The Russian Telecommunications Market Development in October 2008

1. General Trends of the Market Development

Rostelecom gets ready to compete

Rostelecom declared about a new tariff plan introduction. The tariff plan provides reduction in price for domestic calls.
It is necessary to mention users of the new tariff plan must only use Rostelecom’s services of DLD communications (preselect regime). However, according to the legislation, a user is to be able to choose an operator for each call (hot choice regime).
Presently the hot choice regime is not very popular among subscribers. The main reason is that connection to the hot choice regime is a rather complicated procedure. In most region of the country a subscriber has to come to a signal office centre and write an application.
According to analysts, the new tariff plan introduction is the next step on the way of the LD communications market liberalization. On one hand, Rostelecom’s tariff plan will be more profitable for subscribers than that of MTT, and it will contribute to the operator’s subscriber base regulation. On other hand, the reduction in prices may affect the company’s revenue. Making permanent contracts, Rostelecom tries to attach clients. However, in case more beneficial contracts appear, subscribers may cancel their contracts with Rostelecom and it will impact the market share of the operator.
The hot choice regime will be hardly popular, experts say. A lot of people make calls to certain regions actually and they usually choose the most profitable operator, i.e. use preselect regime.

Sistema pledged 0.4% of MTS shares

AFK Sistema has pledged 0.4% of MTS shares for security of an in-group credit worth 35 mn USD. Sistema’s representatives note the credit will be already repaid in November. The pledged shareholding of MTS is assessed at 76 mn USD, i.e. twice as much as the credit amount.
In the end of 2Q2008 the consolidated debt of AFK Sistema came to 9.5 bn USD. The great part of the debt (46% or 3.1 bn USD) falls to Sistema’s telecoms assets, 26% - to the corporate centre, 11% - to Sistema-Gals, 7% - to Sitronix and the Moscow Bank of Reconstruction and Development each. From 4Q2008 to 3Q2009 Sistema’s telecoms subsidiaries will have to repay the debt worth 1.11 bn USD, including 987 mn USD of MTS.
The debts will be repaid by the company’s own funds and due to re-financing. There will not be any problems with re-financing, they say in the company. Not many Sistema’s assets are pledged: securities of Sistema-Gals, securities of Bashkirian oil companies and 25% +1 share of Svyazinvest. The rest assets of AFK, including Comstar-UTS and MTS, belong to the company. Besides, Sistema has a good credit history and a stable financial position: according to the results of 2008 Sistema intends to achieve all financial figures, it planned, and to increase its revenue, in particular.
According to analysts, the holding may not have problems because of its pledge of 0.4% of MTS shares. Firstly, a credit, secured by a pledge, is always cheaper than an ordinary one. Secondly, the pledge amount is twice as much as the credit amount. Thirdly, the amount of 35 mn USD is insignificant for Sistema and its main shareholder, so the risk of MTS loss is minimal.
Sistema must not have problems with re-financing, experts say. The company has corrected its investment programme and thus, the part of funds may be spent on discharge of the debt.

MTS will invest 100 mn USD in communications in the Underground

MTS has finished 1st stage of the works on continuous communications provision in the Moscow Underground. The construction is planned to be finished by 2012. The investments will come to 100 mn USD. Today MTS services are available at 173 stations of the Moscow Underground. The project realization is divided into three stages.
1st stage has been already finished by the company: MTS subscribers can use all services of the operator on the loop line of the Underground. At 2nd stage the coverage must reach Sokolnicheskaya, Zamoskvoretskaya, Tagansko-Krasnopresnenskaya and Arbatsko-Pokrovskaya branches. And by 2011 MTS communications services must be available at all stations of the Underground.
In accordance with the project, all services, available outside (including high-speed data communications (EDGE), radio and mobile TV), will be available to subscribers in the Underground. The mobile TV services of DVB-H standard may be available in the Underground even before it will appear outside.
According to analysts, MTS plans on development of continuous communications in the Underground seem quite realistic. The investment amount seems sufficient, experts say as well.
However, the operator’s investments in the networks development in the Underground will not be covered soon as traffic is not so big there. Mobile Internet may contribute most to the company’s development under ground.

MegaFon is participating in the tender for an Iranian GSM license

On October 18th of 2008 the Iranian telecoms regulator Radio Communications and Regulation Organization (RCRU) finished to sell documents, necessary for participation in the tender for 3rd GSM license in the country. 13 companies acquired the documents. Three companies are foreign and one of them is CJSC MegaFon International.
RCRU changed terms for the tender documents acquisition on repeated occasions. Finally the regulator announced the date of the documents reception – November 1st of 2008. When considering the documents RCRU will pay attention to financial consistency, a company’s capital, lack of withdrawn licenses and a subscriber base that is to be no less than 2 mn subscribers overseas.
All the Big3 operators had planned to take part in the tender for the Iranian GSM license. However, MegaFon only confirmed its acquisition of the tender documents.
According to analysts, MegaFon has a chance to receive 3rd GSM license in Iran. In many respects it depends on shareholders’ interest to enter this market as well as on evaluation of the operator’s application by the Iranians.
The license is a very interesting asset in respect to subscriber base growth. Presently penetration of mobile communications is 60% in Iran. Penetration of fixed-line communications is around 35%. The market seems to be very promising. On other hand there are political risks.
In case MegaFon wins the tender it will get 49% in a new operator, experts say. The question of investments in the network construction will have to be solved.

Svyaznoi is buying Cifrograd

VTB Capital is completing a transaction on acquisition of 15% of the second largest cell retail company Svyaznoi. Simultaneously Svyaznoi is buying its competitor Cifrograd (as of September 1st Cifrograd included 1450 salons. In 2007 the company’s turnover was RUB 19.8 bn, the market share was 10%). The stake in the consolidated company will cost 100 mn USD to VTB. The transaction must be completed by mid November.
In the end of September Sergey Vasilyev, Chairman of the Board of directors of an investment group Russian Funds, said the group had consolidated 75% of Cifrograd shares in the interest of the consortium of investors. Cifrograd held additional issue then, selling investors 25% of its business. 100% of the retail company were assessed at 67 mn USD, and according to Russian Funds, they were ready to sell their stake in the retail company.
VTB may resell its stake in Svyaznoi, though it will hardly happen in the nearest time, experts say. In total Cifrograd and Svyaznoi may be evaluated at 200-300 mn USD.

The market of electronic payment will expand

According to participants of the RIW-2008 conference, in 2009 the number of companies, involved in electronic trade, will increase. The sector of electronic payments will expand due to the growth of broadband Internet access penetration. The amount of plastic cards users will increase as well. Besides, large companies from retailing and telecommunications segments come to the sector. New operator and banking cards processors will enter the market, too.
Cell market participants operate actively in the segment of electronic trade. In the nearest time the share of Internet payments will reach 10% of all payments for mobile communications services. MTS has launched a service “Platezh-Online” recently.

