The Russian Telecommunications Market Development in August 2008

1. General Trends of the Market Development

AFK Sistema is planning to enter the market of Bangladesh

Vladimir Evtushenkov, co-owner of AFK Sistema, stated about the company’s interest to the market of Bangladesh. Sistema’s representatives and the authorities of the country have signed the memorandum about mutual understanding. However, Sistema has not declared about its certain plans on the business development in Bangladesh yet.
There are four JSM and one CDMA operator in the country and they provide services to 25% of the population. Sistema expects to receive frequencies for cell communications in the country.
The company GTel Mobile, 40% of which belongs to the Russian operator VimpelCom, has started working in Vietnam. MegaFon has opened its representative office in Iran recently. (15.07.2008).
According to experts, first of all Sistema does not have a plan of the business development in Bangladesh and it is difficult to forecast the situation. They agree that entering the market of Sistema is appropriate. On one hand, the market is attractive due to low penetration and big population. On other hand, the competition is growing. Analysts suppose Sistema will probably buy a local operator instead of obtaining the license.

VimpelCom is entering the market of long-distance communications and broadband access

VimpelCom is planning to enter the long-distance communications market and the market of broadband Internet access. The company will offer its customers to make international and domestic calls through its network instead of networks of long-distance operators.
The codes, main lines and licenses were obtained by Vimpelcom from the acquired Golden Telecom. Services on the markets of fixed-line communications and broadband access will be sold under Bee Line trade mark.
The advertising campaign on the new services promotion will be launched in 30 towns of Russia , where Vimpelcom has its networks. Since 2008 VimpelCom has become a multi-field holding: in February VimpelCom completed the transaction on GT acquiring, in May Corbina was consolidated. After obtaining codes for DLD and ILD communications in December of 2006, GT began to work on the long-distance communications market, though in the corporate segment only. In autumn of 2007 Corbina in cooperation with GT introduced the programme on broadband access networks construction in 65 towns of the country.
In the segment of broadband access one subscriber brings around 20-27 USD and a subscriber of long-distance communications brings 120 USD approximately. The annual advertising budget of a long-distance operator reaches 20 mln USD and more than a half of the amount is spent on TV advertising. To promote services of broadband access companies may spend up to 10 mln annually. (22.07.2008)
Analysts agree in the opinion, that entering the markets of long-distance communications and broadband access will not contribute much to Vimpelcom’s revenue. The company does it to increase its subscriber base and to improve its economic efficiency.
Concerning the company’s prospects in the nearest future, analysts have different opinions. Some of them say about the increased market share (around 30% in a 3-year period), others believe, Vimpelcom will not manage to increase its market share considerably (no more than 3 % in a 3-year period).

MegaFon’s unlimited tariff plan (Bezlimitka) will not change the tariff policy of competitors

From August 1st the cell operator MegaFon is offering a new unlimited tariff plan “Vizov non-stop” ( Call Non-stop). According to the tariff plan, subscribers can make an unlimited number of calls on local and mobile phones of the Moscow region for RUB 2700 per month. There is a special offer, abolishing any limits on total calls duration in the frameworks of the license fee until November 1st of 2008. From November 1st the duration of local calls to federal mobile numbers of the Moscow region (Bee Line, MTS and Sky Link) and to numbers of Moscow and the Moscow regions will be limited to 3000 minutes. The cost for other calls in these directions will be 2 roubles per minute. The previous unlimited tariff plan of the operator Vizov Xtreme was almost two times as more expensive. The new offer is almost 40% cheaper than all other existing tariff plans of the operator and of its Big3 competitors. (04/08.2008).
According to most of experts, there will not be a significant reduction of prices from the direction of the competitors. Subscribers will hardly change an operator in order to get a temporal profit. Some operators may offer a number of new services and bonuses instead of the reduction in price.
The new tariff is the company’s innovation. The tariff plan will be certainly popular, but the company should not expect big profit or significant growth of its subscriber base.

Sistema is claiming to a 3G license in India

AFK Sistema is planning to participate in the tender for 3G license. The Indian authorities have permitted foreign companies, possessing experience in 3G services provision, to take part in the tender. Previously the telecoms regulator of India (TRAI) insisted that the local players were able to provide 3G covering in a short period of time. That is why in accordance with the condition of one of the tenders two state-owned cell operators BSNL and MTNL would obtain licenses immediately. After the tenders are held, BSNL and MTNL will pay the maximum amount according to the results of the tenders. Thus, in the nearest two month a tender will be held, according to which the authorities will distribute 3-5 3G licenses and another 5 licenses later. Each operator will get a 5 MHz frequency band. The initial price for a license across India is 475 mln USD.
The Russian company is represented in the region by its subsidiary Shyam Telelink, providing services of mobile communications in Radjastan and possessing licenses for mobile communications services provision (800 MHz range) in 19 licensed circuits, covering 27 administrative states of India with the population of around 1 bn people, i.e. 94.5% of the country’s population. Until the decision is made, the company has started constructing a network of CDMA-800 mobile communications. (05.08.2008)
Experts have different opinions on the matter. A license obtaining is certainly important for the company’s activity development in the region. However, Sistema should hardly expect profit from the 3G launch, especially taking into account the license value. On the whole analysts assess positively the growth rates of the Indian economics and the common wealth. It means, in case Sistema decides to invest considerable amount in these services, the investments will be recouped in future.
The 3G introduction will help Indian operators to increase ARPU. The license value increases due to the intention of the authorities to get foreign companies to take part in the tender, though it is difficult to assess whether AFK Sistema will decide to participate in the tender.

A quartet of Dalsvyaz’s revenue is contributed by services of broadband Internet access

In the first half-year of 2008 new services of Internet access, data communications, mobile telecommunications , interactive TV and video on demand contributed 27.2% to the total revenue of Dalsvyaz. Dalsvyaz is the biggest operator of telecommunications in the Far East region. Actually it is a regional monopolist, which possesses almost the whole wire infrastructure. Most of the company’s revenue is contributed by local communications services. However, Dalsvyaz is a leader among MRK (the Interregional companies) in terms of revenue, contributed by services of broadband Internet access. The revenue from cell communications is decreasing constantly. The company’s subscriber base and ARPU continue to go down. The company’s Board of directors is planning to consider a matter of reorganization and separation of Dalsvyaz’s cell subsidiaries on September 5th of 2008. On October 31st of 2008 the matter of the company’s cell business will be considered at the extraordinary meeting of the company’s shareholders. (01.08. 2008)
On the whole experts agree in the opinion that running the sell business is unprofitable for the company. Selling the assets is the most rational step to reduce expenses. The company will be able to obtain sustainable development in case it develops services of broadband access, increasing its subscriber base and increasing tariffs. On the whole the company has good financial results and the forecasts are positive.
Dalsvyaz should sell its cell assets as soon as possible. Being a leader on the market of fixed-line communications and developing broadband access services, the company will get over its financial straits, caused by the cell business.

Sistema is planning to buy Sky Link

Hurdsfield Corporation, a subsidiary of AFK Sistema, owning 50% of Sky Link, has filed a petition to the Federal Antimonopoly Service about acquisition of another 50% of the operator (belongs to Gamma Capital) from the offshore company Carmathen Trading Ltd. Thus, Sistema wants to extend its business. Sky Link possesses CDMA-450 frequencies and GSM licenses in a few subject of the RF. The company’s debt is around 600 mln USD. In future the operator may be wound up as a legal entity and transmitted to MTS, which is a part of AFK. (13.08.2008)
Analysts agree in the opinion, there are no obstacles to make a transaction. In spite of its debt and low figures, Sky Link can become a good addition to another operator’s business. On one hand the company is interesting to AFK Sistema with relation to Internet services development in MTS because in the segment of mobile Internet Sky Link has good results. On other hand the redemption of 50% can be connected with the wish of the second shareholder to quit the asset.
According to analysts, Sky Link can be wound up as a legal entity and merge with MTS. Thus, MTS can obtain new frequencies and licenses, improve mobile Internet services and move to the direction of the total consolidation of the assets.

MTS has presented a new forecast of the cellular market development in Russia

MTS has reconsidered its forecasts concerning the cell communications market in Russia and other countries, the company operates in (Ukraine, Uzbekistan, Armenia and Turkmenistan, except Byelorussia). According to the forecasts, the Russian market will grow 140% from 20.1 bn USD according to the results of 2007 to 48.3 bn USD according to the results of 2012 ( annual growth, CAGR - 19%). The growth in the CIS countries, mentioned above, will be 129% from 25.1 bn USD to 57.6 bn USD (18% annually). The previous forecasts were 34.1 bn USD in Russia (CAGR – 15%) and 42.6 bn USD in the CIS (16% annually). In the second quarter of 2008 MOU of MTS increased 37% compared to the same period of 2007 (up to 207 minutes). The former president of MTS Leonid Melamed expected MOU of the company would reach 400 minutes by 2011.
The changes in the company’s forecast are caused by the company’s 3G network, which is being launched presently. Besides, the revenue growth is also contributed by voice services. (14/08/2008).
According to experts, the company’s forecast is optimistic and quite real. It is mostly based on the operator’s plans concerning the 3G development in the regions. However, according to MegaFon’s experience in Petersburg, the population has not so many handsets for the 3G.
The forecasted growth of the market by 2012 warrants the operator’s investment, though according to experts, the market is overestimated.

Uralsvyazinform has began to work with collectors

Uralsvyazinform has made the agreement with three collector agencies. They will deal with the debts of local communications subscribers in three region of the Ural Federal Region (the Perm region, the Khanti-Mansiisk Autonomous region and the Tumen region). According to the results, the company will decide whether to apply such form of debts collection in all regions of Ural and for cell operators.
It is necessary to say collector agencies will be used only for serious and considerable non-payments and delays from the direction of an operator (for instance, if a debt is not paid for more then a half-year).
Cell operators have been using services of collector agencies for a long time already. The work of agencies is assessed as positive – operators are returned from 40% to 50% of debts. On other hand the scheme of collector and subscribers’ mutual interaction has not been worked off yet. (18.08.2008)
Uralsvyazinform’s initiative to use collector agencies is assessed as positive by analysts. Due to such measures the company will probably enhance a scheme of debts collection, obtain additional funds and the increase of investments. According to analysts, collectors can return more then one third of debts to the company. It is predictable as collector companies possess much more possibilities and resources to achieve the goal than telecoms companies do.
On the whole such practice can be used by other companies of Svyazinvest. It will depend on results of Uralsvyazinform’s experience.

