30 июля '09

The Russian Telecommunications Market Development June-July 2009

Analytical Report. Prepared by the Independent Institute of New Economics Study

1. General Trends of Market Development

Roscomnadzor is ready for ‘digitization”

Roscomnadzor is ready to grant licenses for construction of digital TV networks. Besides, the Service has found frequencies for the second multiplex. Roscomnadzor just has to wait when the government confirms the concept of the federal special-purpose programme “Development of TV and Radio Broadcasting in the RF for 2009-2015”. The Ministry of Communications submitted the document to the Governmental Commission of TV and Radio Broadcasting, presided by Sergey Sobyanin, in December 2008. The project implies the step-by-step transfer to digital TV and radio broadcasting: first the transfer will be carried out in the Far East and the South of Siberia in 2010-2011, and by 2015 digital TV will cover the whole Russia’s territory, according to the Ministry of Communications. The programmed developers have assessed the digitization process at RUR 127 bn, RUR 80 bn are expected to be obtained from the federal budget. The concept was confirmed at the Ministry of Finance on March 5th. The Ministry of Economic Development approved the project in February and currently it has been sent to the government.
Roscomnadzor has considered the opportunities of the further development of digital TV. On the whole in the frameworks of digitization they are planning to create 3 digital packages of free access (multiplex), containing 20-24 channels. The first multiplex, confirmed by the Governmental Commission on TV and Radio Broadcasting in December of 2008, contains 8 TV channels: 1 Channel, Russia, Vesty Plus, Culture, Sport, Children’s Channel, NTV and 5th Channel; and 3 radio channels: Radio of Russia, Mayak, Vesty FM. This package will be free of charge for subscribers. The second and the third multiplexes, which will be launched later, will contain 12-16 free channels. Roscomnadzor has found frequencies for the second multiplex. The channels, included in this package, have not been defined yet. Besides, Sergey Sitnikov has stated about a possibility to start digital TV broadcasting in Moscow.
According to analysts, frequencies for the second and third multiplexes were the key problem. Currently the matter has been settled. However, the channels have to invest in the multiplex creation themselves, which is quite difficult due to their financial condition. As a result, the real start of the multiplexes might be postponed.


Time and price of calls have continued going down

Cell operators continue noticing the decrease in their subscribers’ activity. Vimpelcom has admitted that its ARPU has gone down as well as MTS.
Vimpelcom’s ARPU in the cellular segment of Russia has been RUR 307, 4.4% decrease compared to 1Q2008 and 10% decease compared to 4Q2008. The operator’s MOU was equal to 203 min, 10.9% decrease compared to 4Q2008. However, MOU increased by 2.2% y.o.y. According to Vimpelcom, the decrease in ARPU and MOU has been caused by seasonal factors as well as unstable economic situation. The operator does not expect for the further decline.
In 1Q2009 ARPU of MTS deceased by 4% y.o.y. and by 9% q.o.q. The operator’s MOU went down by 6% to 205 min, compared to 4Q2008, but increased by 6% y.o.y. According to the operator, the reasons for the slowdown are seasonal factors, the growth of subscriber base in the mass segment, the decline in business activity and consumer demand. Megafon has not reported for 1Q2009 so far. However, according to the company, they have already fixed the decline in cell services consumption at the beginning of the year. However, both Vimpelcom’s competitors confirm that that the situation became more stable this spring.
According to experts, MTS and Vimpelcom have different approaches to their subscriber bases. MTS try to stimulate its subscriber base to consume communications services despite crisis and Vimpelcom have been increasing its tariffs.

Euroset reduces the size of its head office

The leading cell retailing company Euroset has carried out its head office restructuring again, reducing the staff by 30%. Previously the company’s office was reorganized in October 2008. Currently the reforms have concerned the office structure and some departments have been reorganized fully. We note the reorganization does not concern shop-assistants. In spring the company declared it intended to get rid of salons in Armenia and Moldova. The company has not already worked in Uzbekistan, Azerbaijan and Baltic countries. The decision on staff reduction was made by authorities of some other companies, selling mobile phones in Russia, including Svyaznoy and Division.
According to experts, the decision to restructure the company’s management, taking into account the decline in mobile phones sales, could be effective and despite this measure is quite serious it can’t be called dramatic. Contrary to Euroset other market participants do not have serious problems with the number of their employees.
The measure of changing the companies’ management structure is forced due to the dramatic decline of mobile phones sales, experts say. The measure is to make the companies’ structure more flexible and effective.

Vimpelcom may redeem Millicom’s assets in Cambodia, Sri Lanka and Laos

Millicom International Cellular S.A. has changed the plans of its further development in Asia. The company intends to focus on African and Latin American countries. Since July 2nd the assets in Cambodia, Sri Lanka and Laos have been offered for sale. The bank Goldman Sachs has been chosen as a consultant of the transaction. The Asian assets of Millicom contain: 100% of Celtel in Sri Lanka (2.1 million subscribers or 17% of the local market, according to iKS-Consulting), 58.4% of Mobitel in Cambodia (2.2 million subscribers, 50% of the local market), 74.1% of Millicom Lao Co Ltd in Laos (250 thousand subscribers, 20% of the local market). The total revenue of Millicom’s Asian assets was equal to 68 mn USD according to the results of 1Q2009. Millicom’s assets in Sri Lanka and Cambodia are of interest to the second biggest operator in Malaysia Telecom Axiata, which is ready to offer 500 mn USD for the asset in Sri Lanka and 200 mn USD for the Cambodian subsidiary of Millicom.
Vimpelcom, stating about his interest to Millicom’s subsidiaries, can’t be able to offer higher price and redeem Millicom’s assets in Cambodia, Sri Lanka and Laos, experts say. It is caused mostly by the operator’s debts, analysts say. The purchase is only possible if the operator is supported by the corresponding structures. Vimpelcom has been interested in Asian assets since the region is important for the company as the key strategic direction of its international expansion. Currently Vimpelcom is providing cell communications services in the CIS countries (Kazakhstan, Ukraine, Tajikistan, Uzbekistan, Armenia and Georgia). Since May 2009 the operator has been providing services in Cambodia. The operator also owns 40% of the Vietnamese GTel Mobile, the network of which is going to be launched in May.
Will Vimpelcom be able to use the chance and realize its plans and redeem Millicom’s Asian asserts in Cambodia, Sri Lanka and Laos? The question is still open.
Troyka Dialog: telecommunications companies will stop paying dividends to shareholders until 2012
According to analysts from Troyka Dialog, most of big participants of the Russian telecoms sector will either stop or reduce considerably the payment of dividends to their shareholders until 2010. It is caused by crisis and the companies’ individual plans, connected with assets restructuring. The list of companies, refusing to pay dividends for 2008, includes such leaders of the market as Svyazinvest, MGTS, Megafon, Vimpelcom and Synterra. According to the results of the research, Svyazinvest’ subsidiaries are also planning to reduce payments to their shareholders due to the further restructuring of the holding’s assets, which will demand significant funds. According to analysts, Vimpelcom would prefer to pay off the current debt, using all possible ways and therefore the dividends will not be paid until 2010.
Among the few companies, not included in the list, there are Rostelecom and MTS. Rostelecom will spend 20% of its net profit on dividends. MTS will pay dividends since its major shareholder AFK Sistema needs cash. MTS may decrease its payments as according to the charter the operator has to spend no less than 50% of net profit on dividends. In 2008 the company decided to spend 60 % of net profit on dividends.
According to analysts of the sector, payment of dividend must remain stable in operators of fixed-line communications and holdings, for which payment of dividends is of vital importance since it is the basis for distribution of money between the companies. Another factor for the company to pay dividends is participation of the government, support or participation of power structures in a holding’s management. The probable reorganization in some big companies might lead to the change of the dividend policy, i.e. reduction of payments are inevitable.
In current unstable conditions most telecoms companies will start paying dividends if their services consumption grows.

Euroset will not work with MVNO

Euroset has refused the projects of MVNO (Mobile Virtual Network Operator) and decided to focus on its key business development. The main reason for the refusal was low profitability of the business.
We remind the operator was one of the first, launching a MVNO operator and planning to become a federal virtual company. In 2007 Euroset started working on SMARTS’ networks and connecting subscribers under its own brand. Over a year the company only sold 9.5 thousand SIM cards and had to leave this market.
After in 2009 the Ministry of Communications allowed to grant licenses for MVNO, virtual operators got a good possibility for the further development. However, Euroset is not interested in this business any more.
According to experts, Euroset refused its MVNO projects due to their unprofitability for the company as well as the consolidation with the leading cell operator Vimpelcom. According to analysts, Euroset’s MVNO project failed because of several factors. Firstly, the retailing company could not offer interesting tariff plans to its subscribers, secondly, promotion of the service was insufficient, thirdly, the cooperation with SMARTS was not successful. Nevertheless, some experts assess the chance of MVNO development on the Russian market as positive, noting that such projects might be of interest to big companies with the access to the large number of clients. Besides, according to some analysts, MVNO will develop as in Western countries, i.e. the operators will provide various services. However, some analysts say that the government’s initiatives regarding MVNO is late, since cell operator have already made profitable offers for various categories of the population. Thus, it will be quite hard to compete and the service can’t become widespread. According to the forecasts, in 2-3 years MVNO will take no more than 1% of the total subscriber base of cell operators.