According to experts, in 2009 the market of electronic payment systems will double. It will be caused by the growth of broadband Internet access penetration. Experts expect the rapid growth of electronic commerce. The market of electronic commerce in Russia is almost saturated, some experts say. Сompanies look for their niches on the market and start to provide special services.

2. The Market Participants

Akado will spend 300 mn USD on development of broadband access and digital TV

In 2009 Akado company is planning to invest 200 mn USD in the development of broadband access and digital television. The greater part of the funds will be spend on Akado-Stolitsa development. This amount does not include acquisition of new assets. 60% of the funds are planned to be spent on the development of a Moscow subdivision, the rest 40% will be invested in the development of existing regional operators. The investments will be provided by the company itself and its shareholders. Akado shareholders are Viktor Vekselberg (51%) and Yuri Pripachkin (49%).
In 2009 VimpelCom is planning to invest around 540 mn in the development of broadband access and digital TV. Comstar-UTS intends to spend 100 mn USD in 2008-2009.
According to analysts, though this market is saturated, Akado will probably take its share on it.
Speaking of the long-term outlooks of this segment, analysts consider Akado may take 2nd or 3rd place among the leading companies.

Sistema may sell Svyazinvest

Sistema has not decided yet what to do with its 25% of Svyazinvest. They consider a possibility of its selling to Rostelecom. Sistema assesses the asset at 2.1 bn USD. They will make a decision about Svyazinvest after the company’s development strategy, which is to be considered by the shareholders in 2008, is published.
The blocking holding of Svyazinvest was bought by Sistema in the interest of its subsidiary Comstar-UTS from Leonid Blavatnik in December of 2006. Sistema was also ready to acquire the rest state-owned shares, in case the authorities had decided to hold privatization. However, the authorities are not planning to hold privatization of Svyazinvest in the nearest time.
According to analysts we can hardly say whether Svyazinvest blocking shareholding will be sold to Rostelecom, though if the transaction is conducted, Rostelecom will be able to convert the company’s shares in any case. Since Svyazinvest’s privatization is postponed , the sale of Svyazinvest’s shareholding is logical as currently the asset is not considered profitable. The funds, received by Sistema from the transaction, may be spent on its regional as well as overseas expansion. Analysts have different opinions on the transaction amount. On one hand the sale of Svyazinvest for 2.1 bn USD is considered good, on other hand this amount is not enough.

Alfa Group is planning to become a Telenor’s minority shareholder

The conflict between Alfa Group and Telenor may terminate. The companies are planning to make a transaction, according to which Alfa Group will give Telenor 43.5% of Kievstar shares and Telenor will give Alfa Group about 12% of VimpelCom voting shares. Altimo will also receive 5% of Telenor. However, the Norwegians declared they were not ready to reduce their share in the Russian company.
This spring director general of Altimo Aleksey Reznikovich said Altimo wanted to sell its shares in Kievstar and MegaFon. Vladimir Yevtushenkov, the major shareholder of AFK Sistema, mentioned about the company’s plans to exchange some Russian assets for a share in a large overseas telecommunications company.
At the meeting with the RF President Mikhail Fridman said to Dmitry Medevedev Alfa Group was interested in its participation in telecoms projects abroad, and in entering the markets of the Near East and Asia, in particular. According to Fridman’s forecasts, financial institutes consolidation will develop in Russia and the government and private banks will take an active part in it.
Previously the same transaction had been already mentioned, but later it was put off, analysts remind. The transaction may contribute to settlement of the old conflict between shareholders, some experts say. According to others, it is unpredictable since the conflict might not be settled fully. They also mention the matter concerns repurchase of the operator’s securities from its minority shareholders. In case the companies exchange shares, it will influence capitalization positively in a medium-term outlook. At that it is necessary to take into account that Alfa will have to make an offer to minority shareholders.
According to experts, Mikhail Fridman’s forecast about the consolidation between financial institutes and the government has a good chance to be realized in the nearest future. The government will have to interfere since the number of institutions, suffering the crisis, is growing.

MTS will place five-year bonds

Despite the crisis the Big3 operator MTS is planning to place five-year bonds worth RUB 10 bn. The bonds are being placed through public subscription at the Moscow Interbank Currency Exchange (MMVB) on October 23rd. Gasprombank is acting as an organizer. The loan will be floated according to the programme of placing rouble bonds at RUB 30 bn, approved by the operator in summer 2007. In June of 2008 MTS placed its 1st trunsh worth RUB 10 bn successfully (the rate of 1st coupon is 8.7%).
MTS may spend the received funds on its debts refinancing (from 4Q08 to 3Q09 MTS will have to pay back 987 mn USD). Or the operator may invest the money in acquisition of cheapening assets. SMARTS acquisition is being considered as one of the possible variants.
According to analysts, MTS has a chance to float the loan successfully though the situation is complicated on the market since investors speak of big risks. Obviously, the company’s authorities have made some preliminary agreements with state corporations, which will act as purchasers in the transaction. Thus, the largest state-owned financial institutes are the most probable purchasers. Besides, high growth rates, good ratings and excellent credit history of MTS will influence positively the operator’s image.

Sky Link will be sold without GSM

The Federal Antimonopoly Service (FAS) permitted AFK Sistema to acquire 50% of Sky Link shares. However, the corporation will have to sell the operator’s GSM assets within 3 years. Last year Sky Link won GSM licenses in 47 Russia’s regions.
Previously AFK, owning 50% of Sky Link shares, had submitted a petition about acquisition of the rest half of the operator. Sistema was going to bring the operator in its another asset, MTS. However, the Association-800, consisting of regional operators of cell communications (and changing its name recently), decided that the merger of Sky Link and MTS would limit the competition on the regional GSM market and addressed to FAS.
The asset is valuable due to its loyal subscriber base of wireless broadband access mostly. When the 3G networks development is impossible in Moscow, it may become a competitive advantage. However, Sistema is not interested in consolidation of Sky Link’s debt, which comes to around 600 mn USD.
The acquisition of Sky Link by Sistema and the further merger of the operator with MTS will give the company a competitive advantage compared to the Big3 operators, analysts say. On other hand, the sale of Sky Link will allow the corporation get rid of the company’s debt. Though Sistema will hardly receive an obtainable price for the asset, experts note.