Svyazinvest was planning liberalization of the long-distance communications market

Svyazinvest was planning a real liberalization of the long-distance communications market (later the company rejected its plans). From September 1st Severno-Zapadni Telecom company starts to give an opportunity of choosing an operator when calling to another town or overseas. The decision of “hot-choice’ introduction was adjusted with Svyazinvest, the operator’s main shareholder.
The liberalization of the LD communications market was held on June 1st of 2006 and now the former monopolist Rostelecom has seven competitors. But “Hot choice” has been introduced in six regions only: Tatarstan, Bashkiriya, Yakutiya, Pskov, Kostroma and Moscow. The regime was not introduced in other regions because of the lack of technical capacity. Such situation was beneficial for Rostelecom (controlled by Svyazinvest), the most revenue of which is contributed by providing services of LD communications to private persons.
As a result most of new operators of LD communications concentrated on corporate clients. MTT, the only serious competitor of Rostelecom on the mass market, could take only 8% of the Russian market of LD communications within 2 years. (14.08.2008)
According to experts, after “Hot-choice” introduction in the network of Severno-Zapadni Telecom the share of MTT will increase to 15-20%.

Interregional companies (MRK) of Svyazinvest are losing their share on the market of broadband access

For the first time Svyazivest’s subsidiaries have began to lose their share on the market of broadband Internet access. According to the information f J’son&Partners, over the 1st half-year the share of MRK in all regions, except Moscow, has reduced from 44% to 37% and according to the forecasts it will go down to 33-34% by the end of the year. The drop of MRK share is expectable, though the drop rates impress, the market participants say.
In the 1st half-year the shares of MRK went down 5-10% in most regions. In total MRK lost their positions in 50 regions. The biggest drop was observed in the Ivanovo region and Petrozavodsk , 25% and 30% accordingly. MRK managed to maintain or increase its share in the Kursk, Ryazan, Tver, Volgograd regions, Tatarstan and some other regions. According to the results of the 1st half-year, the market share of MRK in Russia, except Moscow, reduced to 37%. In the 1st half-year of 2008 the number of broadband access subscribers increased 35.3% to 2.638 mn people, ARPU was RUB 679.
According to the management of Svyazinvest, the company is planning to increase the number of broadband access subscribers to 11 mn people by 2012. (20/08/2008)
According to analysts, the share decrease was affected by two factors. Firstly, MRK were pressed by local players. Household networks are gradually turning into small providers, which fixed the same prices as those of MRK and even lower, and provide acceptable communications services. The second factor is coming of the Moscow and other regional participants. According to experts, in case MRK do not activate, they will continue to lose their market share. First of all their share will be taken by the Moscow operators, which offer a big range of services, including TV, and more profitable tariffs.
Svyazinvest has good growth rates, analysts say. Despite the growing competition in big cities, MRK continues to increase their subscriber base in small settlements. According to the data of iKS-Consulting, over the 1st quarter of 2008 Svyazinvest’s market share has not changed (32%). In Russia penetration of broadband Internet access is 18%.

2. The market participants

Synterra is planning acquisition of MTT

Synterra is negotiating about the acquisition of 100% of the long-distance communications operator MTT, which belongs to AFK Sistema and Gamma Capital. The preplanned amount of the transaction is 640-720 mn USD. Details of the transactions are being discussed: MTT shareholders may assess the company differently.
Synterra is engaged in the construction of its own network of LD communications, investing around 80 mn USD in the project annually. The company is planning to apply for access codes to MH-MN network and enter the market of DLD communications. In that case the acquisition of MTT is a possibility to acquire a new client base. The company is also a main executer of the project on Russian schools connection to Internet. (24/07/08)
According to analysts, the transaction is profitable to Synterra and MTT both. For Synterra it is a chance to become an integrated operator and to obtain a big client base, to obtain considerable assets on the LD communications market. For MTT it is a possibility to avoid risks, connected with construction of its own networks by cell operators. Analysts estimate the transaction at 700 mn USD–1 bn USD. At that some of them consider the transaction is overestimated. The others say that two main shareholders of MTT (Sistema and Gamma Capital) may speak of different prices.
According to analysts, two moments can be emphasized. The first one concerns a certain profit for Synterra from the purchase of MTT. The second moment is that presently penetration of cell operators to the market of LD communications is increasing and it is unprofitable for MTT.
Rostelecom is recommended to turn to the London Exchange
Rostelecom was recommended to float shares on the London Stock Exchange (LSE) after the delisting from the New York Stock Exchange (NYSE) by the Committee on Strategic Development at the company’s Board of directors. However, the company’s Board of directors has not decided yet whether to follow the recommendations. Despite expenses, in particular SOX (Sarbanes-Oxly), regulating financial and accounting disclosure information, Rostelecom is not going to leave NYSE independently.
According to experts, the decision of Rostelecom’s management to wait a little with delisting is based upon the fact that the company’s capitalization is overestimated and it is very unprofitable to redeem even a small shareholding. But it will become necessary as the shareholders will be obliged to redeem securities from the minorities who do not agree with the decision about delisting. Besides, not many Russian companies float their shares on NYSE. It is the evidence of a company’s good organization of work, transparency of accounting and responsibility of a company’s management, which accepts the conditions of NYSE and SOX.
According to analysts, turning to LSE, Rostelecom will lose its funds and a certain part of its image on the market. At the same time the experience of operating on NYSE allowed Rostelecom to show itself as a company, which accepts more tough conditions for itself, but gives big guarantees to investors.

SMARTS is selling 97% of its assets

Among possible purchasers of the Volga region company the operator may be of interest to the Big3 operators. The amount of the transaction is from 1 bn USD to 1.5 bn USD.
The negotiations about the sale of SMARTS have been carried out since summer of 2005. However, the process has been protracted because of the court examinations, connected with property claims of SMARTS shareholders. In January of 2007 one of the possible investors made an offer for a purchase, but within the short period of time the company got a more profitable offer and decided not to accept the first offer. In July of 2008 the company’s management declared that six investors participated in the negotiations and there were three potential purchasers among them. (15/08/2008)
According to analysts, VimpelCom and MTS are the most probable candidates for the purchase of SMARTS, though VimpelCom’s chances are worse due to the recent acquisition of Golden Telecom. The company is assessed at 1-1.5 bn USD, i.e. 300-400 USD for a subscriber. Analysts have different opinions on the prospects of the operator’s development. Some of them suppose the Volga region operator will be absorbed by a company-purchaser, others say it will develop independently.
On the whole we can suggest the transaction will be beneficial for SMARTS. And the company, which will acquire the operator, will increase its market share considerably.

Rostelecom has introduced its financial statements of the 1st half-year

Over the 1st quarter of 2008 Rostelecom’s revenue has come to RUB 30 587.5 mn, not changing much in comparison with 2007. The domestic traffic has reduced 0.9% compared to the 1st half-year of 2007. The outcoming international traffic has reduced 2.8%. The international traffic from foreign operators has increased 9.4%. Net profit of Rostelecom has increased 6.2% to RUB 4 983.5 mn over the 1st half-year of 2008.
At present 6 companies possess codes for long distance communications: Golden Telecom, MTT, Transtelecom, Orange, Arktel, Synterra. The Big3 operators (MTS, VimpelCom and MegaFon) have also applied for LD codes.
According to the plans of strategic development for 2008-2012, Rostelecom is considering opportunities of international markets expansion, increasing the number of main lines and entering the market of broadband Internet access. (06/08/2008)
According to analysts, Rostelecom’s results for the 1st half-year of 2008 seem appropriate and positive. Maintaining the good financial figures is a result of the tariff policy optimization and the growth of demand for the company’s services. Because of entering the long-distance market by new participants, the competition has increased considerably. Some analysts say, in this case the traffic has been re-distributed in favour of alternate operators. Others say it does not affect Rostelecom’s figures.

MTT has introduced its statements

According to the results of the 1st half-year MTT demonstrated good results in all directions. OIBDA has increased 15% to 73.7 mn USD; the consolidated revenue under US GAAP has grown 21% compared to the same period of 2007 (to 582 mn USD). The revenue from ILD communications has come to 88 mn USD, 35% growth. The revenue from DLD communications has grown 21% to 27 mn USD. The operator’s subscriber base has doubled. The voice traffic, transited through MTT network, has increased 31% and the incoming international traffic has grown 46.6%. According to estimates of MTT, its share on the market of DLD/ILD communications is 8%.
Rostelecom’s revenue has not changed almost over the reported period. And the revenue of MTT has increased 21%. (08/08/2008)
Analysts assess the figures of MTT as positive, comparing them with Rostelecom’s figures. MTT only yields to Rostelecom in OIBDA profitability.
On the whole due to the positive figures, analysts expect MTT will develop and maintain competitive advantages, in particular, in the introduction of the whole range of services.

Reorganization of Comstar-UTS has been postponed

Shareholders of Comstar-UTS have postponed considering the matter about the company’s reorganization. At the extraordinary meeting of shareholders the consolidation of the subsidiaries CTS Ug and Intersvayzservice was not approved. Previously shareholders had not approved the consolidations of Comstar-Direct 1.
According to the company’s management the main reason is the unfavourable situation on the market of shares. Postponing of the matter considering allows to protect interests of minorities. In case the decision had been made in favour of the subsidiaries’ consolidation, the price for Comstar shares for the shareholders, voting against, would have been higher then the current quotations. The situation is unacceptable for the company.
Comstar’s shareholders do not intend to refuse the reorganization. The matter of Comstar-direct, CTS Ug and Intersvyaz-service consolidation will be considered at the next extraordinary meeting of shareholders, which will be probably held in the beginning of September. (12/08/2008)
According to analysts, it is unprofitable for the shareholders to quit the company now. The situation on the exchange market is very unstable at present. AFK Sistema is the main shareholder of Comstar-UTS and the assets of the corporation are underestimated, analysts say. The decision about postponing can be a negative factor for investors’ attitude towards Comstar-UTS. Nevertheless, investors should not overestimate risks as finally the decision on the matter must be positive. Comstar’s growth potential is very big and the company’s reorganization will be carried out by the end of 2008.
According to analysts, the decision about postponing is a necessary step. Because of the situation on the market another decision would affect shareholders and the company in the long-term outlook.

MTS introduced its statement

MTS introduced its statements for the 2nd quarter of 2008. The consolidated revenue of the company has increased 34% compared to the same period of 2007 to 2.635 USD. The operator’s net profit has grown 30% to 659 mn USD. OIBDA has increased 32% compared to the 2nd quarter of 2007 to 1.349 mn USD, OIBDA margin has come to 51.2%. The company is planning to maintain OIBDA margin at the level of 50%.
Net profit of MTS has increased 34% to 538 mn USD over the reported period. The revenue from the Russian business has grown 36% to 2.02 bn USD. OIBDA in Russia has come to 1.035 bn USD, 35% growth, and OIBDA margin reduced from 51.8% to 51.2%.
In the 1st half-year MTS the subscriber base of MTS increased by 4 mn people to 538 mln people. IN the 2nd quarter of 2008 MOU was 207 minutes (151 min – in the 2nd quarter of 2007.) ARPU of MTS came to 11 USD. (14.08.2008)
According to the common opinion of analysts, MTS results for the 1st quarter of 2008 have exceeded all expectations. Most figures have grown compared to the same period of 2007. The revenue growth can be maintained on the level of “two-digits” because of the forthcoming launch of the 3G networks and their subscriber bases growth. OIBDA profitability regeneration to 51.2 % is also a very positive factor. The company has a good chance to maintain this figure over 50%.
The results are assessed positively by analysts. Speaking of the further development of MTS, they say about the maintenance and improvement of the present figures.

