements of the Big3 Operators

Cell operators of the Big3 have finished construction of telecommunications networks and sent them to the regulating bodies, the Ministry of IT and Communications and Rossvyazohrankulturi (RSOK), to make an examination. MTS has built the telecoms network in all regions of Russia and sent its project to the Ministry of IT and Communications. After the Ministry approves the project the company will start putting the network fragments into operation. VimpelCom also informed the Ministry that the company had built the telecoms network and expected its examination by specialists from RSOK. According to licenses of MTS and VimpelCom, the companies must begin to provide services of trunk and international communications this autumn. MegaFon finished construction of the network at the beginning of the year. Now the company is introducing the network to the regulating bodies.

Operators of fixed-line communications do not expect considerable changes after cell operators enter the market. MTT gets around 30% of the total revenue by admission of calls of cell subscribers. Cell companies do not have enough resources to process the whole traffic. Cell companies will take the traffic out of fixed-line networks, but they will do it by degrees, MTT representatives say.

According to analysts, in 2007 the total volume of the Russian telecommunications market (without taking into account the mobile traffic and companies’ revenue from transit of calls) was 2.2 bn USD. Success of cell companies will depend on their price policy, though they will hardly dump. The companies will recompense the networks construction within a year. But the investments will be risky in case cell subscribers are able to choose a telecoms operator when making each call as it happens when they call using fixed-line networks.

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On March 12 VimpelCom published the results of the company’s activity in 2007. It resulted in the drop of ADR: after opening of NYSE the deposit receipts went down in price by 5.7%. According to the statement of VimpelCom under US GAAP, the company’s proceeds have grown by 47.3% to 7.17 bn USD over a year, net profit has come to 1.46 bn USD. OIBDA has increased by 46.7% to 3.59 bn USD compared to the same period of the previous year. At that the company’s return on equity according to OIBDA has reduced from 50.4% to 50.2%.

1.2. Offer of New and Standard Services

In the 2nd half of 2008 VimpelCom intends to put into operation the 3G network in most cities of Siberia and the Far East. By the end of 2008 the 3G network will be launched in Novosibirsk, Krasnoyarsk, Irkutsk, Chita, Ulan-Ude, Vladivostok, Birobidjan, Magadan, Anadir, Yakutsk. According to the license conditions, in 2009 VimpelCom will provide all Russian regions with the 3G communications.

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A subscriber will be able to choose an operator of fixed-line communications when calling not only from a home telephone but from a mobile phone as well. The Ministry of IT and Communication does not exclude the corresponding amendments will be made in the legislation. At present they are analyzing consequences of the innovation for the market. Meanwhile the Big3 operators are constructing telecommunications networks and soon they will be able to provide services of trunk and international communications independently.

Specialists from the Ministry of IT and Communications consider a possibility to give cell subscribers a right to choose an operator of trunk and international communications.

According to some participants of the market, it would be logical to finish de-monopolization of the telecoms market and then to give cell subscribers a right to choose an operator. Others say the present legislation does not imply a possibility to choose an operator of trunk and international communications. Any call, regardless of anybody, it was made to, is considered as a call under the license of a cell operator. Thus, a cell operator fixes tariffs for all calls. According to the offered project, services of trunk and international communications must be provided by telecoms operators and subscribers of a cell operator will become their subscribers simultaneously. However, the matters of roaming and cell operator’s responsibility for the quality of communications and services provided are vague.

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Since March of 2008 MegaFon has begun to sell the 3G modems under the company’s trade mark. The modems will be sold in the operator’s shops and in shops of traditional retailers. The operator will also promote a special tariff for the 3G modems. The company does not intend to introduce special limitations for use of SIM cards of competitors. The operator will sell modems tuned for work in MegaFon network.

1.3. The Market Potential (trends, capitalization, profit)

VimpelCom remits debts to its former subscribers. The company expects they will begin to use services of Bee Line again. The act of grace will concern subscribers from the Moscow region whose debt does not exceed 100 USD.

According to the information from VimpelCom, around 15% of the company’s debtors are those who used postpaid tariffs. Several thousands of the debtors are planned to be amnestied. The total debt does not exceed several hundreds thousands dollars. However, a debtor will be amnestied in case he or she connects to one of the existing postpaid tariffs. The purpose of the actions is to increase the amount of connections to postpaid tariffs.