4th federal cellular operator is being created in Russia

According to Svyazinvest’s statement, the operator starts creating 4th federal operator of cellular communications. The new cell operator will be created on the basis of Svyazinvest’s cell assets and the consolidation of some regional operators. Aleksey Nichiporenko, 1st deputy director general of Megafon, has been invited to head the new cellular company. He will be engaged in strategic matters of the new cell operator creation. Nichiporenko was working in Megafon for 15 year. He took the offer of the transfer after it had become known that Megafon refused its plans on expansion in foreign countries.
Regarding Svyazinvest the decision on the holding’s reorganization was taken as well as the strategy of the holding’s reforming. The project of the strategy, approved at the session of the special governmental commission, presided by Sergey Sobyanin, includes an item about a new cellular operator creation. Such regional companies as Tele2, SMARTS, Motiv and NTK, the total subscriber base of which is 17.2 million people, may be included in the new operator. Another variant of a big cell operator creation is taking the control over one of Big3 operators. Megafon is the most probable candidature.
Currently Svyazinvest consists of 13 regional operators of cell communications, operating in 29 regions of Russia. The biggest of them are Uralsvyazinform and Nizhegorodskaya Sotovaya Svyaz. (20/06/09).
According to experts, 4th federal cell operator must be created in Russia. Svyazinvest possesses enough resources and possibility to do it. One of the reasons for the new cell operator creation is that the government possesses no operator of cell communications. This industry becomes strategic and its role will be growing in future. According to other counties’ experience, governmental investments in telecoms sector are effective. Thus, the RF government has decided to create a state-owned federal operator of cellular communications.
On other hand, the creation of the federal cell operator on the basis of Svyazinvest’s assets will be complicated. The process of the holding’s reorganization may take a lot of time. Besides, the process will be expensive. Thus, in the nearest future the new cell operator can’t become a serious competitor to Big3 operators.

MTS is interested in the markets of Kazakhstan and Azerbaijan

According to MTS’ authorities, the market of Kazakhstan and Azerbaijan are the most interesting for expansion. Besides, these regions have good results in their economic development and paying ability of the population. We note the operator has been working in Armenia, Turkmenistan, Uzbekistan, Byelorussia and Ukraine.
According to the statistics, around 95.5% of residents are provided with cell communications in Kazakhstan. Three operators are working in the region at present. They are GSM Kazakhstan, owned by TeliaSonera (51% of the asset) and Kazakhtelecom (49%), Kar-tel, controlled by Vimpelcom, and Mobile Telecom Service under Neo brand, owned by Kazakhtelecom. In 2007 MTS negotiated with Kazakhstantelcom about the acquisition of Mobile Telecom Services, which takes around 3% on the telecoms market.
Regarding Azerbaijan there are three biggest cell operators: Azercell, controlled by TeliaSonera, Bakcell, owned by the Israeli GTIB, and Azerfon. Penetration in the region is 69%.
Currently MTS’ key objectives are the acquisition of Comstar-UTS, payment of dividends to shareholders worth 1.16 bn USD as well as repayment of the debt worth 1.2 bn USD. So the operator has not made any attempts to enter the markets of Kazakhstan and Azerbaijan so far.
According to analysts, Kazakhstan and Azerbaijan are the most attractive markets among the CIS countries due to low saturation as well as economic development. MTS’ financial condition is such that the operator does not possess additional resources to acquire a local operator, since MTS will not increase their debt and will focus on their key objectives. However, the operator could enter these markets in case of rebates.
If the company decides to enter the markets of Kazakhstan and Azerbaijan, it can take 25-30% of each country’s market. Besides, MTS has remained the leader in terms of subscriber base overseas and the operator must manage to maintain its position after entering the markets of Kazakhstan and Azerbaijan.

Euroset is closing the business in Moldova and Armenia

Euroset’s authorities have decided to terminate its business in Moldova (12 salons) and Armenia (32 shops). It was caused by small revenue in these regions. We note the retailing company has already left the markets of Baltic countries, Uzbekistan and Azerbaijan. Leaving the markets of Moldova and Armenia by the company will reduce the company’s costs in unstable financial conditions. Besides, Eurosets’ business could be also closed in Byelorussia and Kirghizia.
According to the company’s management, the former authorities made a mistake, supposing that the more regions were developed the bigger was the company’s value. The company’s value depends on its revenue, Alexander Malis, president of Euroset says.
We remind in 2004 Euroset entered the Ukrainian market, where 350 shops have been opened so far. In 2005 the company entered the Byelorussian market and in 2006 the company started providing its services in Kirghizia, Moldova, Armenia, Uzbekistan, Georgia, Azerbaijan, Lithuania, Estonia and Latvia. After less than a half-year of work on the market of Azerbaijan the company closed its business there. The reason was that the population used mostly second-hand phones, which brought insignificant profit. In Uzbekistan 40 shops were closed in 2008 by the same reason. In 2008 the shops in Lithuania, Estonia and Latvia were sold as well. The Baltic countries were a springboard to enter the European market. We note currently there are around 3790 Euroset’s shops in Russia.
According to analysts, Euroset has made the correct and logical decision, allowing to reduce the company’s costs, adjust the business and enhance the company’s profitability. Currently the CIS markets are not promising and profitable, especially in crisis conditions. The market participants focus mostly on highly profitable projects with the quickest pay-back period as well as on maintenance and development of their networks on the markets, which develop faster and where the political and economic environment is quite stable.
The Russian market is a priority market for the company’s business development, experts say. Although the Russian market is oversaturated and has strong competition, Euroset is taking the strong position there. So far, the company has been the leader among the retailing companies in terms of the number of shops. Besides, Euroset is controlled by the strong shareholder, which is interested in its business profitability.

2. Market Participants

Megafon wants to acquire Synterra

Megafon has submitted the application to FAS for the acquisition of 100% of shares of CJSC Synterra. FAS will conduct analysis of the markets, where both companies work. If there are any threats to free competition, both companies can be made certain terms.
The question concerns not only CJSC Synterra, but the whole group of companies Synterra. Previously, Megafon’s director general Sergey Soldatenkov stated about the company’s intention to become the leader jn the market of broadband access by 2012. To do it Megafon will acquire Internet-providers, planning to spend up to 500 mn USD on the transactions in 2009, according to Soldatenkov.
The group of companies Synterra was founded in 2005 by consolidation of assets in the field of fixed-line communications, which belonged to the “Petersburg” group of communicators. Megafon had been controlled by this group until last summer. After the number of re-sales at the end of 2006, the control over Synterra was taken by Promsvyazcapital (owned by the senator Dmitry Ananyev and his brother Aleksey Ananyev). However, some experts do not exclude the “Petersburg” communicators have been still influencing the company.
According to analysts, Megafon’s choice is not proper. The acquisition of Synterra will allow the operator to save on traffic transit. However, the acquisition will not contribute to the operator’s entering the market of broadband access: in fact Synterra is not represented in the retailing segment, while in the corporate segment the company’s clients are generally governmental structures, the budgets of which are being reduced due to crisis. Synterra is an operator for operators, and over the half of the company’s revenue is contributed by channels leasing. Even in regions, where the companies of the group provide services of broadband access, they are not the leaders. For example, in St. Petersburg PeterStar’s share is less than 1%. The reason for the transaction may be that Synterra has big debts. The company needs to be sold, analysts say.

Svyazinvest creates a partnership

At the last meeting Svyazinvest’s board of directors has approved the company’s top-managers’ offers to create a non-commercial partnership, engaged in financing the banking services and consultants, who work out the schemes of the company’s reorganization. The holding is not able to finance the banking services and consultants itself, so they decided to create a non-commercial partnership. By this autumn Svyazinvest has to define a model of its assets consolidation.
We remind Svyazinvest already created another non-commercial partnership “Centre for investigation of problems of the telecommunications market development” in 2001. The centre was aimed at enhancement of telecoms organizations’ competitiveness, creation and maintenance of these organizations’ attractive image and reputation for Russian and foreign investors, consumers, etc. The Centre’s founders were Svyazinvest, all MRKs and Rostelecom. MRKs and Rostelecom had to pay the regularly membership dues of 0.4%-1% of the annual revenue to the Centre. However, at the beginning of 2008 Svyazinvest’s subsidiaries refused to pay the dues to the Centre. At the end of 2008 Svyazinvest decided to reorganize this non-commercial partnership.
According to experts, the new partnership does not refer to the previous one. The difference is that MRKs and Rostelecom will not have to pay membership dues. MRKs as a part of the holding will invest in each particular project. When Svyazinvest becomes an operating company, the non-commercial partnership will become unnecessary.