Mamut is planning to sell Euroset

Aleksander Mamut intends to sell 25% of Euroset for no less than 150 mn USD to a financial retail company, which will obtain an exclusive right to a sale of financial products and will define independently the financial retailing development. The candidates are Russian Standard, Home Credit and Alfa Group. Previously FAS had approved the transaction on the sale of 49.9% of the biggest cell retail company to VimpelCom. According to the conditions, set by the regulator, after the transaction with VimpelCom, Euroset will have to remain a multi-brand network within three years. Besides, the retail company is forbidden to show preference to any cell operator when making contracts with subscribers.
Aleksander Mamut expects the transaction will be terminated until the end of this year. He did not announce the value of 49.9% of Euroset, though, according to experts, it is around 225 mn USD.
Aleksander Mamut bought 100% of the retail company for 1.25 bn USD, including the company’s debt worth 850 mn USD, from its co-owners Yevgeny Chichvarkin and Timur Artemyev in September. Without taking the debt into account, the amount of the transaction came to around 400 mn USD. In case Mamut sells 49.9% of the company for 225 mn USD to VimpelCom now, Euroset will be evaluated at more than 450 mn USD without taking its debt into account.
According to experts, the evaluation of Euroset at 450 mn is a very positive step, which demonstrates that assets are evaluated with big bonus since they are strategically important for cell operators. Experts do not exclude VimpelCom has an option for its share increase in the company.

GTF purchased the shareholding of Svobodnaya Kassa

An investment fund Global Technology Fund (GTF), created under the initiative of Eventis Telecom’s owner Gleb Ognyannikov, acquired 31% of a Russian network of payment terminals Svobodnaya Kassa and got an option for the purchase of 20% of the company more. The investments in the project come to 30 mn USD. In the nearest future GTF is planning to consolidate its two previous acquisitions, Expresspay and Moldpay, providing services of payment reception in Ukraine and Moldova, on the basis of Svobodnaya Kassa.
Previously 100% of Svobodnaya Kassa had belonged to a Cyprus offshore company Ever-West. GTF redeemed additional shares issue of the network and became an owner of 31% of the company’s shares. The rest shares belong to the Cyprus company.
The received funds will be spent by Svobodnaya Kassa on its terminal networks expansion in regions. Besides, the company intends to enter the market of the CIS and BRIC.
According to experts, all countries, where the share of payments in cash is big, are potentially interesting markets. Possessing efficient technologies and experience of payment systems development, the company is able to receive payments in 2-3 countries more with the support of GTF in 2008-2009. They say in the company, they have already carried out marketing research in some countries and are negotiating with potential partners.

eHouse acquired Internet shops from Marta

eHouse company, uniting over 25 Internet shops, acquired several more shops from Marta holding, which suffers financial problems. In total around 20 assets were acquired, the largest of which are shops of consumer electronics 003.ru, m3x.ru, bytehnika.ru, tehnopolis.ru. Their total turnover hascome to 45-48 mn USD over 2008. eHouse paid around 55 mn USD for all Marta’s assets. eHouse will invest about 5 mn USD in a new warehouse, cars and logistics.
According to the information from mass media, the assets were acquired from Internet Trade company, a Marta’s subsidiary. The holding had sold the assets before. Currently Marta is not controlling Internet Trade’s business.
The holding had its first technical in May, delaying retirement of bonds worth RUB 700 mn for one day. In August the company was not able to redeem securities worth RUB 1.202 bn. And in September Elexkor company, developing the main asset of the holding, Grossmart network, declared its bankruptcy. Since the beginning of the year the Moscow Arbitration Court has registered 317 claims from banks and suppliers against Marta’s structures worth RUB 2.74 bn.
According to experts, 5.5 mn USD is a low price for such projects as 003.ru. This Internet shop has already offset front-end investments and surpassed traditional retail networks in consumer electronics selling in terms of profitability. According to analysts EBITDA profitability of 003.ru is 12-15% minimum. Consumer electronics selling is a profitable business (15-30% profitability), and 003.ru is a business with well-developed logistics. The low price, paid by eHouse, is a result of financial problems of Marta, experts say. Probably the holding needed to sell the assets as soon as possible.

Synterra acquired Inar

A group of companies Synterra acquired a regional Internet provider CJSC Inar. 100% of the asset were bought by Peter Star, involved in the group, with its own funds. Peter Star redeemed Inar shares from private investors. The amount of the transaction is not disclosed. In future Synterra intends to consolidate Inar’s subsidiary base with technological infrastructure of TD-Telecom, acquired this July.
Thus, Peter Star continues to realize its regional development programme. The acquisition will strengthen the company’s presence in the North-Western Federal Region as due to Inar’s resources used for the company’s and Synterra’s projects realization as due to synergetic effect, provided by the consolidation of Inar’s subscriber base with TD-Telecom’s technological infrastructure.
According to analysts, the acquisition of CJSC Inar could cost 10-20 mn USD for Peter Star. TD-Telecom possesses a serious fiber structure and the main line Arkhangelsk-Severodvinsk. Inar has a good subscriber base. The consolidation of the two companies may increase the operators’ coverage and increase their subscriber zone due sufficient marketing support, experts note.

AFK Sistema disclosed its debts

In the nearest four quarters AFK Sistema and its subsidiaries will have to pay out debts worth 3.1 bn USD. In the end of 2Q08 Sistema’s total consolidated debt came to 9.5 bn USD, one third of which must be paid out next year. The main part of these 3.1 bn USD are loans of telecoms subsidiaries: from 4Q08 to 3Q09 inclusive they have to pay out 1.11 bn USD, including 987 mn USD of MTS. However, according to Sistema’s president Leonid Melamed the crisis affects telecoms business to a lesser degree: the subsidiaries are able to cope with their debts. Actually in the end of June of 2008 MTS had 1.1 bn USD of free funds, according to the information from the company.
The other subsidiaries’ loans will be repaid or refinanced as independently as due to new loans. In particular, in 1Q09 AFK and its subsidiaries will repay around 300 mn USD independently. To pay the rest they are planning to re-borrow. Several credit lines have been already opened for AFK and its companies.
In the end of June 2008 net debt of AFK only exceeded its consolidated OIBDA by 60%. Melamed promised to reduce expenses and investments (all the subsidiaries are reconsidering their investment programmes for 2009) and to use various opportunities in order to increase the company’s revenue.
Previously analysts of some investment banks (the Deutsche Bank, in particular) had not excepted in 2009 AFK would demand especially high dividends of MTS, the most profitable of its subsidiaries (in 2008 the operator paid 60% of net profit for 2007 as dividends, i.e. 1.2 bn USD). AFK has no other way out, analysts say. The crisis proved again: Sistema is a telecoms holding first of all, and MTS is the only of all its subsidiaries, able to repay its debt worth 1 bn USD. To pay debts of other companies AFK will have either to sell a part of its assets or to ask the government for help or to draw out the money from MTS. Even in case AFK decides to sell a part of its non-public assets (Sistema Gals or Sky Link, for instance), it will receive almost nothing currently, experts say. It is impossible to refinance debts because of the crisis. And Sistema has just asked Vneshekonombank for help for the sake of Sitronix. This subsidiary will have to repay 125 mn USD, taken from the Alexandria Bank with the Dresdner Bank’s participation.
Another way to find the money is to reduce investments considerably, analysts suppose. In 4Q08 the holding’s consolidated investments will reduce 30% compared to the guideline, and investments of the non-public subsidiaries will be halved, according to the data from AFK.