Svyazinvest offers to sell a building in Tverskaya 7

Svyazinvest has found the way to finance the development of the Central Telegraph (CT), selling its shares neither to Centertelecom nor to MGTS.. They will have to sell the building #7 in Tverskaya street. CT is planning to choose an independent appraiser. Then the company’s shareholders will decide whether to sell the building or not.
Svyazinvest offers to sell 37 000 sq. km, which belong to the Central Telegraph. According to experts, 1 sq. km in the building in Tverskaya street costs 6000-10000 USD. Selling the whole area, they can obtain 222-370 mn USD.
According to Svyazinvest’s management, the obtained money will contribute to the development of CT, not merging with other companies. In autumn of 2007 KIT Finance, owning around 40% of Rostelecom, offered to consolidate it with CT.
Afterwards Svyaziinvest offered to consolidate CT with its another subsidiary Centertelecom. Comstar-UTS, possessing 25.1% of Svyazinvest, proposed to consolidate the company with is subsidiary MGTS.
All three variants would provide CT with a partner, able to finance the development of its network of broadband Interned access (Qwerty brand). According to the estimates of McKinsey, CT needs 40 mn USD to connect 1 mn households to the network. In June CT’s network covered 1.5 mn households in Moscow and the Moscow region, but only 100 000 of them used services of broadband access. In the end of the 1st quarter Qwerty took only 5.2% of the Moscow market of broadband access ( J’son & Partners). (21/07/08)
According to analysts, after the building reconstruction, 1 sq km can cost no less then 10 000 USD (370 mn for the whole area). Some experts suppose, even taking into account expenses for the reconstruction, 1 sq km can cost 13 000-16 000 USD (481-592 mln USD for the whole area). It is difficult to find more well-disposed premises in Moscow.
At the same time experts do not understand why it is necessary to sell the property in the centre of Moscow, which will be getting more and more expensive. Even selling the building, CT will not be able to develop independently, some analysts say. The merger with MGTS, which controls 35.7% of the Moscow market of broadband access in cooperation with Comstar, is the best way, some experts believe. According to others, the merger with MGTS is a privatization actually.

Rostelecom is planning to enter the Tajik market

Rostelecom has made the agreement with the Tajik operator of communications Vavilon-T. According to the agreement, the partners will carry out the two-way exchange of traffic. Previously Rostelecom had carried out the two-way exchange of traffic with the national operator Tajiktelecom.
According to Rostelecom’s plans, the cooperation will allow the Russian operator to raise carrying capacity of direct routs on traffic exchange between Russia and Tajikistan and improve the quality of ILD services, offered to Russian operators and end users. Rostelecom’s representatives note the company aims to increase the number of direct connection with the CIS operators in order to improve the quality of communications for Russian users.
In July of 2008 Rostelecom published the strategy of the company’s development till 2012, in the frameworks of which overseas expansion was mentioned. Among the foreground directions, Rostelecom emphasized entering the regional market of broadband access. Operator also intends to carry out all forms of cooperation with international operators: traffic exchange, more complex cooperation and participation in privatization of companies. (22/07/2008)
Rostelecom is not a single Russian DLD and ILD operator, which works with Tajik companies. MTT cooperates with Vavilon-T, too. Synterra works with few Tajik operators.

Prestige is entering the Russian telecoms market

Prestige company has declared about its forthcoming entering the Russian telecoms market. The project is targeted to creation of a network of wireless broadband access to provide services on the basis of IEEE 802.16-2004 protocol (WiMAX). WiMAX equipment, produced by Nokia Siemens Network, is used in the network of the project.
In accordance with the project, the target is to create and use a wireless network of broadband access and provide the following services: fixed and mobile access to Internet through a radio channel: VPN services and renting of communications channels; multi media and additional services.
The companies of the project obtained the decisions of GKRC for frequencies use in 2006. In 2007 they obtained the frequencies in 3.4-3.6 GHz range in 33 largest towns of Russia (the population over 21 mn people).
Within the 1st half-year of 2008 the group of companies of Prestige project built, registered in the bodies of Roskomsvyaznadzor and put into operation the first 33 base stations in 33 towns of Russia. During engineering and construction the company’s employees worked up and applied the newest technologies of the equipment construction and assembling.
At the first stage of the project’s network development the regional and main basic network is built upon rented communications lines and channels. Concerning the further development of the network, an own basic network will be created on the basis of faber-optic lines. The control and monitoring system is built upon the software of the leading producers (HP, IBM, Microsoft, Siemens). (05.08.2008)
According to experts, this system allows to collect information about all the elements of the network and from all BC sensors, which are set on sites for the environment monitoring, providing continuous work of BC equipment and its security. At that all elements and sensors can be displayed on virtual maps of Russia’s towns and regions.

OSMP and e-port have consolidated

OE Investments company, created by the payment systems of OSMP, e-port and the fund Digital Sky Technologies, has acquired 100% of OSMP, e-port, Mobilny Koshelek and Direct Contact. Andrey Romanenko, president of OSMP, has been appointed the head of the company. OSMP, e-port, Mobilny Koshelek and Direct Contact will maintain their operation independence and brands. According to the calculations of OE Investments, in 2008 the total turnover of the embodied company will be around 10 bn USD.
OE Investments was founded in July of 2007. Digital Sky Technologies fund, managed by Jury Milner and Grigory Finger, owns the blocking shareholding of the company. The rest shares belong to OSMP and e-port. The transaction on the purchase of OSMP, e-port, Mobilny Koshelek and Direct Contact was finished in July of 2008. According to the market participants’ assessments, the amount of the transaction was no less than 500 mn USD.
At present the company and the Russian Railway are coordinating the programme of railway tickets sale through terminals. The programme launch is scheduled to September. (30/08/2008)
According to analysts, the market is maturing, the growth rates of cell communications are getting slower and participants of the market of electronic payment must introduce a wide range of innovative services. According to the forecasts, the new holding creation will allow the embodied companies to create and develop new services.
According to the calculations of the company’s management, the consolidated company will take 47% of the market. Thus, OE Investments will become a leader on the market of electronic payments, leaving behind Cyberplat, which holds 34% of the market according to the results of 2007. At that as the market players have developed no more than 10% of possible payments, the competition will strengthen in future, some experts suppose.

Sky Link has made an agreement with Synterra

Synterra has made the agreement of unlimited duration with the mobile operator Sky Link about around-the-clock processing of subscribers’ calls on the basis of Synterra’s centre of calls processing (COV). The contract value has not been disclosed by the parties.
On August 5th in Vladimir Sky Link put into test operation a unified contact-centre of servicing of subscribers. COV of Synterra is planned to be used for few functions. At the first stage of the operation, the contact-centre will receive and process up to 6 thousand calls, queries from web-sites and e-mail from subscribers of Vladimir and the Vladimir region. By the end of 2008 in the unified contact-centre Sky Link will serve subscribers of the Central region, Moscow and the Moscow region, and subscribers of the Southern region, the Volga region, Siberia and the Far East. According to the development plan in 2009 Sky Link will process calls of subscribers from the Moscow region and the North-West.
COV of Synterra will process around-the-clock calls of Sky Link’s subscribers concerning services, tariffs, the Internet access, etc.
According to experts, Synterra has got experience of information service organization. MegaFon’s information service works on the basis of COV as well as the Service of Technical Support of Standard Base Software Packages for educational institutes in the frameworks of the national project Education, the service of support for LD subscribers of MTT and the “hot line” of Organon company’s representative office in Russia. (Organon is one of the leading pharmaceutical companies in the world).

MGTS has made a contract with ASBT

Operators of fixed-line communications MGTS and ASBT have made a new contract about incorporation. The previous contract was made by the companies in 1994 and since then it has not been renewed. According to representatives of MGTS, ASBT is now equal to other incorporated operators.
The contract about ASBT’s incorporation was made after months of the negotiations. Recently MGTS and Sonic Duo, MegaFon’s subsidiary, have made the contract about traffic connection and transit.
MGTS has initiated the same conflict with Synterra. According to Synterra’s representatives, the company does not agree to make a new contract about traffic connection and transit yet and expects to obtain a court decision about legitimacy of the existing contract. (22/08/2008).

Stream-TV has introduced its statements

According to the results of the 1st half-year of 2008 the revenue of CJSC Stream-TV, the federal operator of cable TV and Internet services, reached 58.7 mn USD, 51.2% growth compared to the same period of 2007. In case Stream-TV maintains such growth rates in the 2nd half-year, its share on the Russian market of fee television will come to 12% and exceed 17% without taking into account satellite TV.
The Russian market of fee television is growing rapidly. In 2006 the market grew 27% compared to 2005 (from 346 mn USD to 462 mn USD). In 2006 the annual growth was 48% (648 mn USD). According to the forecast of ComNews Research, in 2008 the Russia’s fee television’s growth will come to 50%, i.e. the market will come to 1 bn USD according to the results of 2008. Thus, in 2008 the annual turnover of Stream TV will be over 117 mn USD and the market share will be 12%.
The management of Stream-TV emphasizes the growth of the financial figures is connected to the growth of operation figures as well as to the efficient policy of interaction inside the company. Over the short period of time the company has begun to develop subsidiaries and has drawn up the unified financial and commercial processes. It has resulted in the possibility to spend money more effectively and to increase profit, revenue and OIBDA. (27/07/2008)
According to analysts, together with the continuous growth of the market the players’ shares will be redistributed. In 2007 37% of the market fell to the share of satellite TV operators and in 2008 their share will reduce to 32%. Providers of satellite TV services work more actively in places, not having cable operators’ infrastructure. It allows satellite operators to maintain bigger tariffs, which influence ARPU, analysts say

Rambler has introduced its statements

According to the results of 1st half-year of 2008, the Internet Holding Rambler Media has increased its revenue 2.5 times to 52 mn USD. At the end of 2007 the company’s net profit was 6.439 mn USD compared to the net loss worth 487 thousand USD in 2006. Such result was obtained due to the sale of the television business, which brought the company net profit of 7.1 mn USD. Rambler Media intended to pay special attention to the market of banner and context advertising. To do it the company increased its share in CJSC Begun to 50.1%, acquiring additional 25% of the company’s shares in August of 2007.
However, less then in a year the Internet holding signed a contract with Google corporation about the sale of Begun. According to the contract, Rambler will redeem the rest 49.9% of Begun shares from Finam and then sell Google 100% of the company for 140 mn USD. Rambler’s net profit from the transaction will be around 50 mn USD.
The company confirms the forecasted revenue of 100-110 mn USD for 2008. Rambler also confirms the forecast on EBTDA margin increase to 20-25%.
The revenue, contributed by advertising on Rambler, increased 62% to 6.9 mn USD. According to the agreement, after the transaction is completed, web search of Rambler will operate by Google search engines. Moreover, Rambler will demonstrate Google’s ads. (24/07/2008). Begun has contributed 16.6 mn USD to the consolidated revenue of the Internet-holding. According to the assessment of some analysts, Begun’s share in Rambler’s total revenue is 11-20%. Over 1st half-year of 2008 Rambler’s consolidated revenue from context advertising has reached 23.5 mn USD compared to 4.3 mn USD over the same period of 2007, experts note.
According to experts, the agreement between Rambler and Google will influence financial results of the Internet-holding, too. The figures for 2nd half-year of 2008 will obviously include 50 mn USD, earned by the company due to the transaction.