A new operator of wireless broadband access will fight for regional subscribers

In 2009 the fund Icon Private Equity is going to invest 200 mn USD in creation of an operator, providing services of wireless broadband access on WiMAX technology under Freshtel brand. Apart from the sum, invested by the fund, the operator will also obtain a credit from several Chinese banks for the purchase of Huawei equipment. The sum of the credit has not been disclosed. Freshtel intends to acquire 2 000 base stations.
The new operator will not compete with Comstar’s and Scartel’s (Yota) WiMAX projects. Freshtel will construct its networks in the regions, where the services of operators of wired broadband access are provided badly. The company is planning to launch its network in the Central and Southern federal regions of the RF. Freshtel is going to offer cheap unlimited tariff plans. The operator’s prices will be lower than those of local wired operators. The network’s commercial start has been scheduled to this autumn. Sagem, Seon and Huawei will be providers of subscriber equipment.
One WiMAX base station may cost from 100 000 USD, according to experts. The investments of Icon Private Equity are equal to Big3 operators’ investments, made during their networks development. However, it is not obvious that WiMAX technology will become as mass as GSM. In 2008 the market of broadband access, without taking into account UMTS and EDGE, was only 180 mn USD that is less than Icon is planning to invest. The question is how the company intends to compensate the investments.

Pyaterochka will become cellular

One of Russia’ biggest retailing companies X5 Retail Group intends to launch a MVNO project this year. The project will be started on the basis of one of Big3 operators. X5 has managers, having experience in the “virtual” business running: the company’s marketing director Mikhail Susov is a co-owner of the European company Effortel, which develops virtual cell networks in Europe.
The company has not disclosed yet what brand will be used for the MVNO operator. The company is planning to acquire the traffic in bulk from Big3 operators and then operate independently, forming their own pricing policy and working with subscribers.
According to experts, the project is not the same as the model, chosen by Aschan in cooperation with MTS.

Cell operators will be admitted to payments

In the nearest time cell communications subscribers’ accounts can be used not only for payment for communications services, but also for other services without using additional banking accounts. The Central Bank of Russia is already ready to submit this matter to the RF government.
At the meeting, devoted to the future of electronic payments, the leading Russian and foreign financiers stated the key problem of cashless electronic payments in Russia was low speed of transaction, high prices and the legislation, impeding the active use of banking cards and cashless payments.
Despite the level of banking cards spread is high in Russia, the culture of their use is low. One of the reasons is low speed of transactions. If the system is improved, the costs will become three times as less. Russia lags behind the countries of Central and Eastern Europe regarding the structure of electronic payments. Banking cards are mainly used for operations with cash and the situation has not been changing for 10 years.
Cell operators suggest how to settle the problem for bankers. Mobile communications penetration has already reached 90-95% in Russia, i.e. each person, possessing a mobile phone, has an account. The money from the account can be used to pay for goods and services. So far, the legislation has not allowed to do it. For example, the payment system could be created on the basis on Visa and it would connect mobile operators and retailing companies. Payments could be made from a mobile phone. Possibilities of mobile payments are huge. If this system is realized, the number of cashless transfers will increase dramatically.
The problem of electronic payments development is also mentioned by representatives of the Central Bank. However, they note that electronic and mobile payments should not develop independently.
Despite financiers’ views on outlooks of mobile payments, the possibility to pay for services and goods with a mobile will not appear soon, experts say. To make mobile payments possible it is necessary to make fundamental changes in the RF legislation that will not happen soon. However, analysts believe mobile payments are necessary for subscribers and their needs can create a situation, when mobile payments will become possible in Russia.

The plan of Svyazinvest’s assets reorganization will be ready in September

The step-by-step plan of Svyazinvest’s assets reorganization will be probably ready in September 2009. The company’s top-managers will face a serious problem: to increase the government’s share from 23.8% to 40% on the telecommunication market.
Currently the company’s financiers and lawyers in cooperation with the specialists from the Ministry of Communications are working out the details of the consolidation of Rostelecom and MRKs. This reform will lead to creation of a unified national operator, controlled by the government, which will provide a wide range of telecoms services.
On May 29th the Government Commission for Transport and Communications approved the concept of the holding reforming, submitted by director general of Svyazinvest Evgeny Yurchenko. The strategy of the holding reforming, submitted to the Commission, was also approved by Vice Prime Minister Sergey Ivanov and all the departments.
The purpose of reforming is to create a state-owned holding, “the national champion” in the field of telecommunications. The model of reorganization on the basis of Rostelecom is not new, it has been discussed for several years.
The company’s item of expenses regarding the consolidation includes redemption of shares and possible payment of MRKs’ debts, analysts say. The other company’s costs for restructuring, including costs for consultants, will be equal to several tens millions dollars. At that, the consolidation might allow to save 300-400 mn USD per year. On other hand, the consolidation will first of all lead to the traffic costs saving. The mainline traffic will be cheaper for Svyazinvest’s regional assets, so MRKs will be able to decrease tariffs for broadband access services that will lead to their subscriber bases’ growth. Besides, the company will be able to reduce managerial costs, for example, by reducing MRKs’ boards of directors.

MTS will open an online-shop

This autumn MTS are planning to open an Internet shop under its brand, which will sell phones, contracts and accessorizes. At the first stage the investments in the project will be 500 000 USD.
The shop will be launched this autumn in Moscow. It will be tested until the end of 2009. MTS are planning to sell around 3% of its contracts via Internet.
According to experts, it will be easier for MTS to launch such a projects than for other companies, since MTS has already had its regional network. The company will certainly have to invest in promotion, the team creation, additional staff recruitment, etc. However, 500 000 USD may be enough for the operator to start the shop’s operating in 8-9 cities. The Internet-shop’s revenue may exceed 5 mn USD for 1st year.

Svyazinvest may develop cellular business in cooperation with Big3 operators

One of the aims of Svyazinvest’s reorganization is to become one of Russia’s leading cellular operators, according to the Minister of Communications Igor Shegolev during his speech at the European Business Association. To reach these goals Svyazinvest’s cellular assets may be consolidated with one of Big3 operators, he notes. Another model of the reorganization implies these assets consolidation with regional cell operators, not included in Big3.
In fact, the 4th federal operator creation is possible by consolidating the mobile assets with big regional operators: SMARTS, Motiv, Tele2, NTK and Sky Link. Another interesting project for the government in the mobile segment is creation of an infrastructure company, providing services to all interested operators, which will be controlled by Svyazinvest. All mobile operators’ networks double each other, taking a lot of money, which could be spent on improvement of services provided. The business model of the network joint development has been widely spread in some developed countries (West Europe, the USA, India, etc.). To provide successful operating of such a company in Russia it is necessary to attract one or several Big3 operators. Realization of this project may impact the construction of networks of new generation.
Svyazinvest has no money to acquire one of Big3 operators, analysts say. The only Svyazinvest’s subsidiary, possessing funds, is Rostelecom. As of the end of 2008 the company had around 540 mn USD in cash and short-term investments. It is not enough to obtain the control in one of Big3 operators, though supported by the government structures Svyazinvest can try to get the control in one of the leading operators. Megafon is the most probable candidature.

Megafon can’t pay dividends this year

TeliaSonera has submitted the members of Megafon’s board of directors the offer on the operator’s dividend policy. Previously the board decided to discuss payment of dividends to the operators’ shareholders. We note the dividends were planned to be paid for the first time in the operator’s history. However, currently TeliaSonera’s offer is not urgent. The board has not accepted TeliaSonera’s suggestions. The matter of dividends has been postponed.
Payment of dividends is first of all supported by Alfa Group. The company offered to spend almost all Megafon’s cash on dividends. Megafon (RUR 57.1 bn as of the end of March taking into account the short-term investments) outstrips Vimpelcom (RUR 32.9 bn) and MTS (RUR 31.9 bn).
Altimo (an Alfa’s telecoms subsidiary) is not against dividends, though it is necessary to confirm the company’s dividend policy first. However, according to AF Telecom Holding, the discussion of dividends is untimely. The market has risks and opportunities and Megafon might need the money itself.
To have free money in crisis conditions is certainly positive, analysts say. Besides, the operator is planning to enter the market of fixed-line communications and will need money, experts remind. Megafon has submitted the application to FAS regarding acquisition of Synterra.