Russian Railways has not decided yet what to do with Rostelecom

State-owned companies Russian Railways(RZD) and an InG Alrosa acquired 45% of KIT Finance’s shares each. At that RZD was guaranteed it could become a single owner of KIT Finance at any moment. The new owners also acquired KIT Finance’s assets, including Rostelecom.
RZD has not decided yet what to do with Rostelecom shareholding. Currently the Ministry of Economic Development and the Ministry of Communications are considering different variants of work with Svyazinvest and RZD will be expecting for a decision. Previously both Ministries had been charged to estimate whether a transaction, within which some state-owned company would redeem 40% of Rostelecom from KIT Finance, was possible and appropriate
Meanwhile RZD will monitor Rostelecom shares not to be spent among KIT Finance’s shareholders, RZD manager says. Alrosa’s position on KIT Finance shares will be coordinated with RZD.
The fact that KIT Finance possessed 40% of Rostelecom, was known in summer 2007. The shareholding had been redeemed by the bank for the sale to a managing company Lider, controlled by an insurance company Sogas within a year and a half. Currently KIT Finance’s representatives are holding 3 of 11 seats in Rostelecom’s Board of directors, one seat is being held by Sogas’s representative.
RZD has already possessed one telecoms asset, 100% of Transtelecom (TTK), the largest competitor of Rostelecom on the market of traffic transit. A few years ago Rostelecom’s co-owners offered to consolidate TT with Rostelecom. The merger would lead to creation of a largest telecoms operator, working with natural people and corporations. However, TTK refused. TTK has its development strategy, approved by RZD, regarding entering the market of natural people and amendments will hardly appear in the strategy.

3. Tension Lines

Cell retail companies introduce commission fee

The biggest cell retail company Euroset has introduced commission fee at the rate of 3% for payment reception from all cell operators’ subscribers. From October 6th Svyaznoi is introducing its commission fee at the rate of 2%. According to analysts, all the rest market participants will do the same in the nearest time. On the whole their market share is 60% of all subscribers’ payments. The companies’ decision is the result of change of VimpelCom’s and MegaFon’s dealer policy, according to which their commission fees to retails companies were reduced.
The previous conditions had been set in 2005, when communications services were paid for through operators’ cashier’s offices and communications dealers’ salons. The current conditions allow salons’ owners to earn much more than other operators’ agents.
According to the old scheme the commission fee for dealers was 2.95% for a payment, carried out through their payment system. Now VimpelCom has set a progressive scale: a dealer receives 0.9% for a payment RUB 89.9 and less, 1.4% for RUB 189.9, 1.9 % b 2,4% for RUB 290 and more.
Since October 1st MegaFon has followed VimpelCom’s example. The operator has reduced dealer commission fee from 2.2% to 1.7%. According to MTS, Euroset introduced its commission fee, not submitting this to their approval.
The commission fee introduction will not impact the number of subscribers, paying through their communications salons, Euroset’s representatives say. They also add other cell retail companies will follow their example soon.
In the nearest future all cell retail companies will introduce their own commission fee for payment reception, experts agree. According to experts’ estimates, it will allow retail companies increase their profit. In 2009 Euroset’s additional business is assessed at 40-45 mn USD by analysts (30 mn USD - Svyaznoi). At that the commission fee introduction will not impact the amount of payments, made through retail companies, experts say.

The Court of Bermudas returned MegaFon to Galmond

The Supreme Court of Bermudas ordered to give MegaFon’s shares to a Danish lawyer Jeffrey Galmond. He has already promised to give them to Alisher Usmanov. According to the court verdict, IPOC property will be given to Galmond in the form of shares.
The main assets of IPOC are 26.4% of MegaFon (8% directly and 18.4% through 58.9% of Telecominvest). AF Telecom made an agreement about these assets redemption in summer 2007, when it acquired 15% of Telecominvest (4.7% of MegaFon). The only condition was termination of alldisputes between shareholders, which had been lasting for 4 years, and IPOC liquidation. In May of 2008 the Supreme Court of Bermudas answered a petition of the local Finance Ministry about liquidation of IPOC and its affiliated companies. Three months later the meeting of IPOC creditors was held, but no one was present at the meeting. Thus, the court had to order to give the fund assets to its owner Jeffrey Galmond. It means the assets will not be put up for auction. According to the agreement, made in May, Galmond must give MegaFon’s and Telecominvest’s shares to AF Telecom at once. In case the court decision is positive Alisher Usmanov, owning just 4.7% of MegaFon, will increase his shareholding to 31.1%.
According to some experts, the transaction between Galmond and Usmanov has been already paid. They only need to recoup some costs and pay out IPOC’s debt to Galmond’s structures. Telecominvest had pledged 23.1% of MegaFon’s shares (Usmanov and Galmond’s joint stake) for security of AF Telecom’s credit. According to the source, close to one of the participants, the shares had been pledged in Sberbank for security of the credit worth 1.5 bn USD while the transaction amount is much more different. .

RTKomm.RU disconnected Interned in schools

On October 15th of 2008 RTKomm.RU stopped to provide services of Internet access in 531 Russian schools. Not long before the company had sent these schools contracts, which had had to be re-made, but no contract had been returned to the company. Authorities of some regions have already made or are making contracts with MRK for schools servicing.
Among the five regions, where schools had to be disconnected from Internet, (the Altai region, Mordoviya, Chuvashiya, the Belgorod region and Buryatiya), they noted in the two regions that additional funds for schools connection to Internet had been budgeted before and at that time they had just changed an operator, providing the services.
According to Volgatelecom, there is no disconnection of schools in the Volga region.
RTKomm.RU provided services of Internet access at fixed tariffs of around RU 1.5 thousand a month (128 kbit/s) in all regions, analysts remind. According to the information from Volgatelecom, in Chuvashiya the service on unlimited Internet access (128 kbit/s) costs RUB 330 a month and in the Belgorod region this service, provided by Centertelecom, is RUB 500 a month.

4. Business and Authorities

State Duma will legalize payment terminals

On October 1st 310 of 450 State Duma deputies voted for the bill “On Activity on Reception of Payment from Natural People, Made by Payment Agents” and amendments to corresponding acts of the legislation. According to the bill, payment agents have a right to make contracts of payment reception with a services supplier directly. The scheme of agents had been legal previously as well, but last year the more wide interpretation of the Law “ On Banks and banking activity” was possible. Not all deputies approved the bill. For example, Pavel Medvedev stated the law made possible activity of pseudobanks, working in Internet and through counter-agents. According to him, the law creators offer an unpunished banking system.
According to experts, adoption of the law, regulating payment terminals’ activity, was expected and necessary. The law will allow to remove obstacles for development of the payment market and to enhance availability of financial services.