According to experts, the idea is not bad, though the company can hardly rely on a subscriber who had not paid once. According to analysts, the total amount of VimpelCom’s debtors is 6% of the subscriber base, i.e. around 3.1 mln people.

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The Board of directors of AFK Sistema has approved the strategy of the telecommunications assets (MTS and Comstar-OTS) development. The holding is restructuring the telecoms business. Sistema’s subsidiaries, MTS and Comstar-OTS, will give their main line networks to a company, which was founded specially. The major point of the strategy is regulation about the company’s foundation, to which MTS and Comstar-OTS will give their main line networks. The company will lease the networks not only to MTS and Comstar-OTS but to other operators, earning additional money, the representative of the holding informs. MTS and Comstar-OTS, in their turn, will raise their profitability, getting rid of the low-margin business.

According to estimates of analysts, construction of 1 km of the network costs 7 000 -20 000 USD. Some experts suppose foundation of a special company is a rational idea, which can help to raise profitability of the subsidiaries. Others say the prices for leasing of communications channels are going down now because of new players on the market. In 2007 the prices for leasing went down by around 40%. Thus, creation of the company, which will provide a single service, is not a viable idea. 

The Board of directors of Comstar-OTS has approved the technical, financial and marketing strategies of the company’s development till 2011. The strategy “Five Corners of Attack” consists of five major sections: restructuring, development on the market of broadband Internet, MGTS development, active entering the regional markets and management of Svyazinvest’s share holding. According to the approved strategy, in concern of technological development the emphasis will be placed on the infrastructure development in the regions, integration of the holding’s networks, increase of the data communications network throughput, creation of technical opportunities for rapid provision of services.

The financial section of the strategy consists of the revenues control system introduction, the separate calculation of expenditures and the project calculation of investments as well as improving and reducing of terms of preparation of the consolidated financial statements. As a result the company intends to increase profitability of the operation activity and efficiency of investing and to strengthen its position on the market. By 2011 the company plans to take 50% of the market of broadband Internet.

According to the marketing strategy of the company, major initiatives, including re-branding, will be directed to growth of sales and increase of the market share. The company plans to promote actively its services in the regions of Russia and the CIS.

1.4. The Market Extension Due to Overseas Expansion

Minister for Communications and Informatization of Byelorussia met with the president of the Russian cell operator MTS Leonid Melamed. Melamed declared again the company was interested in consolidation of MTS. However, the regulator does not hurry to give the Russians control over the operator.

Today the Russians own 49% of the consolidated Russian and Byelorussian MTS. The company is ready to increase the share holding to make it the control share holding.

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The Russian operator of trunk and international communications MTT has signed the agreement about direct network interconnection with the Georgian operator Telecom Georgia. In the frameworks of the signed agreement the Russian company will connect the network with the Tbilisi fragment of the Georgian operator’s network. Telecom Georgia will become a partner of MTT in transmission of the voice traffic from Georgia to Russia.

2. The Regulator’s Actions and Dynamics of Legal Field

2.1. News in Legislation and Other Changes in Legal Field

Minister of IT and Communications of the RF Leonid Reiman spoke in State Duma at the “government hour”, devoted to the contribution of modern ICT to social development of the country. He reminded that Vladimir Putin had approved the strategy of the Russian information society development, which would allow Russia to reach the first twenty countries-leaders in the field of ICT by 2015. Minister admitted the existing export of the Russian software at the level of 2 bn USD did not reflect the existing potential of Russia in that field. In case beneficial conditions are created for Russian software engineers, the Russian IT export can come to over 10 bn USD annually. Reiman also noted the serious pressure of China, India and other developing countries would increase on the world market. However, the existing system of taxation of labour remunetration decreases considerably the possibility of effective competition.

The Ministry of IT and Communications supports consideration of the bill in State Duma, which stipulates for introduction of a special regime of business activity for Russian software engineers.

14 thousand medical institutions must be connected to Internet, Reiman says. According to the Ministry of IT and Communications, in 2008 the decision in this field will be worked through in two pilot regions. But the regions have not been defined yet.