Tele2 has introduced its statements and disclosed the company’s plans

Tele2 company, possessing networks in 12 countries and 24 mn subscribers, has introduced its statements for 1st half-year of 2008. In 2nd quarter of 2008 the operator’s subscriber base increased by 606,000 people (778,000 people over the same period of 2007) to 9,458,000 mn people, i.e. over 50% of all mobile communications subscribers of Tele2. In 2009 the company plans to increase its subscriber base of mobile communications to 11 mn people.
In 2nd quarter of 2008 the company’s operation revenue reached $265 mn ($183 mn in 2nd quarter of 2007). EBITDA came to 94 mn USD (60 mn USD). EBITDA margin grew to 36% (33%). It was mostly caused by the continuous growth of operation figures in 16 regions the operators work in. These results were achieved despite the increase of operation and capital expenses in the Krasnodar region as well as in 17 new regions, where the operator had received licenses recently. In 2nd quarter of 2008 EBIT reached 74 mn USD (42 mn USD in 2nd quarter of 2007). ARPU of the operator was 9.5 USD in 2nd quarter of 2008 (8 USD in 2007).
On the regional market of telecommunications Tele2 offers its product at “attractive” prices for less well-to-do subscribers. It is the main goal of the company. According to the results of marketing research, the operator possesses the biggest market share in 4 regions of the country (Chelyabinsk, Rostov-on-Don, Omsk and Voronezh). Tele2 has also acquired licenses in 17 new regions, where it plans to work in the nearest future. According to the company’s management, the rational personnel policy is aimed at the service staff minimization. For example, in a Tele2 subsidiary 70 employees provide services to 1 mn subscribers.
Speaking of the future plans, in 1st half-year of 2009 Tele2 intends to launch its networks in 4 regions and in another 5 regions in 2nd half-year. The company also plans to enter the CIS market, and thinks of obtaining a license in Moscow. The operator plans to increase its financial figures (for instance, to increase ARPU to 10 USD and EBITDA margin to 40%). (28/08/2008)
According to analysts, many figures of the operator are better than those of other regional operators. It can be explained by the operator’s aggressive pricing policy. However, on other hand, low prices affect the company’s ARPU, which is still low. Analysts have different opinions on the company’s prospects in new assets development. Tele2 is capable of doing it, some experts say. According to others, the competition is too strong as the market is oversaturated by local and the Big3 operators.

SMARTS has introduced its statements

Over the 1st half-year of 2008 SMARTS’s aggregated net profit has come to over RUB 254 mn, 45% growth compared to the same period of 2007. The company is planning to increase its share on the mobile communications market.
Over 6 months of 2008 the operator’s revenue has come to RUB 2.8 bn, 1.4 % growth. The revenue growth over the same period of 2007 was 30%. EBITDA has remained the same as in 1st half-year of 2007 – around RUB 1 bn. According to Andrey Girev, director general of the company, SMARTS reduced its net debt from 250 mn USD to 150 mn USD.
In 1st half-year of 2008 subscriber base of SMARTS increased 1%. In 2nd half-year of 2008 the company is planning to increase its revenue and profit due to aggressive marketing and the company’s expenses reduction. In 2nd half-year of 2008 SMARTS is planning to obtain its revenue growth of 15-20% and to increase its subscriber base by 5-10% by the end of 2008. (05/08/2008).
According to analysts, the company’s plans are real. SMARTS is developing fast, trying to increase its value for potential purchasers. The Volga region operator may be of interest for the 3G operators, though, according to analysts, MTS is the most probable purchaser.

Telecominvest has pledged shares of MegaFon

Telecominvest, AF Telecom and TeliaSonera have signed agreements: Telecominvest has pledged 23.1% of MegaFon shares on security of credit for AF Telecom, belonging to Alisher Usmanov, and pawned the rest 8.2% of MegaFon to TeliaSonera. A year ago AF Telecom bought 15% of Telecominvest for 410 mn USD. In May of 2008 the company acquired 58.9% of Telecominvest from the First National Holding (FNH) of Jeffrey Galmond; 26.1% of Telecominvest belongs to TeliaSonera. The main asset of Telecominvst is 31.3% of MegaFon.
After the transaction with FNH, Usmanov not only got the control over Telecominvest, but he also obtained the rights to the property of the Bermudan fund IPOC, owning 8% of MegaFon. After IPOC is liquidated, its property will be divided between its owners. The procedure will probably last till November and AF Telecom will become an owner of 8% of MegaFon. After IPOC is liquidated, Usmanov’s share in MegaFon will increase to 31.3%. Usmanov has already declared about his plans to increase its share. (25/07/2008).
The credit may be worth 1-1.5 bn USD, experts say. The fair value of 23.1% of MegaFon (in case Usmanov owned it directly) would be around 4.5 bn USD. Altimo is ready to sell its 25.1% of the operator, analysts remind. The company is negotiating actively with partners in Russia and Turkey.

Comstar-Direct will be divided into two parts

In the frameworks of re-structuring Comstar-Direct (Stream brand) will be divided into two parts by its shareholders. One of the parts (Comstar-Direct1) will be incorporated to Comstar-UTS, the other part (Comstar-Direct2) will be added to Sistema Mass Media (SMM). The shareholders of Comstar-UTS and SMM have already approved such take-over. The take-over is carried out in the frameworks of re-structuring, begun in June of 2008.
As a result Comstar-UTS will obtain the main part of assets and subscriber base. SMM will receive content production. The reorganization will be finished in 3rd quarter of 2008. (29/07/2008).
Re-structuring is positive for business development, experts say. Previously Comstar had to share its 48% of net profit with SMM. Now the company is able to control the business of broadband access and IP-TV in Moscow, to make independent decisions on development of projects, not consulting with another shareholder. At the same time the internal reorganization will hardly influence the market, analysts say.

3. Tension Lines

Georgy Gens has quitted K-Systems

Eduard Voronetsky has become a single owner of K-Systmes after Georgy Gens quitted the company. Gens had been a co-onwer of K-Systems within 3 years. In 2004 he bought 50% of the company’s chartered capital from Voronetsky. In 2007 Voronetsky redeemed it back.
The main reason for the purchase was that Voronetsky had needed a managing partner, but Gens had only been a financial investor.
When Gens bought the company’s share, K-Systems was a leader on the Russian PC market. And in 1st quarter of 2007 before Gens quitted the company, it had been holding just 6th place on the market. After Gens had quitted the company, it strengthened its positions and in 2nd quarter of 2007 took 2nd place after Depo Computers. (16/07/2008)
Analysts have different opinions on the amount of the transaction: they assess 50% of K-Systems at 50-100 mn USD. According to some of them, Gens made good profit, selling his shareholding. The main reason for his quit was the disagreement between company’s leaders about its development and goals, analysts say.

The group of companies Svyaznoy may accounts for CJSC Svyaznoy

During the court hearings in the Moscow Arbitration Court Eduard Rebgun, acitng manager of CJSC Svyaznoy, accessed the company’s property at RUB 70 mn. According to lawyers, taking into account the company’s debt (around RUB1.5 bn) the Group Svyaznoy will be probably called to account for its former subsidiary. Moreover, tax officials has got time for new claims as the court postponed the judicial trial about the bankruptcy of CJSK to November 25th. The court also ordered the acting manager not to hold 1st meeting of shareholders until the decision on the company’s tax came into force.
On June 5th of 2008 the Moscow Arbitration Court declared legal the tax claims on value-added tax for 2004-2006 at RUB 2.69 bn. Svyaznoy appealed this decision. The company will hardly pay all debts to its creditors. According to the statement about the company’s financial condition, its major funds are worth RUB 3.035 mn. The company’s debt is RUB1.579 bn and its losses come to RUB 67.36 mn. Tax authorities will be interested to call to account the Group of companies Svyaznoy.
Analysts agree in the opinion the bankruptcy procedure will be protracted and will last for a long time as the company has an opportunity to contest the tax claims. CJSC Svyaznoy may be liquidated. Concerning new tax claims, they will be hardly answered as the company does not have money to pay the debts, experts say.

School Internet budgeting may face problems

Igor Shegolev, Minister of Communications, has paid special attention to the problems of connection of schools to Internet in the frameworks of the national project Education.
In autumn of 2006 the project Education was started and around 53 thousand schools of the country were connected to the Net. RTKommRU company, belonging to Synterra at that time, became an executor of the prject. In the beginning f 2008 Synterra sold the shareholding of RTKommRU to Rostelecom. Thus, after the acquisition, Rostelecom became an owner of 99.5% of RTKommRU (the rest 0.5% belongs to Svyazinvest). After RTKommRU had carried over to Rostelecom, Rostelecom also became responsible for Internet access provision in schools.
According to the project’s procedure, its budgeting from the federal budget must be discontinued two years after the beginning of the project’s realization. Thus, from autumn of 2008 the project budgeting will be carried out from regional budgets of the RF regions. (22/07/08).
Analysts agree in the opinion that Minister’s fears are overstated. There won’t be failure of the project and the problems can only appear in unfavourable regions.
On the whole, the transfer to regional budgeting is a matter of time and it won’t cause big problems, analysts say.

MTS was asserted tax claims

The Inspection of the RF Federal Tax Service has asserted MTS the tax claims at RUB 1 bn 130 mn (around 49 mn USD), according to the examination for 2005-2006. (6 mn USD fall to fines). The major part of the taxes may be attributed to mutual payments, connected with traffic transit, and capital allowances. Such claims have been already asserted to VimpelCom and MegaFon.
The company was already asserted the claims at RUB 1.216 bn (RUB307.9 bn were fines) according to the examination for 2003-2004. On May 20th of 2008 the Moscow Arbitration Court dismissed the appeal of FTS against MTS and upheld the decision of the Moscow Arbitration Court of February 19th of 2008, rejecting the tax claims over the reported period. The operator did not agree with the tax claims and is planning to defend its position in accordance with the legislation. (23/08/2008)
According to analysts, MTS has a good chance to contest the claims of the tax authorities. Most of companies win such cases and they manage to reduce the amount of claims, asserted by tax authorities. Concerning additional tax charges, it is inevitable for big companies, some experts say.