State Duma rejected amendments to the Law “On Communications”

The RF State Duma rejected the bill “About Making Amendments to the Federal Law “On Communications” in 1st reading. According to the bill, operators would be obliged to exercise permanent control over international mobile equipment identifiers (IMEI) and insert information about them in their own information base. Operators would also have to stop communications services provision to subscribers, whose phones were considered as stolen, in accordance with a court decision.
48 deputies only vote for enactment of the bill. Vladimir Gorbachev, 1st deputy chairman of the Committee on Information policy, Information Technologies and Communications recommended to reject the bill. According to him, the bill will make operators carry out activity of law enforcement bodies.
According to experts, theft of cell phones is growing in Russia. So amendments, directed to counteraction, are necessary. There are different ways of the problem solving, experts say. Firstly, owners of cell phones should watch over their phones. Secondly, the social situation in Russia impacts development of adolescent delinquency, and until social problems are solved, any innovative technologies will be ineffective. Thirdly, there is a social subdivision at the Ministry of Internal Affairs that is to struggle with crimes in this field.

The Ministry of Communications is returning RUB 2.4 bn to the budget

In 2008 within the programme on electronic foreign passports issue the Ministry of Communications appropriated RUB 2.8 bn. The Ministry offered to return RUB 2.4 bn to the budget provisionally. Igor Shegolev, Minister of Communications, offered to transfer these funds to the budget of 2009. It concerns the funds, appropriated by the Ministry of Communications on development of an interdepartmental system of information exchange. Around RUB 460 mn are put aside for recently declared tenders ( for the system’s technical support and rework of local systems). This money is not planned to be returned to the budget. Departments, participating in the programme, requested the Ministry of Communications to transfer unused funds to the budget of 2009. They were provided for creation of the departmental segment of the system on producing, execution and control over passports of new generation.
Since 2006 the Federal Migration Service has distributed over 200 000 of passports of new generation (in total it distributes about 5 mn passports annually).
Analysts have different opinions on the regulator’s initiative. Vladislav Kochetkov agrees with the funds return to the budget. Ht says it demonstrates the regulator’s aspiration for effective development of the budget resources. According to other analysts, the Communications Ministry’s initiative can be assessed as sabotage and inability to realize the project. Moreover, one of the experts doubts whether it is necessary to introduce new-generation foreign passports.

Outlooks of domestic electronic industry

Deputy Minister of Industry Yuri Borisov stated it was necessary to invest RUB 300 bn in Russia’s electronic industry by 2015. Then, according to him, our country will be able to take a strong position on the world market and maintain its internal market. It is necessary to mention, this amount exceeds by RUB 100 bn the amount of funds, declared in the Federal Programme before.
The State Duma speaker Boris Grizlov noted they needed large-scale measures and a certain change of the development strategy in order to develop the country’s electronic industry. These additional measures will cost much for the government. Currently the electronic industry is receiving funds in accordance with the Federal Programme “Development of Electronic Component Base and Radio electronics” for 2008-2015. The amount of funds comes to RUB 187 bn. Thus, the government offers to appropriate RUB 113 bn more to the planned investments.
According to the government’s plans, Russian companies may take 65-70% of the market of systems and facilities of radio frequency security, 70% of the market of digital television and 15-20% of the market of mobile communications facilities.
Analysts have different opinions on the matter. According to some of them, possible investments in the domestic electronic industry can be estimated as positive, noting, however, it is necessary to invest in profitable and interesting projects. Then this sector may become competitive in the world. Other analysts are sceptic about the government’s plans as enterprises of electronic industry has a problem of strategic planning and the funds may be spent improperly.
Speaking of the development outlooks, Russia’s enterprises of electronics should focus on production of chips in future, experts say.

NTS is considering a matter about a normative base for MVNO

This autumn the Scientific and Technical Council of the Communications Ministry is considering a matter about a normative base for mobile virtual network operators (MVNO). The officials intend to develop procedures for license distribution for MVNO. At that the regulator will not oblige cell operators to receive them in their networks. The creators of the offers expect the first MVNO licenses will be already distributed this year.
To make MVNO official it is necessary to insert some additions to the order No.97 of the Ministry of Communications (“Requirements to construction of networks for general use”) and issue a special order of the Ministry on MVNO activity regulation, including licenses distribution. MVNO have been already admitted officiously in Russia: mobile networks without frequency resource use.
Deputy Minister of Communications Naum Marder speaks of the Ministry’s willingness to change legislation with regard to MVNO. The regulator does not intend to oblige operators to receive MVNO in their networks.
Some companies have already tried to start MVNO in regions, but the projects can’t be considered as successful. In 2007 Euroset in cooperation with SMARTS started a virtual network and within the first ten months it only managed to connect 8.5 thousand subscribers, less then a half of which were active.
The project realization won’t take a lot of time, experts suppose. At the same time they specify, the former Ministry of Communications had rushed to create a normative base for MVNO, though its authorities had agreed about this business model utility. At present the regulator and the Infocommunications Union are preparing a normative basis for licenses distribution for high-level MVNO (possessing full infrastructure). The first MVNO may appear in Russia until the end of 2008, experts expect.

Communications lines will be constructed without permit

In December the State Duma Committee on Information Policy, Information Technologies and Communications is submitting for consideration a bill “About Making Amendments in Article 6 of the Federal Law “On Communications”. In accordance with the document, operators will be able to construct communications lines without a corresponding permit from local authorities. Besides, deputies intend to broaden the conception “communications lines”, including radio mast installations as well as wireless communications objects in it.
In the nearest time the Committee is submitting the bills for consideration in different government bodies in order to estimate them. Afterwards the Committee will prepare the bill to be introduced at the session of State Duma in December 2008.
According to deputies, at present operators must receive too many permits and agreements when constructing communications structures. It creates administrative barriers, which impede development of the important branch and satisfaction of people’s needs. The rapid development of communications networks makes it necessary to construct a large number of standard communications structures.
The bill enactment will allow to precipitate the communications infrastructure development with the use of market mechanisms and will lead to reduction of budget expenses of natural people for telecoms services and energy input, deputies note.
The bills enactment is necessary, many experts say. New networks will be developed faster due to the bill and it is important for the 3G networks construction.