Scartel thinks over international expansion

Putting in operation the networks in Moscow and St. Petersburg Scartel, an operator of mobile WiMAX, has thought about international expansion. By the end of 2009 the operator is going to develop at least two WiMAX networks overseas.
Currently the operator is working out 15 projects in Latin America, Asia and the CIS. In one of Latin American countries Scartel has already opened its office and appointed director general. Scartel’s investments in the overseas projects have not been disclosed. By the end of 2009 the total investments are planned to be equal to 470 mn USD (300 mn USD of which were already spent in 2008).
300 mn USD have been already invested in development of the networks in St. Petersburg and Moscow. This February Scartel obtained 170 mn USD more for its regional development. The operator’s foreign projects will be financed from this budget. The current operator’s business model will be transferred to countries of the CIS, Asia and Latin America. Scartel intends to work with Samsung overseas.
Scartel might manage to realize its ambitious projects by the end of the year, analysts say. We remind the state-owned corporation Rostehnologii is one of Scartel’s shareholders. The corporation supports the operator’s projects as well as lobbies the operator’s interests at the high political level. The corporation was created to support and export innovative projects.

NetByNet is planning to spend 60 mn USD for acquisition of the Moscow region assets

In conditions of strong competition on the Moscow market of broadband access Moscow operators think over their businesses expansion. In particular, NetByNet intends to strengthen its position in the Moscow region, acquiring several companies with the total subscriber base of 150 thousand people in the region and investing around 60 mn USD.
The company intends to attract a portfolio investor by the end of the year. Currently they are holding due diligence. New transactions will be financed by the money, obtained due to the transaction.
According to analysts, NetByNet has chosen a good niche for the investments. On this market penetration is two times as less than on the Moscow market, while the demand for Internet services is big. The most noticeable participants of this market are Infoline and Flex, which can become potential objects for the investments, analysts say. They also note Centretelecom is not well represented in the Moscow region.

The board of directors of MTS suggested spending 1.16 bn USD on dividends

The board of directors of MTS has suggested confirming payment of 60% of the company’s net profit of 2008 as dividends. The sum is RUR 39.4 bn or 1.16 bn USD. In March Sistema’s major co-owner (Sistema controls 52.8% of MTS) Vladimir Yevtushenkov stated AFK would not change the dividend policy of MTS, which implied payment of 50% of net profit at least as dividends to the shareholders. If the board’s suggestion is approved, Sistema will obtain 611.58 mn USD from MTS.
The recommended amount is more by 100 mn USD than MTS’ cash means and their equivalents at the end of 2008 (1.06 bn USD). Moreover, MTS also have to pay debts and invest. This year the operator has been planning to spend 1.5 bn USD. At the end of 2008 the operator’s short-term debt was equal to 1.18 bn USD.
Until in March 2009 AFK Sistema set the control over the enterprises of the Bashkirian fuel and energy complex, MTS’ dividends had been the only source of money for the corporation. Taking into account that in 2009 AFK and its subsidiaries have to pay 3.6 bn USD to the banks, the sum of the dividends is quite expected. According to experts, the current financial condition of MTS is stable: the current debts are covered by the money flow and it is not a problem for the operator to obtain an additional loan. In 2008 the ratio debt/OIBDA of MTS was 0.8 (Vimplecom 1.7).

MTS have got a loss

According to the results of 1Q2009, MTS have got a loss worth 57.7 mn USD compared to 610.2 mn USD in 2008. Net loss has been caused by the differences in currency rates.
MTS revenue has also decreased by 24% to 1.809 bn USD due to the devaluation of the national currencies as well as seasonal factors (there were fewer weekdays in 1Q2009). Besides, subscribers continue choosing cheaper tariff plans and saving on expensive options such as roaming and international and domestic calls: because of the business activity slowdown the revenue from these services has gone down by 1.6% and 1.2% accordingly compared to 4Q2008. In 1Q2009 MTS’ revenue in Russia increased by 7.5% y.o.y. in roubles to RUR 46.86 bn.
In 1Q2009 the company drew over one third of the planned capital investments, i.e. around 548 mn USD (1.5 bn USD have been planned to be invested in 2009). 328 mn USD of this amount fall to Russia (Ukraine – 133 mn USD, Uzbekistan – 72 mn USD, Turkmenistan -10 mn USD and Armenia – 5 mn USD).
OIBDA of MTS group reduced by 29.3% to 831.5 mn USD. It has been caused by the rouble devaluation as well as the company’s big investments in its own retailing network creation: MTS acquired Telefon.ru and the network of communications salons Eldorado.
According to analysts, on May 21st the board of directors of MTS recommended the annual meeting of the company’s shareholders confirming the dividends of 60% of the company’s net profit for 2008. If it is approved at the board of directors, AFK Sistema will obtain over 600 mn USD as dividends.

Vimpelcom reduced its loss

In 1Q2009 Vimpelcom’s net loss under US GAAP was equal to RUR 8.5 bn compared to its profit of RUR 14.6 bn in 1Q2008. The operator’s revenue increased by 30.7% y.o.y. to RUR 66.8 bn. OIBDA grew by 17.8% to RUR 32.2 bn. OIBDA margin was equal to 48.1% compared to 53.4% in 1Q2008. Vimpelcom has reduced its net debt to 6.73 bn USD compared to 7.529 bn USD as of December 31st of 2008.
According to Vimpelcom’s director general Alexander Torbakhov, one of the company’s priorities is reduction of debt and maintenance of profitability on the appropriate level. He underlined in current conditions Vimpelcom could pay the debt without any problems. This year the company has to pay 1.174 bn USD. Apart from its own means the operator also has Sberabnk’s credit line of RUR 8 bn, which has not been used yet.
So far, Vimpelcom has settled its problems, analysts say. Despite the loss, Vimpelcom’s statements are strong. Compared to MTS, which reported before, Vimpelcom’s results seem to be more impressive: the company has demonstrated higher OIBDA profitability even despite the less profitable business of Golden Telecom, the results of which are included in the company’s statements. The company’s loss was expected: the rouble devaluation has led to serious losses from differences in currency rates, causing the operator’s net loss.

Ingosstrakh paid for Express-AM2

The open insurance joint-stock company (OIJSC) Ingosstrakh has paid the State Enterprise Space Communications (GPKS) RUR 1. 71868 bn. The insurance company paid for the partial loss of Express-AM2 last December and also undertook to pay over RUR 1 bn on this occurrence insured.
Express-AM2 was put into orbit on March 30th of 2005. Its launch and the further operating had been insured by OIJSC Ingosstrakh for over RUR 81 mn. In September and December 2007 the anomalies in the work of Express-AM2 resulted in the unstable operation of the satellites system of power supply. In July there appeared serious problems in the satellite’s work. In March the satellite was only revived with the help of the special algorithm.
The specialists from GPKS and OJSC ISS named after M.F. Reshtnev tried their best to prolong the satellite’s operating. However, the breaks in the satellite’s work became longer. Russian and foreign experts carried out the examination of the satellite and the occurrence insured was admitted. Meanwhile, Express-AM2 continues providing partially services of communications.
According to experts, insurance companies pay compensations unwillingly. In this case the sum is record for Ingosstrakh. GPKS has managed to obtain the compensation due to the long hours of negotiations with Ingosstrakh and the contract, made competently by GPKS, experts say. Now it is quite probable that financing and creation of Express AM4, expected by Russian operators, will face no problems despite crisis and the slowdown in the Russian economics.

Sistema reduces losses

In 1Q2009 Sistema’s consolidated revenue under US GAAP went down by 24.1 % to 2.8 mn USD. The corporation’s OIBDA decreased 38.7% to 869.4 mn USD, operating profit decreased by 49.5% to 434.7mn USD. According to the results of the quarter, the company’s net losses were 395.5 mn USD compared to the profit of 398.8 mn USD in 2008. At that net loss decreased by 44.5% compared to 4Q2008.
Sistema’s consolidated revenue in roubles increased by 6% and it was mostly contributed by telecoms assets (7% growth) and consumer assets (22% growth). The negative results were caused by the losses due to the differences in currency rates, which were equal to 437.5 mn USD, according to the results of 1Q2009. In crisis conditions Sistema’s telecommunications assets have turned to be the most stable. The share of the corporation’s businesses, not included in the business-union “telecommunications assets” was only 21.7% in Sistema’s consolidated revenue in 1Q2009, compared to 22.7% and 28.4% in 1Q and 4Q of 2008 accordingly.
As of the end of the reported period the company’s consolidated debt was equal to 9.4 bn USD, 31% of the debt are nominated in roubles. 37% of the debt fall to the short-term obligations: 1.3 bn USD have to be paid in 2Q2009 (0.3 bn USD – in 3Q2009 and 0.6 bn in 4Q2009).
According to analysts, Sistema’s results seem to be positive though they were expected. Within 1Q2009 the company has managed to put off the payment of 80% of the debt and refinance the rest 20%. Besides, the share of the rouble debts has reached 31%, which is positive for the holding’s further development. The acquisition of the Bashkirian fuel and energy complex will bring the holding around 800 mn USD annually, which is positive for the whole business of Sistema. In future Sistema’s profit will be growing since the rouble is strengthening its positions and the business will lose less because of the differences in currency rates.