According to Reiman, the practical transfer to digital TV has already begun. Recently, the digital TV system has been launched in the Sverdlovsk region. Digital technology will allow the Russians to watch the guaranteed freely broadcasted programmes regardless of where they live, Minister says. Digital technology will increase people’s awareness of events in the country and consolidate the society.

Rossvyzohrankulturi creates the Unified Information Centre, which will help to control all operators and broadcasters. As a result the scheme of interaction of licensees and the regulator will be simplified and the control over the market participants will be improved.

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According to Order 25 of February 28 of 2008, the Ministry of IT and Communications confirmed the rules of introduction of grants to organizations of communications and to organizations, working in the field of IT, from the federal budget in 2008-2010. The order was registered in the Ministry of Justice on March 17 of 2008 ( the registration number 11347).

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The RF president Vladimir Putin signed the decree «On measures on the RF information security when using information and communications networks of international information exchange». The order was signed in order to provide information security of the country when using information and telecommunications networks, which allow to transfer information overseas.

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The Ministry of IT and Communications has published the project of the concept of free software development in Russia. The concept must be approved by the government this summer. The concept concerns the state support of software products, competing with Microsoft software.

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The Ministry of IT and Communications has edited Order #9 “On confirmation of requirements to telecommunications networks for search measures holding”, which regulates procedure of giving the special services an access to telephone calls and correspondence of subscribers . In accordance with the order operators are obliged to provide the special services with a possibility of distance access to talks. An operator must provide militia or FSB with technical means in order to read correspondence or listen to talks of supposed criminals without leaving an office. According to operators, the order confirms relations, which have been already established between them and the special services.

The order regulates the resolutions of “Rules of interaction between operators and authorized state bodies, engaged in investigation activity” of 2005. According to representatives of the Ministry of IT and Communications, new normative documents do not concern the present norms and procedures, in accordance with which necessary information is given to corresponding bodies. In particular, the orders, regulating requirements to operators, do not abolish the statute-established order, according to which the special services must have a legal resolution to get an access to information.

Analysts agree, this order does not have principal changes, just specifying and adding to decisions, made before. On the whole analysts agree that the Ministry’s order continues regulation of the norms, approved before.

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Minister of It and Communications expressed a hope that when Putin headed the government, privatization of Svyazinvest would go on. The Minister expects a “positive decision” of the matter will be made by a new government. It has resulted in the rise of the holding’s subsidiaries’ shares. RTS and MMVB indexes have decreased by 1% and 1.78% accordingly. Shares of most interregional companies of the holding have rosen in prices: Centertelecom (+7.14%), Uralsvyazinform (+6%), Volgatelecom (+2.86%), Sibirtelecom (+4.05%) and Severo-Zapadni telecom (+2.44%).

This year their shares have been going down more then the market. According to estimates of Uncredit Aton, since the beginning of the year they have fallen in prices by 20-30% and RTS index has decreased by 9%. In 1997 the state sold 25.1% of Svyazinvest shares for 1.875 bn USD and since then it has promised to sell the rest 75% minus 1 share. In 2005 the draft decree of President about removal of the holding from the list of strategic enterprises was prepared, but it has not been signed so far.

The growth of the telecoms companies was caused by Reiman’s statement about the possible privatization of Svyazinvest, analysts explain. Experts do not exclude the speculative purchase can continue in expectations of transfer of the assets to private persons. However, it is risky to invest in Svyzinvest companies. There is a threat of unprofitable sales of their cell assets, analysts say (in June of 2007 CEO of the holding Alexander Kisilev promised to sell cell assets of the subsidiaries within the nearest 6 months).

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MTS, VimpelCom and MegaFon will be included in the list of strategic and dominating companies. The Federal Antimonopoly Service will be able to limit their prices and the government will be able to prohibit foreigners to acquire large share holders. It is necessary to remind that State Duma has passed the bill about an access of foreigners to strategic branches and made amendments to some laws.

According to data from AC&M Consulting, as of March 1 MTS provided services to 35.5% of 166.41 mln Russian subscribers (VimpelCom – 25.3%, MegaFon – 21.9%). In case the amendment to the Law “On Communications” is approved, VimpelCom, MTS and MegaFon will be considered dominating companies, confirms Konstantin

Senichkin, the chief of the administration for control and supervision in the field of transport and communications of FAS.