Tender for WiMAX frequencies

In 2009 the regulator will announce a tender for deficit frequencies in 2.3-2.4 GHz range, designed to provide broadband Internet access services on WiMAX technology. The range is designed for three operators and the tender will be transparent and public, the Communications Ministry promises.
The State Commission on Radio Frequencies has not distributed licenses for a half year already and there are a lot of applications for WiMAX range. However, the range is overloaded by radio electronic facilities and the former regulator did not distribute the deficit frequencies much. Few operators, including Summa Telecom, Synterra and Start Telecom, only managed to receive frequencies in this range. But no one of the operators has built a WiMAX network so far. The only operator, launching a mobile WiMAX network (for testing only), is Skartel company, a new operator on the market. Skartel networks work in 2.5-2.7 GHz range. The frequencies were obtained by the company due to other market participants buying up.
The 2.3-2.5 GHz range was opened by the Communications Ministry in spring, experts remind. The Ministry allowed commercial organizations to use the range. According to experts 2.3-2.4 GHz range is more available since it is quite clear, it has less limits, then 2.5GHz range. Huawei, Cisco, Motorola, Alvaron and other producers have base stations as well as subscriber terminals for this range, experts say.

The Ministry of Communications will reconsider license lists

The Ministry of Communications will reconsider the list of communications services, which are to be licensed. The State Duma Committee on Information Policy, Information Technologies and Communications has not prepared a corresponding bill so far.
In 2005 the RF government approved “The List of Communications Services, Inserted in Licenses for Carrying out Activity in the field of Communications Services Provision”. In accordance with this document, 20 services of communications are to be licensed, including local, international and domestic telecommunications, mobile radio communications, etc. The government was planning to reconsider the list every year, though the list has not been changed since 2005.
The list of licensed services must be reconsidered since it does not include all the existing kinds of communications, lawyers say. It has resulted in legal ambiguity that is to be eliminated. Any of new communications services must be included in the list. According to experts, consolidation of broadcasting and operator licenses for TV broadcasting services would be positive since the existing system of double licensing of these services by the same body is outdated. The system changing will reduce the process of licensing by 3-4 months. However, some analysts think the changes will be only technical and they do not expect for fundamental reconsideration of licensed services.

FAS will regulate roaming tariffs

The Interstate Council on Antimonopoly Policy of the CIS countries is considering a possibility for regulation of mobile operators’ roaming tariffs. The Council will introduce results of the research of CIS cell operators’ roaming tariffs by December.
Last May the European Parliament confirmed the Roaming Regulation in mobile networks of EU. After the regulation came in force consumer tariffs reduced 70% in EU.
Now the Interstate Council on Antimonopoly Policy in the CIS countries started to regulate roaming tariffs. FAS and antimonopoly bodies of the CIS decided to study roaming tariffs in more detail. The results of the study will be introduced in December.
It is necessary to mention that the RF legislation has not defined a term “an operator of mobile communications, taking significant position on a market”. Operators of fixed-line communications are only considered as significant operators. This April a deputy of State Duma Maksim Korobov has introduced amendments to the Federal Law “On Communications”, setting criteria to determine a mobile operator, holding significant position on the market. The document specifies and extends the concept “an operator, holding significant position in the network of communications for general use” in accordance with requirements of the market and the communications sector. According to Article 2 of the Federal Law “On Communications” a significant operator is an operator, that either possesses no less than 25% of removable capacity in a certain area or throughout Russia or is able to transit no less than 25% of traffic. A significant operator’s activity is regulated by the government and it is also obliged to introduce non-discriminating conditions for connection.
According to experts’ assessment, under the current competition on the Russian cell market, regulation of retailing roaming tariffs is inexpedient.
Speaking of subscriber roaming tariff, it is beyond reason for its regulation, lawyers note. Speaking of interoperator roaming tariffs, the regulation may be applied for operators, holding significant position on the market.

The scheme of DLD traffic will be changed

The Ministry of Communications may make changes in the scheme of DLD traffic on operators’ networks. As a result the cost price for such calls may be halved almost. It is caused by the appearance of new generation networks of communications (NGN), based upon switching of data burst instead of circuit switching. The Ministry of Communications has just begun to consider the situation.
Currently a DLD call goes through three networks: local, zone and DLD networks. For an operator of long distance communications the main part of a call cost price is payment it transfers to zone operators for a call origination (its transit to a network of long distance communications) and its “landing”. Zone operators, in their turn, pay for the same services to local operators. The payment to a zone operator is twice as much than to a local one. For instance, MGTS takes RUB 0.4 per minute from operators for a zone call and from RUB 0.22 for a local call. Thus, due to abolition of the zone level a cost price for a DLD call could be halved almost.
According to the consolidated statements of Rostelecom, the largest Russian operator of long distance communications, in 2007 the company earned RUB 50 bn, transiting DLD and ILD traffic. RUB 27.86 were paid to local and zone operators afterwards.
According to analysts, possessing other technical decisions it is not rational to transit traffic through DLD zone networks. Besides, the new rules will demand change of the legislation and it will take a lot of time until new laws come in force. The zone level abolition will make the legislation closer to international practice, experts say. It will also lead to reduction of cost price for long distance communications and reduction of tariffs for end users. The abolition of multi-level scheme of DLD traffic transit would be logical as operators of NGN networks are able to transit voice traffic directly to each other, using IP-networks.

5. Economics of Innovations

Synterra is investing in NIOKR

Synterra is planning to invest money in the development of the domestic system of network security. The operator will invest around RUB 50-70 mn in the project within a year. Synterra’s project will be realized by leading specialists in the field of information security from Russian force departments and academic scientific schools. MFI Soft is acting as a general subcontractor: it will be engaged in the product promotion, introduction and maintenance. Specialist from Synterra’s subdivision in St. Petersburg will test the security system in a special pilot zone of the operator’s network.
According to the company it is necessary to invest in domestic scientific projects, which are able to protect Synterra’s infrastructure and create favourable conditions for realization and development of telecoms projects for clients.
Analysts assess the company’s plans as positive. In the conditions of the information infrastructure rapid development and the growth of danger for telecoms networks the matter of network security is quite sharp. According to some experts, in case the project succeeds, other operators may get interested and a lot of companies will want to acquire the product. According to others, network security systems will be only demanded by a few structures, the governmental departments, in particular.
The amount of investments (RUB 50-70 mn) must be sufficient for the project realization, experts note.

Scartel is planning to introduce WiMAX network in Venezuela.

Scartel company is planning to launch WiMAX network in Venezuela. This matter was discussed during the visit of Vice Prime Minister Igor Sechin to Venezuela. Sergey Chemizov, director of the state-owned corporation Rostehnologii, is acting as a supervisor of the project.
The preliminary agreement about the planned joint project on WiMAX network construction was made on the government level. In case the project on WiMAX introduction is realized, it will be 1st case when Russia builds a platform of such high technologies in the West.
WiMAX has been already working in Moscow and St. Petersburg. The investments in the project come to around 200 mn USD and 100 mn more are planned to be invested. The price for the network use is 50 USD. However, the price will go down as long as WiMAX is spread.
Analysts have different opinions about the possible project in Venezuela. According to some of them, it is a natural consequence of intergovernmental relations and it is mutually beneficial for both parties. Venezuela attracts investments and Russian can enter a new rapidly growing market. However, it may be just an expensive marketing step, others say. Besides, Russia possesses a great area with good outlooks for business development as well.