Megafon reported for 1Q2009

According to the results of 1Q2009, Megafon has become a single break-even enterprise of Big3 operators. While MTS and Vimpelcom have finished the quarter with net losses, Megafon has increased its net profit by 20.2% to RUR 11.1 mn. However, Megafon’ subscribers as well as its competitors’ subscribers, have started saving, so the growth of the company’s incomes and the growth of new connections have gone down.
Over the reported period Megafon’s consolidated revenue has decreased from 29% in 20008 to 11.7% (to RUR 42.2 mn). In terms of the revenue growth Megafon has taken the middle position, outstripping MTS (7% in Russia) and yielding a little to Vimpelcom (12.3% from providing mobile communications services in Russia). At that Megafon’s EBITDA growth has gone down. In 1Q2009 the company’s EBITDA increased by 10.3% y.o.y. to RUR 20.9 bn. In 1Q2008 EBITDA grew by 32.3% to over RUR 18 bn.
The growth rates of Megafon’s ARPU have become negative. ARPU has decreased by around 9% from RUR 315.7 to RUR 256.7. The company’s MOU has also dropped by 4% from 275 min to 265 min. The decrease in MOU and ARPU has been caused by the world economic slowdown. Megafon has issued a range of offers for those subscribers, who were affected by crisis.
The growth of the operator’s subscriber base has also slowed down. In 1Q2008 Megafon’s subscriber base growth was 19.3% and in 1Q2009 the number of Megafon’s subscribers only increased by 18% from 36.8 to 43.5 million of people. At that MTS’ and Vimpelcom’s subscriber bases grew by 17.3% and 8.7% accordingly.
According to analysts, the reason for Megafon’s make-out for 1Q2009 is that the company does not has a big debt. Megafon does not have such a big debt as MTS and Vimpelcom (4 bn USD and 7.7 bn USD accordingly as of the end of 1Q2009), which suffered losses due to the differences in currency rates as their debt had been determined in dollars and euro. Megafon’s debt is only 1.7 bn USD. The company is operating normally. Although Megafon’s ARPU has gone down, caused by crisis and seasonal changes, the company demonstrates good results.


Synterra obtained a mainline network of one of the companies-providers

Synterra has completed the transaction on the acquisition of the mainline Moscow-Vladimir-Nizhny Novgorod from Mir FM. The length of the mainline is 650 km. Previously Synterra rented the channels of data communications from Mir FM. This mainline acquisition will allow the company to enhance its business stability and impact positively Synterra’s EBITDA profitability. The operator uses all the possible variants like construction of own fiber-optic communications lines, long-term leasing of fibers or cable lines as well as acquisition of mainlines from other companies.
Acquisition of a large part of the mainline network by one operator from another one is uncharacteristic for the Russian market, analysts say. Recently small operators have constructed a lot of mainline networks in regions. They are not able to earn on traffic transit and other traditional services. They cannot also obtain money to construct the “last mile” infrastructure and start earning, providing services of broadband access. So, the sale of their channels to bigger and more successful participants of the market is a logical way out.

Megafon will spend 300 mn USD on Huawei

Megafon has signed an agreement with the China Development Bank (CDB) about crediting. The company will obtain 300 mn USD which will be spent on acquisition of the equipment of the Chinese producer Huawei Technologies. The term of the credit is 7 years. The credit has been issued in the frameworks of the programme of Chinese producers support. The transaction has been insured by the Chinese state-owned insurance company.
In 2005 the China Development Bank already gave the similar export credit to Megafon for acquisition of Huawei’s solutions. However, it is the first case when the companies agreed about such a large sum of the credit.
Such transactions are typical for countries, focused on their internal production development, analysts say. CDB’s money will be invested in the Chinese economics and China will simultaneously increase its influence on the Russian market as well as obtain an additional income as interests on the credit. However, the interest on the credit is quite low. The creditor obviously took into account Megofon’s small debt and strategic character of the operator’s cooperation with Huawei. We note that Russian banks work according to the same model as well: they give loans to Russian companies. However, in the segment of high technologies there are few such projects due to insufficient development of this sector in Russia.

Rosnano made the agreement with the group of companies Renova

Director general of Rosnano Anatoly Chubais and chairman of the Supervisory Committee of the group of companies Revnova Viktor Vekselberg have signed an investment agreement in the frameworks of the 13th Petersburg International Economic Forum.
According to the agreement, the parties have arranged to create a joint venture on production of solar modules on the base of the technology of Oerlikon Solar, the Swiss company, belonging partially to Renova. The total investments will be equal to RUR 20.1 bn, RUR 3.7 bn of which will be invested by Rosnano. Besides, the state-owned corporation will give the joint venture the loan worth RUR 9.8 bn. Rosnano’s and Renova’s shares in the joint company will be 49% and 51% accordingly. Renova will be also in charge of the business development.
The plant on solar modules production will be located on the territory of OJSC Himprom (Cheboksary). The project capacity of the enterprise is 1 million of modules per year or 120 megawatt/year. The start of the construction has been scheduled to 3Q2009, by 4Q20011 the plant will have to reach the project capacity and by 2015 the company’s revenue will have to reach RUR 10.5 bn.
Besides, RUR 1 bn of the assigned RUR 20 bn will be spent on the creation of a research centre on the base of the Physics and Technical Institute named after A.F. Ioffe. The production of the enterprise will be also exported.
According to experts, Europe has been contributing to the development of the outlet. According to the EU, by 2020 20% of the EU energy must be received from alternative resources, including solar energy. The project may start being repaid in 8-9 years already. Renova group develops actively on the innovative market and around 20-25% of the company’s business fall to hi-tech business. Renova’s total capital is 10 bn USD.

The acquisition of Euroset’s share by Vimpelcom has not made this network the operator’s key channel of sales

At the end of October 2008 Vimpelcom informed it had paid 226 mn USD for 49.9% of shares of Morefront Holdings Ltd, which owned 100% of Euroset, the leading cellular retailing company in Russia. Since then the share, taken by Euroset in Vimpelcom’s total sales has not changed, it is 20%. When approving the transaction FAS demanded that within three year Euroset would not have a right to give preferences to one of the operators. So far, the retailing company has not disclosed the data, according to which we could realize if the company has fulfilled the requirement. However, according to the data from AC&M Consulting, since the beginning of 2009 Vimpelcom’s share in the total Russia’s sales of SIM cards, has risen dramatically and MTS has lost its leading position. In summer 2008 the share of MTS in Euroset;s sales reached 40%, according to the operator (at that time MTS was planning to acquire a share of Euroset). And over the first months of 2009 MTS’s share has decreased to 10-15%. As a result, since April MTS has broken the agreement with Euroset, accusing the company of non-fulfillment of the requirement. After the contract had been broken Euroset made an agreement with Megafon, according to which the company has to sell 7.2 million of contracts for 18 months, i.e. no less than 0.4 million contracts per month.
The agreement between Euroset and Megafon implies connection of 7.2 million subscribers for the royalty worth 146 mn USD, i.e. the retailing company has to receive around 20 USD for each subscriber connected. The contract, broken by MTS, implied 25 USD for a subscriber. According to these conditions, Vimpelcom pays Euroset 10-13 mn USD per month.
Like other dealers, making agreements with operators, Euroset has certain sales obligations. However, Vimpelcom’s share in Euroset is just a guarantee that the sales of Vimpelcom’s SIM cards will not go lower than a certain level. Apart from Euroset Vimpelcom works with other federal and regional dealers as well as owns the monobrand salons.
Experts remind that in April FAS received the letter of the Union of Consumers of Russia, asking to check how Euroset fulfilled the Service’s requirements. The authors of the letter confirmed Euroset had offered the operators a partnership on condition of monopoly high fees for connection of subscribers. Besides, referring to the data from Romir, the Union of Consumers stated Euroset’s employees offered mainly Vimpelcom’s services to the clients.

Central Telegraph redeemed Centel

Central Telegraph has increased its share in CJSC Centel to 100%. The company has redeemed the shareholding from the Danish lawyer and businessman Jeffrey Galmond, who owned 49.9% of Centel via Pilot Ltd.
Centel was founded in 1998 by Central Telegraph (74%) and the Corporation Intersvyaz (26%). Centel offered services of broadband access, digital TV and telephony in Moscow and the Moscow region under brand Qwetry. Later the Corporation Intersvyaz sold its shares to the Petersburg Pilot Ltd. And in 2004 Central Telegraph decreased its share in the company to 50-12%.
Currently Central Telegraph has increased its share in Centel to 100% and the Danish businessman Jeffrey Galmond has left one of his last telecommunication assets.
The increase in the share to 100% allows to enhance the control over the process of the assets adjustment. It is an important move to strengthen Svyazinvest’s position on the Moscow market. It corresponds with the concept of Svyazinvest’s reforming.
According to experts, most of the business under Qwetry brand was controlled by Central Telegraph. When the process of consolidation began, the company redeemed Centel. It was not hard to negotiate the sale, analysts say. Jeffrey Galmond declared about his quit from the telecommunications business long ago. He must sell his share in Sky Link to Svyazinvest.