After the bill is approved, a private foreign investor, wishing to buy over 50% of the Big3 operator, will have to ask an “authorized body” for a permission for a deal. If an investor is under control of the state, the application for acquisition of more than a 25% share of a strategic company will have to be submitted. The investor will be responded by the commission, headed by Prime Minister, within six month. The law is not retroactive, but foreign investors, owning over 5% shares in a cell operator, will have to inform an “authorized body” about themselves.

“Cell communications sector as well as the sector of fixed-line communications are strategically important, that is why dominating enterprises are of interest from the point of view of the country’s defense and security of the state, “ explained Martin Shakkum, the chairman of the State Duma committee on construction and land relations. Inclusion of cell communications in the list of strategic branches is a result of the compromise between President’s administration, FSB and the Ministry of IT and Communications, which had spoken against extension of the list of strategic branches owing to communications and procured that Internet-provided were excluded.

According to some experts, cell operators have been discriminated: in other branches dominating position begins from a 50% share of the market. If operators do not violate the law on competition, the innovation will not affect them. However, experts warn that FAS may check relevance of tariffs, set by operators as dominating companies.

2.2. Struggle with Illegal Entrepreneurship

At the session of RSOK board the head of RSOK administration for control and supervision in the field of communications Sergey Demochko declared that MGTS had changed groundlessly tariffs on connection and admission of the traffic, which had taken an effect on March 1. The procedure, according to which MGTS defined a monthly charge for operators, connected to its network, is illegal, he says.

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RSOK has issued the order regarding Comstar-OTS about removal of violations in allotment of Comstar’s technical facilities to other operators of communications. According to the regulator, the company had fixed illegal “compulsory payments” for the partners, who needed to use its networks to provide services to their subscribers. It is the first case when the state interferes in the activity of the company, which laid hold of the fair share of traditional wired networks, built in the Soviet period, and now is trying to form the convenient competition on the market of communications.

According to experts, it will be difficult for the company to prove such high payments. As a result the operator can be presented serious claims.

2.3. Assessment of the Regulator’s Activity

Two weeks before the second reading the State Duma committee for construction and land relations had recommended to pass a bill about an access of foreigners to the strategic sectors. However, the Ministry of IT and Communications was dissatisfied with the bill. The text of the bill was approved conceptually during the first reading in September and since then it has had to be agreed by the Ministry of Industry, the Ministry of Nature, FSB and the administration of President. 43 strategic sectors were chosen. They were added with entrails, TV and radio, fishing, printed mass media, dominating on the market, polygraphy, internet-providers.

According to the Ministry of IT and Communications, the limitations in the filed of communication are excessive, they will concern around 10 500 companies. 200 companies of them are natural monopolies, around 200 of them are dominating companies on the market, 10 000 are internet-providers. 9 500 of them are household networks, which provide a micro district with communications, as a rule. They are numerous companies, the activity of which cannot be considered as strategic. According to the Ministry of IT and Communications, there are so many companies, inaccessible for foreigners, that investments will be complicated.

According to analysts, the limitations of foreign investments inflow will not affect the Russian economy as a whole and the market of telecommunications in particular.

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Vice Prime Minister Sergey Narishkin has criticized RSOK. «Rossvyazohrankultura's actions, connected with transfer of GSM tenders terms in regions and change of the assessment criteria, has caused the public resonance - said Narishkin at the session of the Department Board, - I'd like to ask the management of RSOK to pay attention on the necessity to keep within requirements of the Russian legislation. 

3. Companies’ Actions and Decisions, Influencing Most the Market Development

3.1. Success and Failure in Acquisition of New Assets

The cell operator VimpelCom has obtained the right to use Bee Line brand in Armenia and started preparing for re-branding of its daughter company Armentel. On February 25 the Agency of intellectual property of Armenia made the decision about registration of the license contract between VimpelCom and its 100% subsidiary Armentel, which concerned the use of the trade mark Bee Line.