VimpelCom is introducing a new subscription fee

VimpelCom has decided to collect money from subscribers, not using the operator’s services for 90 days. Thus, the company is looking for a new way of obtaining additional funds. The subscription fee will be RUB 3 a day. This measure will not concern subscribers, who only use incoming calls. The innovation will not affect other services provision and will not influence the operator’s tariff plan. The fee will be collected until a subscriber uses any chargeable or free-of-charge service. In case no services are used, a subscriber will be deleted from the list of the operator’s active subscribers in 3 months. Meanwhile, other big operators such as MegaFon and MTS do not rush to introduce such measures for their clients, trying to use other methods to increase their financial figures. (28/07/2008)
According to analysts, such measure may affect VimpelCom’s image. Even if the company tries to protect itself from possible losses and unreliable clients, it can also lose a part of its subscribers. The expected discontent will cause legal actions from corporate clients. Moreover, financial profit from this measure for such a big operator as VimpelCom is doubtful.
On the whole, this VimpelCom’s measure, targeted to its active subscriber base stimulation, will probably result in loss of clients and contribute to the growth of potential clients’ distrust. They will probably prefer the company’s competitors, where the rules of communication services provision are less tough.

Turkcell has closed a way to Byelorussia to VimpelCom and MegaFon

The Turkish company Turkcell has signed the agreement about the purchase of 80% of Best (Belorusskaya Set Telekommunikacii) for 600 mn USD, paying 4042 USD for each subscriber. 20% of Best shares will be temporally “forbidden” within 5 years. The share of Best will be paid for step-by-step: 300 mn USD will be paid 30 days after the agreement is signed, 100 mn USD will be paid in 2009 and another 100 mn USD - in 2010. The rest 100 mn USD will be paid by Turkcell when the operator obtains net profit for the first time.
Best will not influence significantly the consolidated figures of Turkcell: according to the results of 2007 the operator’s revenue came to 1.6 mn USD, while the revenue of Turkcell was 6.3 bn USD. 500 mn USD are planned to be invested in Best within 10 years. Within this period the Byelorussian operator must become a competitive market participant.
The transaction was approved in April of 2008. MTS, operating on the Byelorussian market with its 49% of the Byelorussian MTS, showed interest in Best, too. Acquiring Best, Turkcell has closed a way to Byelorussian market to VimpelCom and MegaFon. All three companies have a common shareholder Alfa Group (6.6% of Turkcell, 44% of VimpelCom and 25.1% of MegaFon). (01/08/2008)
According to analysts, the acquisition of the Byelorussian operator is important for Turkcell as the Turkish company not only acquires 3% of new subscribers, but also enters the new perspective market. Perhaps, Best is not the most attractive asset, but on the whole the cell market of Byelorussia is of interest. Analysts have different opinions on that Turkcell has closed a way to VimpelCom and MegaFon. According to some experts, the leading companies do not need this segment. The companies may struggle for their market share, others say.
The amount of the transaction is overcharge. However, the Turkish company will be able to develop its business with the help of the Byelorussian operator, experts say.

The dispute between MGTS and Synterra continues

On July 9th of 2008 Synterra brought a suit against MGTS. Synterra is charging MGTS with the default on obligations according to the contracts (about the traffic transit). The amount, Synterra is seeking, is RUB 375 188. The amount includes losses, borne after transit of Megafon’s traffic was discontinued. According to MGTS the traffic transit discontinuance was caused by the fact that calls from a federal number to a local one are considered as zone calls instead local ones. According to Synterra, an operator does not have a right to refuse a communication service to another operator without any coordination. Synterra is not planning to withdraw its suits and it will probably demand more. (15/08/2008)
The prospects of this conflict are still vague as there are no regulations for this situation in the Russian legislation, analysts agree. The conflict between MGTS and Synterra must become an incentive to the legislation basis development on the matter. According to some analysts, the situation reflects the growing tension between cell operators and operators of fixed-line communications.
On the whole, the conflict will be settled in favour of Synterra, some experts believe. However, according to others, presently MGTS has a right to discontinue traffic transit.

Court examination of MTS about the Yakutsk operator

MTS appeal against the decision of the Arbitration court, which declared invalid the purchase of shares of the Yakutsk cell operator Gorizont-RT by “Professional Information Technology”, later acquired by MTS, was dismissed. The transaction was declared illegal in court.
In November of 2004, winning the auction in Yakutiya, MTS became an owner of 76% of Gorizint-RT, which was acquired by the operator for 52.5 mn USD. The rest 24% were sold to the Professional Information Technologies company. Later this share was also acquired by MTS, so the operator became an owner of 100% of the regional Yakutsk operator. In 2007 the action was brought to the Prosecutor’s Office. The sale of 24% of Gorisont-RT had caused property damage to the Yakutiya republic. The former director general of Gorizont –RT Vasily Vakhrameev was charged with the theft of 24% of the company. (28/08/2008)
Analysts agree with MTS that at present it is impossible to apply the consequences of the transaction invalidity. Thus, it will be hardly possible to take the shares from MTS. Even if the court decision is made in favour of Gorizont-RT, the rest 76% of it belongs to MTS, and MTS will decide what to do with those 24% of the operator

Prosecutor’s Office is examining the contract of TTC and the Ministry of Internal Affairs (MVD)

The head of the Main Centre of Special and Operating Communications of MVD is suspected for the attempt to pass an act about execution of the contract with Transtelecom, which was not executed. The Investigation Committee of the Moscow Prosecutor’s Office brought an action against Sergey Ponomarev under Article 286 of the Criminal Code “exceeding power commission”. According to the results of the investigation, Ponomarev had threatened to fire his employee, in case he had not sign documents about the delivery of equipment for MVD by Transtelecom (TTC) and about the works execution at RUB 5.4mn.
For 3 years Transtelecom has been constructing a unified information system, which consolidates local militia stations and allows to work with different data bases. No violations from the direction of TTC were discovered during previous inspections of the Ministry. (Vedomosti, 25/07/2008)
According to experts, it is easy to understate the volume of provided services. It is difficult to check facts of works execution or services provision, especially when the acceptance report has been already signed. In 1st quarter of 2008 40% growth of IT services delivery (compared to the same period of 2007) was observed in Russia.

The legal investigation about profiteering in Electronic Russia

The Moscow City Court has returned the criminal case of the financial pyramid Russian Style plus, the founders of which profiteered in the federal government programme Electronic Russia. Over 200 people have suffered from the pyramid’s activity, covering almost all cities of the country’s central region. According to the estimates of investigators, the damage is around RUB 10 mn.
19 people were accused. But the case was not tried because the court found technical errors in the suit and sent it back to the Prosecutor’s Office.
In 2002 citizens of Ukraine Andrey Moldovan and Dmitry Churkin came to Moscow and founded the company Russian Style plus. The entrepreneurs used the federal special-purpose programme Electronic Russia, started in 2002. The goal of the federal programme was to extend the consumer market of computers and household appliances, to create a unified information area on the country’s territory and to provide the population with a wide range of services in the field of information and education.
In January of 2006 the company’s clients complained to the militia. In summer 2007 Moldovan and Churkin were accused.
The swindlers resold cheap computers and household appliances, bought in one the Russian big Internet-shops. Besides, they held various seminars and trainings, presentations of so-called new products in Moscow. The most active participants and depositors were encouraged with expensive gifts. When the funds of the pyramid’s heads ran out, they began to refuse to customers.

MGTS has stated about its rights to the service name

Registering a trade mark of “Baryshnya, soedinite” service, MGTS demands of other operators, including Syazinvest’s subsidiaries – the North-Western Telecom (NWT) and Centertelecom, to refuse this name using. NWT does not agree with the claim.
This service was launched by MGTS in 2004. Users of the referral service “009” can connect with MGTS subscribers, not knowing their telephone number. They must just say an operator of “009” a subscriber’s full name or address. Such connection costs RUB 35 per minute for MGTS subscriber.
This service is one of the most important. A service of the same name is provided by the fixed-line operators NWT and Centertelecom. In particular, NWT has been offering this service to subscribers of Moscow and St. Petersburg since 2006. (ComNews, 01/08/2008)
According to lawyers, as on July 28th the Federal Service of Intellectual Property, Patents and Trade Marks (Rospatent) decided to register the trade mark “Baryshnya, soedinite!”, MGTS will have a right to demand compensation worth up to RUB 5 mn or a double price of services, provided under this trade mark, if another company uses this slogan.

Drop of VimpelCom shares may affect Altimo

Altimo, the shareholder of VimpelCom, had to pay the credit worth 500 mn USD in advance because of the drop of the operator’s shares. In the end of July Altimo (the telecoms asset of Alfa Group, owning 44% of VimpelCom) made the agreement with the Deutsche Bank about the revision of the credit agreement terms. In November of 2007 the Deutsche Bank organized placing of Altimo's bonds worth 500 mn USD on the security of 27.8% of VimpelCom shares. According to the previous conditions of the credit agreement, the bank can demand to pay the credit in advance in case the value of VimpelCom shares reduces 25% compared to 30.67 USD and does not exceed this border within 5 days.
In the end of 2007 VimpelCom shares reached the maximum in the operator’s history because of the largest shareholders Altimo and Telenor were buying the shares and the acquisition of Golden Telecom was expected. In the end of July VimpelCom shares dropped following all Russian securities after Prime Minister had criticized the Mechel group. The shares of operator dropped by 21.1% to 24.2 USD (July 28th). However, Altimo has settled the problem.
According to new conditions of the agreement, the advanced retirement of bonds will be demanded after VimpelCom shares go down in price by 75%, i.e. to 7.6 USD per share. Thus, the value of 28.7% VimpelCom shareholding must not drop lower than 2.2 bn USD. At the moment of the bonds placing its value was 9 bn USD. (05/08/2008)
According to analysts, VimpelCom shares drop because of the world financial crisis. Moreover, the drop was stronger than that of MTS.

ISG has not paid to Start Telecom

Start Telecom has charged a system integrator ISG with non-payment of RUB 51.3 mn and it intends to recover the money in court. The dispute arose during the project realization for Rossvyazkomnadzor. In 2007 ISG won the tender of Rossvyazohrankultura (the former name of Rossvyazkomnadzor) for technical support of the Unified Information System (UIS) infrastructure.
UIS infrastructure of Rossvyazkomnadzor consolidates 98 objects, the amount of the contract is RUB 300 mn in accordance with the Register of State Contracts. Start Telecom was commissioned with the work execution, but later the company did not receive the promised amount of 51.3 mn USD from the partner.
Start Telecom and ISG belong to the same group of investors. The market participants consider owners of these companies as “Petersburg group of telecommunicators”. Both companies belong to private persons.
It is known from the source, close to both companies, the problems arose between the companies during the contract execution. Start Telecom began to work on the market not long ago. ISG was founded in 2006 and it positions itself as “ realizing successfully very complex federal projects” and “ always responsible for results to a customer”. According to some experts, the amount of the contract of ISG and Rossvyazkomnadzor is overstated. On august 15th the Moscow Arbitration court will consider the claim of Start Telecom to ISG. Rossvayzkomnadzor will act as a third party.