Synterra made an agreement with Verizon

The Russian alternative operator of fixed-line communications Synterra and the American corporation Verizon Business (a subdivision of Verizon Communications) have signed an agreement about cooperation in the field of interconnect. The networks connection will allow the operators to expand the geography for provision of services.
In the frameworks of the agreement Verizon has obtained the possibility to rent Synterra’s fiber-optic channels and use its data-centres to re-direct the traffic. Synterra’s clients will get an access to Venrizon’s worldwide network. Verizon has over 200 data processing centres across the world, while Synterra only possesses six ones.
In future the new partnership between Synterra and Verizon Business will allow to introduce such innovative and necessary services as high-quality videoconference communications and TelePresence for both companies’ clients, analysts say. These services are especially urgent during crisis as the allow organizations to reduce costs on business trips. However, such services need good channels of communications with high throughput and high-quality image. Both Synterra and Verizon Business possess such channels.

MTS will give Eldorado-Centre to the subsidiary

The Federal Antimonopoly Service of Russia has allowed MTS’ subsidiary CJSC Russian Telephone Company (RTC) to acquire the cellular retailing company Eldorado-Centre Ltd.
In February 2009 FAS answered MTS’ claim on acquisition of 100% in the chartered capital of the retailing network Eldorado-Centre and Salon of Communications Eldorado. This April MTS acquired 100% of these cell retailing companies from the Cyprian Kilcherex Holdings Limited and Tenteco Limited. The amount of the transaction was equal to 22.85 mn USD, including the payment of 5 mn USD to the sellers in 12 months. Then MTS declared the networks of Eldorado’s communications salons would be transferred to the managing company of MTS CJSC RTC. The acquired companies’ financial results will be included in MTS’ consolidated financial statements from March 31st 2009.

The effective integration of the last acquisitions on RTC’s base as well as further M&A transactions will allow MTS to become one of the leading participants in this segment, analysts believe. At that the operator’s costs may grow, as the retailing business development requires considerable financial and managerial resources and is not very profitable. Besides, being a public company, MTS will have to include RTC’s financial results in the company’s statements, which may affect its profitability.

MTS will start selling phones under the own brand

The transfer to the new model of cellular retailing stimulates operators to increase their sales of “own” handsets. By the end of 2009 MTS are planning to start selling phones of the worlds well-known producers under its own brand.
Phones deliveries will be carried out in the frameworks of the partnership agreement between MTS and Vodafone. MTS will obtain a possibility to purchase handsets which Vodafone’ suppliers work out exclusively for the British operator, for the same prices. It mainly concerns handsets of low and medium class. Currently the operator is choosing models and discussing the terms and conditions of the deliveries. It is still unknown how many phones will be sold in MTS’s salons. Around 15-20% of branded phones are sold in Vodafones’ own shops.
MTS have already had the experience of branded phones sale. In spring the company started selling cheap Alcatel handsets for RUR 990 each in the package with the tariff plan Superzero. MTS’ competitors Megafon and Vimpelcom are also engaged in the sale of cheap phones under the own brands. Huawei, Samsung and other producers acted as these operators’ partners.
So far, operators’ experience of branded handsets sales has not been successful, analysts say. It was caused mainly either by low quality of the phones sold or by the operators’ improper pricing policy. Besides, Big3 operators did not have enough channels for such phones promotion. Currently the problem of promotion has been settled. The success of MTS’ branded phones sale will depend on models. Vodafone’s branded models include phones, produced by HTC, Sony Ericsson as well as less popular on the Russian market Huawei and ZYE. If MTS offers popular and interesting models for a good price, the project will be successful.

Megafon finished reorganization

The cell operator Megafon has finished its reorganization. All the operator’s subsidiaries have been consolidated into one legal entity OJSC Megafon.
Since July 1st the company’s nine “daughters” have become Megafon’s subsidiaries. So, the Moscow subsidiary of the cell operator CKSC Sonic Duo has become the capital subsidiary of OJSC Megafon. CJSC Mobicom-Kavkaz has become the Caucasus subsidiary. CJSC Mobicom-Centre has become the Central subsidiary of Megafon, etc. As a result, the names of the companies’ heads’ and employees’ position have changed as well. For example, directors general of Megafon’s regional companies have become deputies director general of OJSC Megafon.
Megafon’s key competitors MTS and Vimpelcom have consolidated their subsidiaries into one legal entity as well. All regional companies of MTS have been integrated in the unified structure MTS. It allows to adjust the company’s management and besides, allows to avoid difficulties with licenses and transactions. Vimpelcom has also consolidated all its subsidiaries into one legal entity, except CJSC Sakhalin Telecom Mobile (the operator only owns 84.4% of the company’s shares).
According to analysts, the subsidiaries’ consolidation will impact positively Megafon’s development. Such reforming is the move towards the increase in the company’s capitalization, transparency and management of financial flows as well as entering the public market.

50% of Comstar’s shares were transferred to Sberbank

50% of Comstar’s shares have been transferred under nominal control of the RF Sberbank. 46% of the company’s shares are nominally controlled by the Deutsche Bank. Actually Sistema controls 50% of Comstar’s shares.
According to the company’s financial statements for 1Q2009, Sberbank has appeared to be the biggest shareholder of the company. Representatives of AFK Sistema, which was the key shareholder previously, explain that the shares transfer is nominal. It is just a change of the depository. (ComNews, 17/07/09).
According to experts, the reason for the shares transfer to Sberbank could be the increase in the interest on the credit, obtained by Comstar in 2007. The credit was given in summer 2007 and at the end of 2000 the interest on credit increased by 50%. At the end of 2008 Sberbank increased considerably the interest on the credit (RUR 26 bn), given to Comstar-UTS, from 9.5% to 13.35%. The nominal transfer of Comstar’s shares to Sberbank could be one of the additional guarantees of the credit paying off.

AFK Sistema’s structure will be responsible for information security

According to the order of the RF government, the functions of the federal network operator on the base of the navigation system GLONASS will be fulfilled by OJSC Navigation Information Systems (NIS), controlled by AFK Sistema. The transfer of functions of such important strategic sphere as security to a private company is the unique event. The operator’s key directions will be providing services on development, introduction, service and information maintenance of technical and programme appliances for work with navigation systems; interaction with other operators to provide the unity of technological control over the navigation system GLONASS; integration of GLONASS with foreign satellite navigation systems; working out hardware-in–the-loop means for information collection, processing and introduction from navigation systems for special services; providing the government with necessary navigation information in case of emergency.
The new structure’s key objectives are to define rules for developers and producers of GLONASS solutions and to provide services of satellite navigation to mass consumers. Currently the company has already made several agreements about navigation technologies introduction, for example, with Siberia and the Bryansk region. The company is planning to enter the market of navigation maps. According to the market participants, it will take the company over 5 years to create a high-quality product. Besides, Russia has at least 4 suppliers of navigation maps, working in both GPS and GLONASS and covering 80-100% of Russia’s population.
According to analysts, the government chose a private partner for work in such strategically essential direction because of the unstable economic situation and the wish to find alternative sources of the project financing. The choice of AFK Sistema is quite logical. Firstly, the company’s policy is characterized by traditional loyalty towards the government, secondly, the company has a good experience of telecoms assets management. Besides, cooperation in the field of security is quite a positive tendency for the market, experts add.
We note the government is currently emphasizing the industry development. The measures, including the recent increase in the tax duty for imported GPS navigators, assigning the budget money on the federal special-purpose programmed Global Navigation System (RUR 31.5 bn in 2009), are aimed to enhance competitiveness of Russian producers.

Tele2 redeemed Sotovaya Svyaz Udmurtii (SSU)

Tele2 has redeemed 25.5% of SSU from the company’s director general Viktor Russkikh. Thus, the share of Tele2 in its subsidiary has reached 100%. The sum of the transaction is equal to RUR 38 mn. In September 2003 Tele2 increased its share in SSU from 55% to 74.5%. Tele2 has two other subsidiaries, in which the company’s share is less than 100%: CJSC Rostovskaya Sotovaya Svyaz (75%) and OJSC Oblcom in the Leningrad region (97.2%).
According to analysts, the redemption of SSU by Tele2 is quite logical and corresponds with the company’s strategy. In current crisis conditions Tele2’s subscriber base growth is impeded by competitors’ actions as well as lack of access to some markets. According to experts, the company’s subscriber base will come to 11 million of subscribers in 2009.
Acquisition of SSU by the operator is just one of the steps in the company’s active policy.