Alisher Usmanov invested in Universal-telecom

Alisher Usmanov, a co-owner of MegaFon, is investing in Universal-telecom company, which is engaged in distance supervision over objects on GPS and GLONASS systems basis. Usmanov possesses a control shareholding of the company and he will be the major investor of the project. The rest shares belong to the company’s management.
The owners of Universal-telecom are planning to invest around 15 mn USD in Geolife, a project of distance monitoring, search and control over mobile objects, which works on the basis of GPS and GLONASS technologies. The most of the investments will be spent on maps acquisition. Currently the company has maps of the whole Russia’s territory.
The project has been working on the basis of GPS so far. The terminal receives a signal of navigation satellites, fixes coordinates and sends information to Geolife’s server. Thus, a Geolife’s subscriber gets an access to information about location of an object.
At present the company provides services to 1500-2000 subscribers. However, in the nearest 3 years they are planning to increase the subscriber base to 200 000 people and to 1 mn in future.

It is necessary to mention until the end of 2008 the government will introduce a bill about navigation activity in the RF, which will allow to prohibit the use of the American GPS navigation system on the state-owned and municipal transport.
According to analysts, this technology is quite interesting. If the marketing is correct, the technology will be required on the market and Alisher Usmanov’s investments will return. It is also important that the government is interested in GLONASS development and promotion. It is difficult to assess investments in the project yet since Sitronix may become a competitor of Universal-telecom. Sitronix declared about a possible production of terminals, supporting the satellite navigation system GLONASS.
However, the matter about prices for subscriber devices is still open. The proper price policy is necessary since there are cheaper offers on the market.

The Chinese offer to disclose IT-codes

The Chinese government offers to introduce an unprecedented system of import products certification, according to which producers of electronic devices and software will be obliged to disclose schemes and codes of their products. As a rule, such information is considered as intellectual property.
A corresponding law may come in force in May of 2009. Admittedly it will concern electronic printed circuit cards, copy machines and digital devices, used at home.
These products will be imported to the Chinese market in the following way: a producer introduces the Chinese source data on these devices – schemes, technical description, etc, - which are examined by corresponding bodies and in case they meet all requirements they are admitted for sale on the Chinese market. In case a company refuses to disclose data, the Chinese government has a right to prohibit import of the company’s product, its production and sale on the country’s market.

According to the Chinese authorities, such measures are aimed at the struggle with crimes in the field of IT, attacks of hackers and viruses distribution.
However, disclosed data may be obtained by local companies, which compete with foreign producers, experts note. Chinese companies may get an access to IT-vendors’ intellectual property if the government makes foreigners disclose codes and schemes of their products. Thus, the law about intellectual property protection will become ineffective since the current bill does not guarantee that secret information will be only used by controlling bodies and will not be obtained by competitors.
Moreover, according to experts, it will also prejudice information security technologies. For instance, Sony Corporation will have to introduce encoding algorithms in the systems of noncontact payment cards Felica. The law may lead to serious discrepancies between countries and to termination of international commercial agreements.

Angstrem russianized crystals for foreign passports

A Russian producer of microelectronics Angstrem declared about the delivery of 1st pilot batch of microchips for foreign biopassports to a federal state-owned unitary enterprise NTC Atlas. 15 thousand chips were delivered and 10 thousand chips more will be delivered to Atals by Sitronix. Over 2.5 mn foreign biopassports will be replaced by Russian analogs. 1st pilot batch of microchips, produced by Angstrem and tested and certified by FSB, was received by Atlas company, which is engaged in foreign biopassports production. In case the schemes are accepted in Atlas, by 2009 around 6 mn new foreign passports will be replaced and distributed.
Angstrem also intends to deliver 95 thousand chips more to Atals. Micron company, a subsidiary of Sitronix, is planning to deliver 10 thousand chips. Primarily, Micron was planning to supply the chips this June.
Sitronix’s representatives remind that their chips were produced in France in STM company, a production line of which had been acquired by Sitronix.

AFK Sistema launched WiMAX in Armenia

AFK Sistema has launched WiMAX network in Erevan. According to Comstar-UTS’s calculations, around 1 mn people will use the network by the end of the year. The network was constructed on the equipment of an American producer Airspan Networks and works in 3.6-3.8 GHz range. It covers Erevan and 18 towns in the regions. The base stations are connected with their own or rented fiber-optic or radio-relay links. The investments in the project come to 4.6 mn USD in Erevan in 2007-2008. In 2009 the investments will depend on results of the network operating in 2008. A Comstar’s Armenian subsidiary Kornet-AM informed the operator intended to connect 400 clients to already existing 600 and the expected ARPU was 70 USD.

According to experts, WiMAX launch will solve the problem of digital divide between Erevan and regions of Armenia. A lot of Armenians will get a possibility to use telephone and surf the Internet. This project launch will make Comstar-UTS a national telecoms operator in Armenia, since Erevan is the major area, which is of interest to telecoms operators and providers. Any telecoms service in the regions will be the same as in Erevan in terms of quality and price. According to analysts, WiMAX technology was chosen due to rapid networks development. Moreover, this technology makes it possible to provide services in hard-to-reach areas taking into account the mountain landscape of Armenia and the small density of population, when traditional wired decisions are unprofitable.

6. Personnel Changes

Oleg Gizatullin has been appointed director general of a Russian system integrator “Open Technologies” (Otkritiye Tekhonologii). He had been already taking this position from 2003 to 2006. Mikhail Kozhevnikov, heading Open Technologies since 2006 was transferred to T-platforms company for the position of commercial director.
Previously Oleg Gizatullin was elected Chairman of the Board of directors of Open Technologies.
Gizatullin will be in charge of operation management of the company and supervision of key business directions. He will be also responsible for strategic business development, projects coordination, control over relations with big customers and governmental organizations.

***
Aleksander Parkhomenko has been appointed director general of Avaya company in Russia and the CIS. He will be in charge of business development of one of the leading suppliers of applications, systems and services for business communications.
Aleksander Parkhomenko replaced Dmitry Kondratyev on this position. He will be engaged in the company management, aimed at further business development in Russian and the CIS.