Farimex demands 6 bn USD from Telenor

Farimex Products Inc. has increased the amount of the claims against VimpelCom’s shareholder Telenor up to 6 bn USD. According to Telenor, the claims of Farimex Products are beyond reason.
The claim of Farimex is a sequel of the contradiction between VimpelCom’s shareholders, concerning the operator’s entering the Ukrainian market through the acquisition of the Ukrainian Radiosystems (URS) in November of 2005. Telenor, owning the control shareholding of Kievstar, the biggest Ukrainian cell operator, was against the transaction, because the company did not want to become a shareholder of two competing companies. Altimo supported the transaction. VimpelCom managed to buy URS without the agreement of the Norwegians. In response the Norwegians brought three suits and lost all of them.
In April of 2008 Farimex Products Inc, registered on the British Virgin Isles and owning 1250 ordinary VimpelCom shares (0.00002% of the chartered capital) brought a suit against Telenor to the Khanti-Mansiisk court. According to Farimex, because of Telenor the acquisition of URS had been put off for more than a year and VimpelCom had suffered damage worth 3.8 bn USD. This amount was demanded to be claimed from Telenor by Farimex. Besides, Farimex asked the court of Khanti-Mansiisk to arrest VimpelCom shares, belonging to Telenor, on the security of the suit.
According to Telenor, the suit is groundless. In June of 2008 Telenor brought a counter-claim to the New York Circuit Court. According to the claim, Farimex is affiliated with Alfa Group, possessing 44% of VimpelCom voting shares through Altimo. The suit in Khanti-Mansiisk was inspired by Alfa, the Norwegians say. (13/08/2008)
According to the judicial papers, Dmitry Fridman is an official representative of Farimex Products Inc., lawyers note. According to Telenor, he is a cousin of Mikhail Fridman, the largest beneficiary of Alfa Group. At that Alfa’s representatives insist, Dmitry Fridman is not Mikhail Fridman’s relative and Farimex is not related to Altimo.

ER-Telecom got to the black-list of tax authorities

ER-Telecom got to the black-list of the Federal Tax Service Department in the Perm region. The company did not pay RUB 12 mn. ER-Telecom is the only telecoms company in the black-list of the Perm region. The list includes the companies, the debt of which is over RUB 1 mn as of August 1 of 2008.
According to the company’s representatives, there weren’t any claims from the tax authorities. ER-Telecom has already asked the Federal Tax Service Department of the Perm region to clear up the matter and intends to raise a claim to the corresponding bodies (ComNews, 25/08/2008).
According to lawyers, most of tax claims against telecoms companies concern tariffs on traffic transit. As a rule, an operator appeals and contests tax claims in court. The tax authorities lose such cases sometimes, lawyers add.

Velcom takes the market from MTS

According to the results of 2nd quarter, the oldest Byelorussian GSM-operator Velcom (Velcom and Privet brands) increased its market share 0.5%, while the market leader MTS lost 2%. For 3 quarters already Velcom has been working under Telecom Austria (TA) holding’s control.
The Austrian telecoms holding TA has introduced the results of its financial activity on the Byelorussian market for 2nd of 2008. Velcom belongs to TA. As of June 30 the operator’s subscriber base was 3.37 mn users, the growth by 142 thousand compared to 1st quarter. Over the same period the leader of the Byelorussian market MTS has connected a half of this amount of users (81 thousand). In 2nd quarter the market share of Velcom increased from 43.9% to 44.4%, while the share of MTS decreased from 54% to 52 %. 3rd Byelorussian GSM-operator BeST, recently acquired by Turkcell, only holds 2.6% of the market (189 thousand subscribers).
The Austrians are satisfied with the work of their Byelorussian subsidiary. Though the investments were minimal, Velcom demonstrates the noticeable growth of operation profit. Velcom is taking the market from MTS due to its marketing activity. The advertising market is very weak in Byelorussia and the company’s activity in this direction produces a good effect.
The operator also demonstrates positive results in its financial statements, too. In 2nd quarter Velcom’s revenue was 71.1 mn euro (in 1st quartet – 64.5 mn euro), operation profit came to 16.9 mn euro (13.3 mn euro). ARPU increased from 6.5 euro to 6.9 euro. MOU grew from 147.7 minutes to 165.8 minutes. However, the whole market demonstrates better figures in 2nd quarter compared to the 1st quarter.
It is necessary to mention in May the operator changed its tariff plans for subscriber calls: previously the 12-second tariff period was used and now they use per minute billing tariffing. Though it caused indignation among the operator’s subscribers, it was probably profitable for the company from the financial point of view. (25/08/2008).
According to experts, ARPU could be affected by the change of tariffing principle, but MOU growth proves that the company’s marketing strategy is effective on the whole. It is impossible to compare Velcom’s results with those of MTS and Best as no one of competitors has introduced its statements. 51% of MTS still belongs to the Byelorussian authorities that is why its figures are not consolidated in the total statement. According to experts, Velocm was the best in 2nd quarter.
However, it will be difficult for Velcom to maintain such dynamics in future: the Ukrainian Astelit, belonging to Turkcell, presses its competitors on the market. In Byelorussia Turkcell may also use its active marketing strategy, demonstrating good dynamics of the market share growth.

4. Business and Authorities

MRK ask to raise upper limits for tariffs on local communications

Interregional companies of telecommunications (MRK) ask to raise upper limits for all existing tariffs on local communications. They are preparing a consolidated inquiry to the Federal Tariff Service (FTS). The first company, addressing to FTS, was Uralsvyazinform. The company declared it wanted to increase its unlimited tariff on local communications from September 1st of 2008. The operator also asked to raise the upper limit for all tariff on local communications.
According to analysts, MRK are always concerned about the upper limit rise for tariffs on local communications. Because of the inflation tariffs must be revised regularly, MRK representatives insist. However, according to the State and FTS, it is not rational to raise tariffs in the nearest half-year. The tariff rise will be probably postponed till the beginning of 2009, experts suppose.

The Moscow government has approved the telecommunications development programme

In the period of 2009-2011 the Moscow authorities are planning to invest RUB 32.7 bn in the programme “Development of Telecommunications and Mass Media in Moscow”. One of the main goals of the document is the use of complex approach to the development of telecommunications and mass media and solving of problems, they face. The programme will be financed from the Moscow budget.
The main objectives are: development of the technical policy, targeted to the development of electronic mass media and telecommunications; providing all citizens with the multi-channel high-quality broadcasting of available to all TV and radio channels and additional services provision ; technical support for distribution of the content, created with the help of the Moscow government: development and appraisal of the procedure of transfer from analog to digital broadcasting. (07/08/2008)
According to analysts, the amount, which is planned to be spent on the programme introduction, is overstated, comparing it with funds, usually invested in different portals development. According to this amount, around 500 mn USD will be spent in Moscow annually. Such expenses are justified in the period of market growth and infrastructure development. At the same time it is necessary to improve the services quality.
According to analysts’ assessment, the programme is quite positive on the whole. On one hand the document is targeted to the support of Moscow operators for the transfer to digital broadcasting, on other hand it is aimed to mass media content enhancement.

Who can head the Board of directors of Svyazinvest?

Svyazinvest’s Board of directors has not elected its Chairman yet. It affects considerably the company’s work. The Board of directors of the company cannot work at its full capacity without Chairman. According to the charter, Chairman organizes work of the Board and has a right to convene meeting of the Board and sigh a journal. Moreover, Chairman’s voice is decisive when voices of the Board members are divided equally. Thus, the current condition in the company complicates and hampers work of the Board of directors. According to the information from experts, Leonid Reiman may head the Board again.
In the end of June Svyazinvest’s shareholders elected a new Board of directors, but Chairman has not been elected so far because of absence of the corresponding directive from the government. Previously, the Board of directors had been headed by Minister of Communications Leonid Reiman. In May he became Advisor to the RF President and resigned his position in the company.
In the end of July the Ministry charged state-owned companies to hold special meetings of shareholders and include independent directors and representatives of new ministries and departments in their Boards of directors. Thus, we can forecast the present Board of directors of Svyazinvest will not exist for a long time. (11/08/2008)
According to experts, Reiman’s appointment for the position of Chairman of Svyazinvest’s Board would be a reasoned decision, especially taking into account his working experience in the sector. However, according to other analysts, the appointment of a new Chairman, loyal to the new Minister, would be more logical. The company needs further reforming and the former Chairman would be hardly associated with cardinal changes.

IKS and Association-800 speak in support of simplification of communications networks registration

The Association of regional operators of mobile communication (Association-800) and the Infocommunication Union (IKS) have prepared a letter to the Ministry of Communications about simplification of the procedure of communications networks registration. According to the authors of the letter, the communications networks registration must be have informing character instead of permissive one.
In June of 2008 Association-800 proposed the State Commission on Radio Frequencies (GKRC) to simplify the procedure of frequencies distribution. Yury Dombrovski, Chairman of Association, offered to distribute decision of GKRC about frequencies use without taking into account a producer’s equipment. An operator should choose itself which base station must be used in a certain range. However, GCRC has not answered.
Association-800 and IKS propose to simplify the procedure of communications networks registration in the following way: after a network constructing and testing an operator sends documents for registration, according to which the network meets all technical requirements. (23/07/2008)
According to Andrey Scorodumov, executive director of IKS, controlling bodies must not interfere in economic activity of operators. Operators are interested that their networks meet all requirements. IKS offers to remove all administrative barriers to make networks launch quicker. At present before a network construction and launch operators must undergo expertise and obtain a license.
According to experts and market participants, the initiative is positive. The informing order of the procedure is useful to operators, especially as they usually use typical certified equipment and typical projects, which can be always examined by the regulating bodies. However, it is necessary to remember that changing the registration procedure will demand changing the current legislation.

5. Economics of Innovations

IKS is planning to consolidate networks

IKS has made an offer about principles of development and mutual activity of fixed-line and mobile communications networks when providing services of high-speed data communications. The goal of the document is to create a consolidated country’s network, integrating separate parts of various NGN-networks. The document will be sent to the Ministry of Communications after Russia’s biggest operators make their notes and amendments.
Common norms and rules, worded in the document, will allow firstly to form a normative base for the coordinated construction of NGN networks architecture across Russia, secondly, to organize mutual activity of separate fragments of the network architecture. An operator, deciding to construct a network across the country, must invest big funds. The new approach will allow to settle this matter quickly and with less investments. (29/0802008)
According to analysts, the offer of IKS is quite reasoned and timely. The document will have a good effect: saving of costs and improvement of network quality. However, the result depends on how the idea will be worked over and realized. In case the networks construction will be carried out according to standards, companies may save up to 15%.
On the whole, the document must have a positive effect on construction first and then on the development of the consolidated NGN-network.