After Armentel was bought in November of 2006, VimpelCom was not able to register its trademark as it coincided with the trade mark of the Armenian firm, engaged in sale of computer equipment and IT decisions (Bi Line). The parties could not agree about use of the brand, and in February the court made the decision in favour of VimpelCom.

3.2. Actions of Companies on Stock Markets

MegaFon will be able to hold an IPO by floatation of the 31% share holding, which belong to Telecominvest at present. Altimo and TeliaSonera are not interested in their stakes smearing and they will dispute it if necessary.

Such variant of MegaFon’s shares floatation is probably profitable as to Altimo so to TeliaSonera: the value of their share holding will increase. However, according to some analysts, the deal is beneficial to Altimo mainly, because in case Telecominvest sells its stake, the company will get a share holding in the public asset. At that TeliaSonera owns a stake in Telecominvest, thus, its stake in MegaFon will decrease.

Analysts agree that an IPO holding has a positive effect for the company’s development, though some experts doubt the offered scheme is good, because of the opposite interests of the groups, which would like to get control over MegaFon.

3.3. Personnel Changes in Major Companies

• Rostelecom has declared about the appointment of Georgi Cherni for the position of the director of sales department of Rostelecom. Before he had been working as the sales director of MTT.

• Alexey Kurov has been appointed the deputy CEO of FGUP Post of Russia. Kurov worked in various financial organizations. From 1998 he was working in Sberbank of Russia as the head of the secretariat of Sberbank President.

• Andrey Semin-Vadov has been appointed the 1st vice president of Transtelecom on commercial activity. He will supervise matters, connected with the further development of the company’s telecommunications activity, development of new segments of the market, including retailing, development of a new line of products.

• Eduard Sharai has been appointed the deputy CEO, the commercial director of MGTS, the member of the company’s Board. From 2001 Sharai was working as the head of the city telecommunications site, then he was working as a deputy CEO on business development of the Kostroma branch office of Centertelecom. From 2004 he was holding the position of deputy CEO on commercial activity of the Upper Volga branch office of Centertelecom.

• Sergey Khanenkov has been appointed CEO of the Moscow Sotovaya Svyaz (MSS). Before he had been working as deputy CEO of the Moscow branch office of Rostelecom. Sergey Khanenkov has replaced Konstantin Kravchenko, who has taken the position of CEO of the Moscow branch office of Centertelecom.

• A new position of director on interaction with the state authority, including FST and FAS appeared in Comstar-OTS. The position has been taken by Vladislav Vasin, the former vice president of the complex of Sistema’s telecoms assets management.

• On March 11 Roman Okatov from Rosnet replaced Leonid Gushturov on the position of the commercial director. Okatov will be in charge of development of the whole commercial activity of the company on the Moscow market of corporative communications, including interaction with principal clients. Gushturov took the position of deputy CEO on commercial activity of Comkor in February.

• Evgeni Ruzhan has been appointed the director of the department on sales to corporative clients of Rostelecom. On September of 2006 he was appointed the deputy director of the department of sales and service of Rostelecom.

• Artur Alekperov has been appointed the director of the strategic management department of Renova Media. Before Alekperov had been working as the head of MGTS department of business development.

• Andrey Anisimov has been appointed the deputy CEO on finance of Sistema Mass Media. Before he had been working as the financial director of Stream-TV.

• CEO of Telecominvest Maxim Gorokhov has resigned. The St. Petersburg holding Telecominvest possesses shares in the company-provider Web Plus, the developer of the billing systems Peter Service, the operator of the network on monetary telephones STP and the supplier of equipment of Lising Telecom. The largest deals of Telecominvest, made by Gorokhov, were the sale of 100% of the closed company Petersburg Transit Telecom for 97 mln USD and a 29% share of the closed company Peterstar for 66.7 mln to one of Telecominvest’s shareholders First National Holding S.A.

• Mark Cibtrenko has been appointed the director of the department on client servicing of Rostelecom. From 1996 he was heading the sector of billing administration in the close company MMS, the cell operator of DAMPS standard of Indigo network, in 2001 he began to work in Sonic Duo (MegaFon-Moscow) as a senior specialist on billing first and then a head of the department on development and support of service processes.