Svyaz Bank will act as a creditor of Svyazinvest’s short-term debt

By the end of 2009 Svyaz Bank will give RUR 40 bn to Svayzinvest and the federal state-owned unitary enterprise Post of Russia, RUR 30 bn of which will be obtained by Svyazinvest and the rest will be received by Post of Russia. To do it VEB, the major shareholder of Svyazbank, has already received RUR 18 bn from the Bank of Russia. Svyazinvest has been included in the list of system-forming enterprises, published in December 2008, and has obtained the right to government support, including its debt restructuring and crediting. We note in 1Q2009 Svyazbank already gave credits of RUR 10 bn to Svyazinvest (RUR 6.5 bn) and Post of Russia (RUR 3.5 bn). The new credit is necessary for the company to restructure the short-term debt of its regional subsidiaries.
According to experts, the part of the money obtained should be spent on refinancing the debts of those interregional companies, having the biggest debts as well as on development of the market promising segments, for example, development of networks of broadband Internet access in regions.

Akado reported for 2008

The group of companies Akado has reported for 2008. The company’s revenue under MSFO has increased by 52% from 205.4 mn USD to 312.4 mn USD. EBITDA has increased by 120% from 29.365 mn USD in 2007 to 64.505 mn USD in 2008. EBTDA margin has grown by 14% to 21%. Akado’s gross income has grown by 102% y.o.y. from 67.9 mn USD to 136.9 mn USD. The company has not disclosed its debt.
In 1Q2009 the revenue of Akado-Stolitsa, which is Akado’s key asset, increased by 60% to RUR 1.096 bn. 41% of the revenue were contributed by services of broadband access, 49% were contributed by television services and 10% were contributed by additional services and telephony. The company’s EBITDA increased almost 6 times from RUR 22 mn to RUR 123 mn y.o.y.
Experts’ estimates of Akado’s results vary from positive to neutral. However, analysts do not agree with the company’s optimism regarding its plans for 2009, taking into account penetration of broadband Internet access in Moscow and the current situation on the market. Currently the company’s regional programme, which needs costs, has been frozen. And in the nearest three years the growth of the market of broadband access will be around 12-15% per year. Thus, in 2009 the revenue growth is going to be no more than 5-10% per year.

Euroset reported for 2Q2009

Euroset has reported for 2Q2009. Over the reported period the company’s revenue, contributed by sales in Russia, where the company has 3700 shops, has gone down by 5.4% q.o.q. to RUR 10.943 bn. EBTDA has grown from RUR 218.79 mn to RUR 610 mn. Thus, the company’s EBTDA margin has increased almost three times from 1.89% to 5.58%. Euroset’s quarter revenue has decreased by 35% y.o.y. EBITDA has increased 8 times and EBTDA margin has grown from 4.42% to 5.58%. Euroset has not disclosed its profit so far, pointing at the statements of Vimpelcom, which acquired 49.9% of the retailing company in October 2008.
Experts assess positively the considerable growth of the company’s EBIRDA and profitability. However, they remind it could be caused by the effect of the low EBTDA in 1Q2009. According to analysts, the company’s positive results have been achieved due to realization of the programme of the network’s efficiency enhancement as well as reduction of some costs. The company may maintain its positive results in 3Q2009 due to the company’s ability to control costs. However, the company will not be able to change the current realty and in 3Q2009 the company’s revenue in dollars is expected to go down by 50% compared to the same period of 2008.
The customer demand will continue going down moderately and Euroset can’t become an exception among other retailing companies. Currently the quarter decrease in sales is 8% on average on the market. However, Euroset assesses its sales drop at 6.5%.


Svyazinvest is negotiating about acquisition of Sky Link

Svyazinvest has been still interested in the CDMA operator Sky Link. The question about acquisition of Sky Link was raised by Svyazinvest’s subsidiary Rostelecom in 2008, though the transaction was suspended. The further negotiations were driven by the decision of the Government Commission on Transport and Communications, which approved the strategy of Svyazinvest’s reorganization, implying the holding’s assets consolidation on Rostelecom’s base and strengthening its positions on the market of mobile communication and broadband Internet access. However, Svyazinvest is not the only candidate for the acquisition of Sky Link.
Analysts have different opinions about the possible acquisition. According to some of them, the operator is attractive due to its possible development in the frameworks of the new legislation in the field of MVNO, the development of new generation services, such as wireless Internet. However, the transaction may be impeded by the current crisis conditions and the operator’s debts, other analysts say
According to experts’ forecasts, Sky Link’s future has remained uncertain due to its difficult financial condition as well as unstable economic situation.

ER-Telecom started a new tariff plan “Moscow” in regions

Er-Telecom, an interregional operator of telecommunications, declared it started providing services at Moscow prices in regions. The new unlimited high-speed tariff of ER-Telecom was called Moscow.
Currently the prices for broadband Internet access are extremely high in regions, although the tariffs for mainline channels have been decreased ten times. Such situation is partially caused by the monopoly position of Svyazinvest’s MRKs on the regional market of broadband access.
The new tariff of ER-Telecom makes broadband access more available for regional users. The price for connection to the tariff is equal to RUR 350. The speed will reach up to 6 Mbit/sec. Every ER-Telecom’s network has been constructed on the technology “optics to building” and is able to provide quite a high throughput. The operator does not conceal the new tariff will allow to expand its subscriber base and increase the company’s revenue.
High prices for Internet, caused by Svyazinvest’s subsidiaries’ monopoly, have been also admitted by the Ministry of Communications. The regulator intends to take measures to eliminate “digital divide” between regions and the centre. It concerns high prices, which impede the growth of subscriber base of broadband access services. Currently around 40% of broadband access services users are living in Moscow and St. Petersburg.
Experts agree that high prices for connection to Internet are the result of MRKs’ monopoly position in regions. However, the dramatic decrease in prices is not expected in the nearest future. The pricing policy in regions depends on how fast the holding will be reformed.
According to experts, the regions’ remoteness does not influence prices for Internet connection at all. The rent of mainline channels has been decreasing. Thus, ER-Telecom’s offer is real and reasonable, though it contradicts other regional operators’ interests. Analysts just wonder how long the operator will be able to keep such low prices and whether it intends to keep these prices in future.

Svyaznoy will carry out money transfers

From June 1st of 2009 anyone can transfer money in Russia and the CIS in Svyaznoy shops. The retailing company has made the partnership agreement with the Centre of Financial Technologies in the frameworks of support of the payment system Golden Crown, which contains over 12000 points. Svyaznoy’s network includes 1770 sops in Russia and 69 in Byelorussia.
According to the statements for 2008, Svyaznoy’s turnover is equal to 2.94 bn USD, taking into account the payment to operators and VAT. The turnover of Golden Crown – Money transfer is equal to 800 mn USD. The IT system integration in the frameworks of the cooperation has required investments of 0.3 mn USD, including personnel training and creation of the conditions for money transfer carrying out. Besides, it is necessary to add 2.5 mn USD, spent on the joint advertising campaign. The potential clients must be attracted by the promise that the money transfer will be immediate. The price for the service will be 1.5% of the sum transferred in Russia and 2% in the CIS countries. The companies have started the pilot project in Yekaterinburg and according to the results, the further cooperation is reasonable. The share of the money transfer in Russia (12%) has appeared to be lower than in some CIS countries. Tajikistan has taken the leading position (46% of the total number of operations). 18% of transfers were carried out to Kirghizia and 15% were carried out to Uzbekistan. Svyaznoy’s authorities are planning to carry out 700 000 transactions at RUR 7 bn by the end of 2009. Thus, the partners’ revenue is expected to be RUR 130 mn by the end of the year.
In 2008 the total sum of money transfers, carried out from Russia, was equal to RUR 13.7 bn and Post of Russia took the leading position in this field. Within the cooperation with Golden Crown Svyaznoy is planning to increase its profit from financial services to 30% and double the number of its shops. The similar project has been started by Alt telecom in cooperation with Golden Crown, though the results of this cooperation have not been disclosed so far. Euroset is interested in such services as well.
According to analysts, carrying out money transfers through retailing companies’ salons is logical as the companies try expanding their services range in crisis conditions. However, the retailing company might overestimate the profit from the partnership. The services of money transfer will be used by a certain category of clients. Besides, the similar operations, carried out in banks, seem to be more profitable. In fact, Svyaznoy can only take a good position on this market due to beneficial location of its shops.
On the whole, according to experts, the increase in services, provided by Svyaznoy, due to money transactions can’t be equal to traditional payments to operators and other services of cellular communications. Keeping independent position in these spheres will be hard, taking into account the tendency of retailing companies’ transfer under the control of big operators. However, the project cooperation seems to be quite logical as it does not require big costs.