Bee Line is planning to introduce internet-payment

Bee Line company has decided to introduce the system of internet payments. After obtaining a security certificate PCI DSS, the operator will be able to create its own payment sluice for use of bank cards in Internet. MTS has already been providing such a service. The launch of this service by MegaFon has failed.
VimpelCom has finished successfully testing on meeting the requirements of PCI DSS. Data Security Standard (DSS) was designed by the Association of payment cards Payment Card Industry (PCI) and was worked out by the international payment systems Visa, Master Card, American Express, Discover and JCB for issue and servicing of credit cards. DCI helps to raise security level for personal data of a card owner.
Due to PCI DSS Bee Line will be able to create its own payment sluice. The tender for a bank-acquirer has already begun. The service Mobile Payment will be provided on the basis of the launched system of bank cards payment. (30/07/2008)
According to analysts, the new service is timely, actual and appropriate. VimpelCom possesses a certain holding of services already. New services are created to collect additional subscribers and for financial experiments in order to make profit. Investments in the project must be compensated in few years as it is planned the service will be available not only in Moscow, but in Russia’s regions, too. It is necessary not to forget about advertising of the new service.
On the whole, the new payment system creation will influence positively the company’s development, analysts say. Moreover, clients will get new opportunities to simplify payment of the operator’s services.

Melamed has divided Sistema into three business-units

To simplify governing the assets, Leonid Melamed, president of AFK Sistema, has divided the holding into three business units: telecoms, the consumer sector and industry. The division was followed by corresponding personnel changes. The business unit Telecommunications Assets will be headed by Vitaly Savelyev, 1st vice-president of Sistema. The business unit will manage telecoms and media assets, including MTS, Comstar-UTS, Sistema-Mass Media and other subsidiaries in Russia, and the Indian subsidiary Shyam Telelink.
Another direction, Consumer Assets, will be headed by the former head of Sistema-Gals Felix Evtushenkov. He has been also appointed for the position of vice-president of the holding. Sergey Boev, vice president of the company, will head the business unit High Technology and Industry, which will be engaged in hi-tech and venture projects in the field of the state-private partnership and in the activity of Sitronix and RTI Sistems companies.
According to experts, the corporation will also include functional complexes, such as: the Complex of Strategy and Development (the head – 1st vice president Anton Abugov); the Finance Complex (senior vice president Aleksey Buyanov); the Property Complex (senior vice president Sergey Drozdov); the Complex for Legal Matters (vice president Anna Goldin), the Complex of Foreign Relations ( Sergey Cheremin, appointed for the position of senior vice president); the Administrative Complex (vice president Ruslan Almakaev); the Complex for Corporate Communications (Gennadi Frolov); the Complex for Internal Control and Audit (Olga Shurigina). All the heads of the business units and complexes will obey to Sistema’s president Leonid Melamed. (30/07/2008)
Melamed has made a rational decision. The control strengthening over the holding’s directions must be positive for Sistema’s business. Such structure will allow to focus on particular directions and to increase responsibility of managers. Further reorganization is expected in business units and complexes.

Operators’ incomes from universal services (US) are growing

In 2008 Rossvyaz is planning to collect RUB 10.3 bn to the reserve of universal servicing. Last year the Department collected RUB 7.5 bn and paid RUB 4.4 bn as a compensation to operators of universal services. The rest RUB 3.1 bn are the funds for those operators, who did not applied for the compensation or did not prepare necessary papers in time. In 2007 the total amount of operators’ incomes from universal services was around RUB 20.3 mn.
Universal services include monetary telephones and centres of collective Internet access. As universal services provision is unprofitable, US operators, mainly MRK and the Post of Russia, receive compensations from the special reserve of Rossvyaz.
In 2005 all Russia’s operators began to assign 1.2% of their profit to the US fund. As of the end of 2005 the fund had RUB 1.7 bn. According to the fund, there were over 100 thousand monetary telephones and over 28 thousand of centres of collective Internet access. In 2008 Rossvyaz is planning to collect RUB 10.3 bn. Over 1st half-year of 2008 around RUB 6 bn has been already collected. Since last year Rossvyaz has been recouping for damages every quarter instead of every half-year. In 1st quarter of 2008 Rossvyaz recouped for damages RUB 1.8 bn. (ComNews, 11/08/2008)
According to experts, not all operators have finished organizing US centres by the date fixed in their contracts. The problems are connected primarily with the level of efforts: as a rule, operators have charge of monetary telephones, the amount of which is thousands. In 2007 MRK had charge of schools connection to Internet in accordance with the national project Education, experts remind.

Enhancement of the procedure for entering the market for new operators

On August 15th Naum Marder, a new deputy to Minister of Communications, and Aleksey Vasilyev, deputy to director general of FGUOP CNIIS, held the meeting of the section of the Science and Technical Council, devoted to the change of the current dialing plan when choosing an DLD/ILD operator. The market participants support the regulator’s initiative, reminding it is necessary to maintain equality among competitors.
According to the Ministry of Communications’ authorities, all operators, pretending to codes for DLD/ILD communications, will not be able to obtain access to subscribers under the current procedure of codes distribution. The Ministry representatives decided to collect offers from operators about the present system enhancement. (19/08/2008)
According to experts, it is necessary to enhance the procedure of new operators’ entering the market. However, it may cause that operators, already working on the market, will lose the funds, invested in the codes advertising. In case the codes are changed from two-digit to three-digit ones, the operators will have to spend their funds on “teaching” advertising for subscribers. Meanwhile, operators, which only plan to enter the market are more loyal to possible changes.

6. Personnel Changes

Mikhail Shamolin has replaced Leonid Melamed in the Council of the Association GSM. The replacement of MTS representative was the result of personnel changes in the company: on May 29th of 2008 Leonid Melamed, ex-president of MTS, headed AFK Sistema.

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Irina Chekun has been appointed deputy to director general on personnel management of CJSC Sonic Duo. This decision was made by the company’s shareholders at the special meeting on July 11th. (AK&M, 11/07/2008)

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The RF president Dmitry Medvedev has commissioned his Advisor Leonid Reiman the head of interagency task force on introduction of passports and visas of new generation in the country. Leonid Reiman is replacing Viktor Ivanov.

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Igor Zharov has been appointed acting deputy to director general on development and exploitation of MTT. Previously the position was held by Stanislav Miron, which is quitting the company on July 11th.
Igor Zharov will be engaged in the development, maintenance and network throughput enhancement of MTT network. Previously he was holding the managerial position in the management of the network exploitation.
Personnel changes in MTT began almost half-year ago. In the beginning of 2008 Igor Zabolotny was appointed director general of the company, replacing Konstantin Solodukhin. K. Solodukhin has taken the similar position in Rostelecom. Georgy Cherni, former director on sale of communications services to operators, has followed Solodukhin. Alexander Yakovenko, former marketing director, quitted MTT and became a director of the Department of Sales to Operators of Rostelecom in March of 2008. Zinaida Nedbailova replaced him in MTT in May.

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Dmitry Milovanysev, ex-deputy Minister of IT and Communications, has been appointed deputy to chairman of the Board of the Modern Development Institute (the former RIO-Centre)
Previously Dmitry Molovantsev had been working as deputy to Minister of Communications for 6 years, where he supervised matters, connected with IT development.

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ON July 11th Vitaly Stitsko was appointed director of the Department on Digital TV and New Technologies in Mass Media of the Ministry of Communications. He came to the Ministry from the Federal Agency For Press and Mass Communications (Rospechat), where he had been engaged in the technical policy in field of TV broadcasting and transfer to digital technology. Vitaly Stitsko will supervise matters of transfer to digital broadcasting in the Ministry.
The new Department was created in the Ministry in July. Igor Shegolev confirmed a new structure of the Ministry, including 10 departments instead of seven. Previously Minister had appointed another three directors of the departments. Oleg Dukhovnitski was appointed director of the Administrative department. Timur Arkhangelski headed the Department of International Cooperation and Maksut Shadaev became director of the Department of the State Policy in the field of Informatization and IT.

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RTKomm.Ru has declared about the appointment of Denis Stafeev the acting commercial director. From 1999 to 2001 he was working in CJSC RGC. In 2001-2002 he was working as a commercial director of Komsvyazenergo. From September of 2002 Stafeev was working in RTKomm.RU, where he was holding successively the positions of manager, head of the regional sales department, director of the regional sale management. From June of 2007 he was working as sales director.

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On July 14th of 2008 at the special meeting of the Svyaz-Bank shareholders they made a decision about the early termination of power of the Bank’s Board of directors and about election of new members. Alla Aleshkina, Irina Golovchenko, Nataliya Samkova, Sergey Lazurenko, Grigory Tsupric have became members of the new Board of directors.

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Andrey Lubin has been appointed director of the Department for Public Relations and Relations with Investors of Rostelecom. Previously the position was held by Anton Klimenko.
Anton Klimenko quitted Rostelecom in July of 2007. Afterwards the Department was broken up. In the beginning of November of 2007 Dmitry Erokhin resigned the position of the company’s director general.
This January Konstantin Solodukhin has become director general of Rostelecom and started the company’s reorganization.

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Minister of Communications Igor Shegolev has appointed Mikhail Leshenko his advisor. Mikhail Leshenko will supervise relations with Svyazinvest in the name of the Ministry.
M. Leshenko has been appointed Advisor to Minister of Communications quite recently, but he has been already included in the Committee on Strategic Development of the Board of directors of one Svyazinvest’s MRK – Uralsvyazinform. Previously he was working in financial structures and banks, including the investment bank Gamma Group, controlled by the well-known Danish lawyer Jeffry Galmond. The bank invested actively in the sector of communications. Being vice president of Gamma Group, Mikhail Leshenko had already got experience of interaction with Svyazinvest: in 2000 Gamma was a financial consultant of Svyazinvest on the integration of 11 telecoms of the Volga region. In September of 2001 Gamma and the holding became owners of 705 of RTK-Leasing, Rostelecom’s subsidiary. Gamma Group was acting as a buffer structure in some transactions with Rostelecom, Telecominvest and MTT.

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The Board of directors of Globus-Telecom has decided to appoint Sergey Semenov, former director of the Rostelecom’s Department for Work with the State Structures, president of the company. From 1991 to 2004 Semenov was working in various IT and telecoms companies. From 2004 to July of 2008 he was holding different position in Rostelecom.

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Alexander Abramkov has been appointed for the position of financial director of National Telecommunications (NTK) company. Previously this position was held by Andrey Reznik. The decision about Abramkov’s appointment was made at the meeting of the company’s board of directors on July 28th of 2008. Before NTK he had been working as deputy to director general on building and material and technical supplying of OJSC Gaspromneft.