• The former manager of Siemens Raimond Armes will head Sistema’s Indian cell subsidiary. Armes will head the business of the Indian cell operator Shyam Telelink, which has been controlled by Sistema since this January.

• Rostelecom has declared about the appointment of Olga Rumyantseva for the position of director of the department on work with the mass segment and MRK. In 1996-2004 she was working in Sovintel, where she was successively holding the positions of manager of the department on clients support, sales manager, senior sales manager, head of the sales department and deputy commercial director – head of the department of sales and client servicing of Rostelecom. 

• Dmitri Bagdasaryan has been appointed the director on marketing of Stream-TV. Bagdsaryan will be in charge of finishing of Stream-TV re-branding, increase of marketing communications efficiency, development and realization of the unified marketing strategy, extension of the portfolio of innovative services IPTV, HDTV, etc on the basis of the advanced networks. In 2001-2007 Bagdasaryan was working in SMARTS, holding successively the positions of operator of subscriber department, engineer of technical services, head of the office of new technology and services, marketing director. From 2007 till 2008 he was the head of the product marketing department of the corporative centre of MTS.

4. Conflict Zones and Interests Opposition Fields

4.1. Contradictions between Entrepreneurs During and As a Result of Property Structure Changes, Mergers and Absorptions

The Arbitration Court of the International Chamber of Commerce in Vienne decided that the Turkish holding Cukurova had to buy shares of Cukurova Telecom, sold to the Russian Alfa Group in 2005, when Alfa had become a shareholder of Turkcell. In May of 2005 Altimo agreed with the Turkish conglomerate Cukurova Group about the redemption of Turkcell’s share holding from it. The deal concerned the purchase by the Russian company of a 49% share of Cukurova Telecom Holding, which in its turn owns a 52.91% share of Turkcell Holding which possesses a 51% share of the cell operator Turkcell. This succession gave Altimo an indirect control over 13.22% of Turkcell’s chartered capital. By November of 2005 the deal was finished, and Altimo not only paid Cukurova Group 1.59 bn USD for 49% of CTH shares, but also gave it the 6-year credit worth 1.707 bn USD on the security of the rest shares of CTH.

The deal between Altimo and Cukorova was appealed against by the Sweden-Finnish operator TeliaSonera, which had already possessed 37.09% shares of Turkcell. Later Cukurova Group under the influence of TeliaSonera and its court actions violated some points of the credit contract, according to which Alfa Group structures had given the credit worth 1.7 bn USD to Cukurova in 2005. Altimo demanded of Cukurova to return the rest on the credit worth 1.35 bn USD. After the demand was not fulfilled, Altimo demanded to give it the share holding of Turkcell. However, Cukurova blocked inclusion of changes in the registry of the company’s shareholders.

As a result Altimo went to the Court of the British Virgin Isles to confirm its position. The court admitted that Altimo’s claims were valid. During the hearings TeliaSonera brought a suit to the court against Altimo, asking to seize the same share holding of Tukcell, referring to the contest between TeliaSonera and Cukurova.

According to analysts, the conflict affects all the participants, preventing normal development of the companies and decreasing their capitalization. Experts agree that even in case Altimo agrees to return the share holding to Turkcell, it will be difficult to Cukurova to acquire it: 13.22% of Turkcell shares, owned jointly by Alfa Telecom Turkey Ltd and Nadash International Holdings Inc, cost 2.67 bn USD according to the results of the bidding on NYSE on March 7. Cukurova will hardly be able to attract such funds. The total revenue of the conglomerate, uniting 143 companies with the turnover of 10 bn USD, has been close to zero for several years already. At that today Cukurova’s debt comes to 5 bn USD, 1.5bn USD of which is the debt to JP Morgan bank and 1.35 bn USD is the debt to Altimo.

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In the end of February Svyazinvest’s subsidiary Volgatelecom brought three suits to the Arbitration court of the Samara region against the cell operator SMARTS, in which it possesses the minority share holding. The company tries to make the operator to exercise the offer for the sale of 97.03% of SMARTS shares to Volgatelecom and abolish the reorganization of the operator from a close corporation to a public company.