At the extraordinary meeting MTS shareholders confirmed the company’s Board of directors, consisting of 9 people. Now MTS Board of directors includes three independent representatives: Mohanbir Giani, Paul Ostling and newly-elected Daniel Crowford.
Besides, Mikhail Shamolin, president of MTS, appointed for this position in May of 2008, was included in the company’s Board as well as Sergey Drozdov, senior vice president of AFK Sistema, head of the Property Department of the corporation.
MTS Board of directors still consists of: Anton Abugov, 1st vice president of AFK and head of the Strategy and Development Complex; Vitaly Savelyev, 1st vice president of Sistema and head of the Telecommunications Assets Development Complex; Aleksey Buyanov, senior vice president of AFK; Tatyana Yevtushenkova, advisor to president of Sberbank of Russia.

We remind that the election of a new Board is the result of requirements of the Russian legislation. According to the RF legislation, in case a number of shareholders exceeds 10 thousand people, a company’s Board must consist of no less than 9 members. Previously MTS Board of directors only consisted of 7 people.
***
Shareholders of CJSC Synterra elected a new Board of directors. Now the Board consists of 7 people. The Board of directors includes: Yevgeny Vasilyev, the former official of the Ministry of Communications, heading CJSC Peter Star in September and Aur Dordjiev, a lawyer from Synterra Cyprus Limited (owns 100% of Synterra).
All the other members of the Board of directors have remained the same. The Board still includes Vitaly Slizen, director general of Synterra; Aleksey Ananyev, Chairman of the Board of directors of Promsvyazbank; Artur Akopyan, the former financial director of the company, now holding the position of financial director in Rambler Media; Igor Mangul, a representative of Promsvyazkapital; and Sergey Kharitonov, deputy chairman of the Consulting Council of Technoserv.
***
Oksana Kovalevskaya has been appointed vice president on strategy of OJSC Sitronix. Previously she was acting as deputy director general on strategy and M&A in OJSC Sistema Mass Media. Kovalevskaya will continue the work on entering new geographical and branch markets, on the business strategy development and on strengthening leading positions on the international market.
***
Shareholders of MTT, a DLD/ILD operator, replaced the company’s director general. Igor Zabolotny was replaced by Viktor Bertyakov, deputy director general on IT of MTT.
The decision about the replacement was taken at the general meeting of shareholders on October 6th of 2008. Since January of 2008 after Konstantin Solodukhin, former director general had headed Rostelecom, Igor Zabolotny was acting as the company’s director general. He was appointed for this position in the end of June 2008.
***
President of an alternative telecoms operator Comstar-UTS Sergey Pridantsev established two new positions in the company’s management. Dmitry Karmanov has been appointed vice president on personnel management and Kirill Andreichenko has taken the position of vice president on corporate management and legal matters. The new vice presidents are in charge of assets consolidation, introduction of unified management standards and personnel policy in all companies and subdivisions of the group
***
Anres Kyaerik has been appointed marketing director of Synterra. He will supervise matters of strategic and product marketing and the block of marketing communications of the company. Moreover, he will participate in the development of Synterra’s marketing strategies.
***
Nikolai Churaev has been appointed deputy director general on commercial activity of MTT. Before MTT in 2007-2008 he was working in CJSC Sky Link as marketing director. In 2006-2007 he was heading the marketing Department in OJSC Start Telecom. Before Nikolai Churaev had worked as a manager in Stelt Telecom (2001-2003), as a specialist on project promotion in CJSC Comstar and as a chief specialist on strategic marketing in CJSC Kompaniya Teranstelecom.
***
Elena Selvich has been appointed deputy director general of OJSC Svyazinvest. She will supervise matters of economics and finance. Previously she was holding the position of executive director – director of the Department of Economics and Finance of Svyazinvest.
Elena Sevich has been working in Svyazinvest since September 2005. She held positions of director of the Department of Finance and executive director – director of the Department of Economics and Finance.

Gennady Kolesnikov has been appointed for the position of director on corporate management of Summa Capital. He is a member of the Board of directors of CJSC Nortgas, of the Board of directors of the Association of Financial Information Distribution. He is also a member of the Expert Council on Corporate Management at FSFR of Russia.
***

Georgy Makarov has been appointed advisor to director general of OJSC Dalsvyaz. Previously he was working as a director of the Khabarovsk subsidiary of Dalsvyaz. Dmitry Temchenko has been appointed acting director of the Khabarovsk subsidiary. Previously Temchenko held the position of deputy director on economics and finance of the Khabarovsk subsidiary.
***
Kristof Joanblank has been appointed deputy director general of Orange Business Services in Russian and the CIS. Before Orange Business Services he had worked as a marketing director of IP-services on B2B market of a Polish national operator TP, the control shareholding of which belongs to France Telecom. In Russian Kristof Joanblank will be in charge of investment strategy realization, the company’s position strengthening on the market of medium and small enterprises. He will also supervise matters of control over services quality.

7. Figures and facts

Centertelecom has collected 525 000 subscribers of broadband Internet access. It is 72% of the preplanned number of users by the end of 2008. According to the operator’s estimates, by the end of 2008 the number of the service users will exceed 730 000 people and it will allow to increase the operator’s market share to 47|5 on the market of Internet access in the Central Federal Region. (37% in 2007).

***
2500 iPhones 3G were sold by the big3 operators over three days of official sales.

***

562 Russian schools were informed by RTKomm.RU about possible disconnection of Internet.

***
RUB 14 000 000 000 is the amount of the government investments in the programme of biopassports issue.

***
179 540 000 people is the number of cell subscribers in Russia. Last month the number of subscribers (according to the number of active SIM cards) increased by 2.2 mn people compared to August 2008. Compared to September the growth is 14.2 mn people.

***
In 2008 the Russian market of mobile advertising came to 8 mn USD. It is about 0.15 of the total amount of advertising expenses in the country. According to the forecast of MTS, the mobile advertising will increase 84% annually and in 2012 it will reach 95.1 mn USD.

The annual export of computer programmes in Russia comes to $2 000 000 000

***
833 308 new subscribers were connected by VimpelCom within September. Thus, the operator increased its market share (in terms of tis subscriber base) by 0.1% to 25.1%.

***
RUB 375 000 000 are planned to be invested by Universal-Telecom in a new telecommunications project GeoLife, a distance monitoring system on the basis of GPS and GLONASS.

***
1 000 000 cell phones with GPS were sold in 2008.

***
$10 000 000 will be lent by the Slavyanski Bank to a designer of rpducts for digital television. These funds will be used to the group’s business development in the field of programme decisions for digital TV systems and for creation of demo broadcasting stations in particular.

***

RUB 2 900 000 000 is the revenue, expected by Er-Telecom holding by the end of the year. Over 9 months of 2008 the holding has increased its revenue 2.4 times to RUB 1. 967 bn compared to the same period of 2007.

***
Tele1-Russian is planning to invest $200 000 000 - 300 000 000 in the construction of new cellular networks

***
15 000 special FON-routers are necessary to be distributed in order to launch a project of Comstar-UTS, a Russian alternative operator, Wi-Fi FON.