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After the consolidation of VimpelCom, Golden Telecom and Corbina-Telecom there will be a new subdivision in the consolidated company, which will supervise business in the field of broadband Internet access. The subdivision will be headed by Alexander Malis. At that senior vice president of GT Andrey Patoka will be in charge of governing the business-sector in broadband access sector. Jean-Pierre Vandromm, vice president on business development of VimpelCom, will head mass sector.

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Vsevolod Rozanov has been appointed for the position of president and director general of Shyam Telelink Ltd, AFK Sistema’s subsidiary in India. Previously he was holding the position of MTS vice president on finance and investments.
Alexey Kornya, MTS director on controlling, has been appointed acting vice president on finance and investments of MTS. Previously the position of Shyam Telelink president was held by Raimond Armes. He will take the position of deputy to Rozanov in Shyam Telelink. The operator has got global objectives and it is necessary to strengthen the management.

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In accordance with the resolution of July 15 #1013-p of the RF Government, the composition of the Government Commission on Transport and Communications was confirmed. The Commission has been headed by Vice Prime Minister of the RF Sergey Ivanov. Igor Levitin, Minister of Transport, and Igor Shegolev, Minister of Communications, have been appointed deputies to Chairman of the commission. Vladimir Ampilogov, deputy director of the Department of Industrial Development of the RF Government, has been appointed executive secretary of the Commission.

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AFK Sistema is holding reorganization of its management structure. This decision was approved by the company’s Board of directors on July 26th of 2008. Three business units have appeared in the company, which will be in charge of governing Sistema’s subsidiaries. The business-unit Telecommunications Assets is a successor of the Complex of Telecoms Assets Development. It is headed by 1st vice president of AFK Vitaly Savelyev. Its functions include development and realization of the corporation’s telecommunications strategy, governing telecoms and mass media assets of AFK (MTS, Comstar-UTS, Sistema-Mass Media and other assets of Russia and the subsidiary in India)
The business unit Consumer Assets will focus on development of the business directions in the consumer sector (Detski Mir, Intourist, Medsi, MBRR) as well as companies of Sistema-Gals. It will be headed by vice president of AFK Felix Evtushenkov.

The business unit High Technologies and Industry will be engaged in matters, connected with Hi-Tech and venture projects of AFK as well as with projects in the field of the private-state partnership. The business-unit will be headed by vice president of Sistema Sergey Boev. He will also supervise the activity of Sitronix and RTI-Systems.
The corporation will also include functional complexes, such as: the Complex of Strategy and Development (the head – t1st vice president Anton Abugov); the Finance Complex (senior vice president Aleksey Buyanov); the Property Complex (senior vice president Sergey Drozdov); the Complex for Legal Matters (vice president Anna Goldin), the Complex of Foreign Relations ( Sergey Cheremin, appointed for the position of senior vice president); the Administrative Complex (vice president Ruslan Almakaev); the Complex for Corporate Communications (Gennadi Frolov); the Complex for Internal Control and Audit (Olga Shurigina). All the heads of the business-units and complexes will obey to Sistema president Leonid Melamed.

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According to the order of the Ministry of Industry and Trade of the RF, Vladimir Minaev has been appointed for the position of director of the Department of Electronic Industry. In 1973-2003 he was serving in the RF Military Forces. In 2004-2008 he was holding the position of head of the Department, deputy director of the Department of Defense-Industrial Complex of the Ministry of Industry and Power System.

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Nikolai Leonov has been appointed deputy to director general of FGUP MGRS. The appointment has been coordinated by Rossvyaz. Oleg Chutov, previously holding this position, was transferred to the Ministry of Communications. Besides, Yevgeny Meichik resigned his position of deputy to director general of MGRS because of the transfer to the Ministry of Defense.

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On July 29th of 2008 the Board of directors of OJSC Central Telegraph confirmed the Board, consisting of 8 people, with the term from August 1st of 2008 to July 31st of 2009. The new board includes: Ludmila Anisimova, accountant general of Central Telegraph; Anatoly Grintsov, deputy to director general on security and regime; Vyacheslav Kozelski, 1st deputy to director general; Oleg Kurnyavtsev, financial director; Vasily Matrenin, deputy to director general on strategic development; Tigran Pogosyan, deputy to director general on commercial activity; Alexander Prikazchikov, deputy to director general on organizational development and business support; Aleksander Rebrikov, deputy to director general – technical director.

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Pavel Repin has been appointed deputy to director general – commercial director of OJSC Centertelecom. Previously he was working as commercial director of Internet Resheniya company. The former commercial director of Centertelecom Rasyam Valishev has quitted the company.
IN August of 1993 Repin began to work in AOZT Sofi as a commercial representative. From September 1993 to June of 2006 he was working as a commercial representative, a manager on commercial activity development, a sales manager on Russia, manager on commercial activity development in the CIS countries and the Baltic countries of CJSC DHL International. In June of 2006 he took the position of commercial director in Internet Resheniya.

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After the change of shareholders of Eventis Telecom the former co-owner of this company Dmitry Ivanter and its former director general Aidar Kaliev are planning to develop business of Summa-Telecom. Ivanter has taken the leading position in Summa Capital holding and he will supervise the telecoms sector. Aidar Kaliev has been appointed director general of Summa Capital’s subsidiary Agregat Media, which will become a managing company for telecoms assets of Summa-telecom.
Who will develop the assets in the field of broadband Internet access has not been decided by the heads of the company yet. The former director of Agregat Media Vadim Sukhoverkhov quitted the company. Afterwards the holding was engaged in the assets development in the CIS. Aidar Kaliev from Kirgizstan was director general of Eventis Telecom and quitted the holding because of its owners change. In May of 2008 Eventis Telecom got a new owner Gleb Ovsyannikov, a minority shareholder of the retailing network Lenta. Simultaneously new director general Valery Malishkin came to the company. Aidar Kaliev, the former head of the Kirghiz company Electric Stations, is charged with the financial theft in the energy sector by the General Prosecutor’s office of the Kirghiz Republic.

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The Board of directors of OJSC Sibirtelecom has approved a new compound of the Board (11 people) with the term from August 11th of 2008 to August 10th of 2009. The Board consists of: Alexander Isaev, Chairman of the Board, the company’s director general; Ivan Borzenko, deputy to director general – director on security; Anatoly Grib, technical director; Ivan Dadikin, 1st deputy to director general; Dmitry Kurilov, commercial director; Valery Ratushni, administrative director; Nikolai Ribakov, deputy to director general – director on economics and finance; Dmitry Selivanov, director on projects management; Irina Snitko, director on Personnel management; Galina Khvoshonskaya, accountant general; Aleksander Sheifer, deputy to director general – director of the Novosibirsk subsidiary.

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Anna Goryainova has been appointed for the position of director on legal matters of the cell operator MegaFon. Moreover, she remains the company’s corporate secretary. Anna Goryinova is in charge of the whole legal activity of the company and the matters, which are under the competence of corporate secretary. In 2006-2007 Goryainova was working as an advisor to director general of MegaFon on international legal matters. Since 2007 she has been working as a corporate secretary of MegaFon. Vadim Semenov, ex-director on legal matters of the company will be working as deputy to director on legal matters.

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The RF Prime Minister Vladimir Putin has appointed Naum Marder deputy to Minister of Communications. He will supervise “matters of communications”. Boris Antonyuk, responsible for this direction in the former Ministry, is quitting the Ministry.
Before 1999 Naum Marder had been holding the position of deputy to minister of Communications. The day before Leonid Reiman was appointed head of the Ministry Naum Marder had held the meeting of the license commission and had distributed VimpelCom 900 MHz frequencies on the territory of three Russia’s regions (Siberia, the Volga Region and the Northern Caucasus).

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Director general of VimpelCom Aleksander Izosomov may not prolong his contract, expired in a year and half. The probable successor is Jean-Pierre Vandromme, head of Vimpelcom’s Russian subsidiary and former head of GT.
Izosimov became a head of Vimpelcom in summer of 2003. The previous contract had to expire in October of 2008, but in December of 2007 the Board of directors decided to prolong its term in advance till January of 2010. Under Izosimov VimpelCom solved problems with tax authorities, carried out the company’s re-branding, entered market of 6 CIS countries and began to develop markets of South-Easter Asia. After the acquisition of GT in February of 2008 VimpelCom became a multi-service operator. However, the rapid development was followed by conflicts between the company’s top-manager and shareholders: in summer of 2006 the Norwegian Telenor, disputing the purchase of the Ukrainian company URS, tried to amove Izosimov, but failed.

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MTS company declared that Aleksander Popovski had been appointed for the position of director of its business unit MTS Russia. Aleksander Popovski, the former director of the macro-region MTS South, has replaced Mikhail Shamolin. M. Shamolin was appointed president of OJSC MTS on May 29th of 2008.
From 1999 to 2001 A. Popovski was working in Kirovelectrosvyaz. In April of 2001 he took the position of director of MTS subsidiary in Kirov. From 2004 he was director of the macro-region of MTS the Volga region-North-West. In June of 2007 he was appointed for the position of director of the macro-region MTS South

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The RF Prime Minister Vladimir Putin has appointed Dmitry Severov deputy to Minister of Communications. Severov will be in charge of IT, informatization and digital TV and radio development. At that he will supervise two department: the Department of the State Policy in the field of Informatization and IT and the Department of Digital TV and New Technologies Use in Mass Media.

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The Board of directors of Dalsvyaz has made a decision to create two committees at the company’s Board of directors: on audit and on personnel and rewards. The committees’ activity will be targeted to improvement of decisions, taken by the Board, and to enhancement of corporate managmement. The Committee on audit consists of: Valery Degtyarev, director general of CJSC Professional Communications; Bogdan Golubitski, deputy to director of the Department for Corporate fiancé of OOJSC Svyazinvest; Yekaterina Vasilyeva, director of the Department for Corporate Finance of the Investment Block of KIT Finance Investment Bank. Valery Degtyarev has been elected Chairman of the Committee.
The Committee on Personnel and Rewards consists of: Aleksander Shevchuk, expert of the Association for Investors’ Rights protection; Nataliya Feoktistova, head of the Department for Corporate Management and Legal Support of OJSC Svyazinvest; Mikhail Alekseev, representative of OJSC Svyazinvest. Aleksander Shevchuk has been elected chairman of the Committee.

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Valery Taranov has been appointed director of the Department of the State Policy in the field of Communications. In 2001 V. Taranov became a head of the Department of Radio Devices of OJSC Elektrosvyaz of the Kostroma region. From 2002 he was working as a head of the Department for the State Control over Communications and Informatiozation in the RF on the Kostroma region. In 2004-2006 he was holding the position of head of the Department of the Federal Service on Supervision in the field of Communications in Moscow and the Moscow region. From 2006 to 2007 he was working as a deputy director of the Department for supervision and control I the field of IT and Communications of the Federal Service on Supervision in the field of Communications.