The first suit concerns abolition of the decision of SMARTS Board of directors about convening of the special meeting of the operator’s shareholders, which took place on February 22. The second suit is about execution of the offer for the purchase of 97.03% of SMARTS shares. SMARTS informed Volgatelecom the company will not be able to execute the offer. Both suits were brought on February 20. According to the 3rd suit of February 29, Volgatelecom intends to contest the decision of the meeting of shareholders in accordance with which SMARTS was rewritten from a close corporation to a public company.

Experts and analysts have different opinions on the matter. Some of them suppose the claims against SMARTS are legally disputable.

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The Board of directors of Rostelecom has decided not to sell the share in the second largest provider according to revenue RTKomm.ru to Sinterra. Instead of it Rostelecom decided to become an individual owner of RTKomm.ru. In 2007 Sinterra made an offer twice about redemption of Rostelecom’s share, but the operator turned it down, considering the offered price was understated.

It is necessary to mention revenues of RTKomm.ru will probably go down this year. The operator will only provide services of internet access. The state has given the provider 1.58 bn roubles for 2008-2009. Thus, according to the budget for 2008, confirmed in the end of January, the proceeds will go down by 6% to 5.4 bn roubles (225 mln USD), though EBITDA must increase by 20% to 521 mln roubles (21.7 mln USD).

According to analysts, the main revenue of Rostelecom comes from telecommunications. This market is becoming more competitive and the company should strengthen its position in other segments, for instance, in the field of data communications.
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5. Figures of the Month

1. IT Expenditure

In 2008 1.1 trillion USD will be spent on IT by developing countries, Gartner expects. In 2007 the Russian IT market came to 198 bn roubles (8.1 mln USD), the Ministry of It and Communications informs.

2. The Market of Communications Links Rent

According to assessment of MForum Analytics, in 2007 the Russian market of communications links rent grew by 26% and exceeded 700 mln USD. The main participants of the market are Rostelecom (36%), Transtelecom (32%) and Svyazinvest’s interregional companies (18%).

3. Cell operators’ Revenue from value-added services

According to the preliminary assessment of Comnews Research, in 2007 the revenue of Russian cell operators from value-added services came to2 750 000 000 USD, i.e. 13% in their total revenue.

4. Preparedness to e-government

In the rating list of UNO Russia takes 60th place among 192 countries according to preparedness to e-government. Ukraine takes the 40th place.

5. Net Profit

Net profit of Sitronix according to RSBU has decreased 11 times to 5.9 mln roubles. In the 4th quarter of 2007 net profit came to 195.6 mln USD.

6. Market of Mobile Advertising

By 2011 The Russian market of mobile advertising will grew 15 times as much and come to 216 mln USD compared to the present 12-15 mln, MegaFon forecasts. According to the partner of the operator, the agency of mobile advertising Customline, MegaFon will be able to take 10% of the market.

According to the result of 2008 the market of mobile advertising can come to 12-15 mln USD, in 2009 it can be 48 mln USD. According to analysts, in 2008 around 57 mln USD will be spent on mobile advertising. In 2009 this figure can come to 123 mln USD.

7. Volume of the World Market of cell communications services

By 2011 the volume of the world market of cell communications services will grow to 800 bn USD. The total volume of the mobile communications industry will exceed 1 trillion USD in 2008 already. According to the analytic company IDC, the amount of wireless communications subscribers will increase by over 1 bn within 4 years.

8. Attraction of Investments

Sibirtelecom is planning to attract 90 000 000 USD, placing CLN at the beginning of April.

9. Subscriber Base of Cell Communications

IN February the number of cell communications users increased by 1% to 166.4 mln subscribers in Russia. Penetration increased by 1.1% to 114.6%.
In Moscow the number of cell subscribers increased to 28.1 mln people compared to 27.9 mln people in the previous month. In St. Petersburg the amount of cell subscribers grew to 9.3 mln users compared to 9.2 mln in the previous month. In February penetration was 165.5% and 146% in Moscow and St. Petersburg accordingly. In the regions of Russia the cell subscriber base grew to 129 mln users compared to 128 mln in January.

При подготовке использованы материалы следующих СМИ: «Ведомости», Прайм-ТАСС, «РБК Daily», Comnews, Деловая газета «Взгляд», Cnews, «Российская газета», «Интерфакс», «Коммерсант», «Время новостей».