MTS and Svyazinvest pretend to Comstar

MTS’ authorities have declared about their intention to acquire Comstar’s assets. The operator has submitted the application to FAS for acquisition of 100% of Comstar’s shares. The mother company AFK Sistema has been considering the consolidation of the business units of cellular and fixed-line communications for a long time. The decision making has been postponed due to the unclear situation with Svyazinvest’s shareholding (25% +1 share), owned by Comstar. The sale of this shareholding may influence considerably the operator’s value.
Currently the decision on the transaction’s value and possible mechanisms of its carrying out by Systema have not been disclosed yet. It is difficult to understand the new operator’s organizational structure, though the merger of Comstar and MTS will certainly strengthen their positions on the market and also help to solve the problem of MTS’ entering the market of broadband Internet access and expand the range of communications services. However, so far, it has been unclear who will head the new company if the transaction is made. The most probable candidates are Mikhail Shamolin, president of MTS, and Sergey Pridantsev, president of Comstar. Perhaps, Sistema will choose someone else, leaving both candidates on their positions.
Svyazinvest has declared about its wish to acquire Comstar as well. This asset acquisition is especially essential for the holding in the frameworks of “the national operator” creation. However, if MTS can avoid an offer to Comstar’s minorities as AFK Sistema is the end owner of the asset, Svyazinvest has to be ready to redeem 100% of the operator. The question about the offer will be submitted on the Board of directors, including representatives of AFK Sistema as shareholders of 25% +1 share of Svyazinvest. It could be interesting to Sistema as previously the assessment of Svyazinvest’s blocking shareholding, owned by the holding, did not satisfy Sistema’s authorities and it was not sold to the government. However, the possible offer from Svyazinvest may make MTS increase the sum, offered by Comstar’s minority shareholders.
According to analysts, Svyazinvest is not able to acquire Comstar. To make Sistema refuse the profitable asset the government has to offer a very high price for it or provide Sistema with a share in the new company, founded after Comstar’s consolidation. The acquisition of Comstar by MTS seemed to be probable for experts.
Svyazinvest and MTS will be able to strengthen their positions on the market due to the acquisition of Comstar, experts say. MTS will be able to enter the market of broadband access and Svyaznvest will strengthen its position in the Moscow region. Comstar is certainly a profitable asset, so the disputes will continue.

Dalsvyaz reported for 2008

In 2008 Dalsvaz’s revenue came to RUR 16.1 bn, increasing by 7.39% with net profit of RUR 2.3 bn, increasing by 67% compared to the previous reported period. The company’s OIBDA was equal to RUR 5.7 bn (22.9% growth y.o.y.). Dalsvyaz’s profitability was equal to 35.6%, increasing by 5%. The growth of profitability was the result of the company’s results maintenance and the growth of revenue. We note the company’s costs increased insignificantly (0.4%).
The company’s free money flow increased 4.6 times. The company managed to decrease its debt by 17% to RUR 5.7 bn in 2008. In 2009 Dalsvyaz’s authorities are planning to improve the company’s investment activity due to the control over operational costs and enhancement of its technical component efficiency. (26/05/2009).
On the whole analysts assess the company’s statements for 2008 as positive. The growth of revenue is explained by the increase in the operator’s incomes due to provision of services of broadband access, raise of tariffs for local communications and additional services provision. Besides, Dalsvyaz’s authorities will manage to enhance efficiency of the company’s investment activity in 2009 as previously the company focused on the most demanded projects with short payback periods. Development of broadband Internet access will become the company’s priority, which will contribute to the growth of the operator’s subscriber base in future, experts forecast.
So, currently Dalsvyaz is holding the stable position in comparison with other interregional companies. The company has managed to reduce its debt, maintaining high results of profitability due its effective strategy, developed by the authorities.

MTS India started providing its services in Calcutta and West Bengal

AFK Sistema’s Indian subsidiary Sistema Shyam TeleServices Ltd has started providing services of cellular communications in Calcutta, the third largest city of the country as well as in West Bengal. Currently SSTS is providing services under MTS India brand in India.
The population of West Bengal is around 80 million of people. There is not additional information about the forecasts of the company’s subscriber base increase or the supposed market share. The next state, where the company intends to start providing cell communications services, will be Djarkhand, the population of which is around 2 million of people.
Sistema’s subsidiary started providing cell communications services in India in summer 2008. In September 2008 the company declared about its intention to work under MTS brand. Currently the company has been covering 20% of the country’s territory. MTS India is planning to cover the whole territory of India in a year and half.
Experts assess the company’s initiatives of regional development as positive. The operator possesses the license for cell communications services provision across the country and according to the company’s strategic plans, it is expanding gradually. The operator’s services may be in demand as the market is far from being saturated and due to the specific character of the region, where competitors’ services quality could be quite low. Thus, MTS can offer its services, taking a share on the market due to the quality of communications and the company’s proper marketing strategy.
On other hand, it is necessary to invest in MTS India. Currently the operator is investing in its network development and marketing to obtain profit in future. Reduction of investments, caused by the financial crisis, can impede the company’s regional expansion as well as lead to loss in the share on the market of cellular communications in India. The Russian AFK Sistema is the only investor of the operator.

3. Tension Lines

Frauds attack Comstar-UTS with false letters

Stream company, a subsidiary of Comstar-UTS, has received a letter, notifying that Stream’s cable network has ceased to exist and the contract with all the company’s partners has been broken since July 5th. The company’s partners have received false letters about breaking the contract with the provider as well. The false letters have been also received by the possessors of the right, which provide the company with content. The similar letters have been sent to the television companies Mir, Muz-TV, A-one and the orthodox channel Soyuz.
Experts doubt the suit will be filed, because of the illegal letters distribution. It is quite hard to find out a certain reason. The letters distribution must be a result of unfair competition. At that experts do not exclude intentional prejudice by a private person. Anyway, according to experts, if people responsible for the incident are found, Comstar has a right to file a civil suit about compensation for the company’s business reputation damage
Distribution of false letters is a new and rare phenomenon for the Russian business. However, it goes unpunished as the Criminal Code does not contain an article, protecting from such actions.

Roscomnadzor prohibited operators to correct terms of their networks launch

The Federal Service on Supervision in the filed of Communications, IT and Mass Communications has refused all applications of the operators, obtaining GSM licenses, about putting off the terms of their networks launch. The order was signed by head of Roscomnadzor Sergey Sitnikov, referring to Article 36 of the federal law of July 7th # 126-FZ “On Communications”. The inspections are already expected three month after the date, stated in the license as a date of the start of communications services provision. According to conditions of most of the licenses, obtained in 2007, the operators must start providing communications services in November-December 2009. The market participants explain they are not able to start on time because of the protracted court examinations regarding the licenses. The market participants have a possibility to contest the regulator’s order in court.
Experts have not assessed Roscomnadzor’s initiative as positive. Most analysts support the position of the market participants, who do their best to execute conditions of the licenses in crisis conditions. However, they are not supported by the government and moreover, the government structures just prevent their work, not allowing to focus on the networks launch.
If the regulator’s decision is realized, neither the market participants nor the government will benefit from it. The prohibiting policy can’t contribute to acceleration of the networks launch.

Apple may apply sanctions against MTS

The cell operator MTS has not fulfilled its obligations to Apple regarding the purchase of iPhones 3G. We note in 2008 MTS acquired iPhones at 65.4 mn USD. According to the contract, the company has to purchase handsets at 847.9 mn USD by 2011. The contract terms can be changed due to the changes in iPhones price and quantity. According to MTS’ authorities, if the contract is not fulfilled by the customer, Apple has right to apply sanctions. According to MTS, the reason for the low level of sales is low purchasing capacity of the population.
In particular, Vimpelcom and Megafon have also made agreements with Apple about selling iPhones in Russia. However, the sales are low. So, around 3.5 million of handsets must be realized by 2011. According to the data from RTK, the company, managing MTS retailing network, sold around 240 thousand of handsets to the population. In 2008 Vimpelcom managed to acquire 12% of the necessary number of phones. In 1Q2009 the company did not purchased iPhones. The operator has not asked the vendor to correct the terms of the agreement. On contrary Megafon’s authorities are sure that if the vendor does not reconsider the contract, the operator will not manage to execute the contract conditions regarding the purchase of iPhones. Megafon must acquire 1 million of the handsets in two years. In 2008 the operator acquired the necessary number of phones, according to the agreement. At the beginning of 2009 the phones purchase was stopped. (02/06/2009)
The unfavourable economic situation has certainly affected the demand for fashionable and expensive phones as well as the amended the plans of both the vendor and the Russian operators on purchases of new models. The population’s low interest in Apple’s new models can be explained by several factors, including overpricing, competition in the sector of touch-phones, when producers offer more convenient and cheaper models.
Non-execution of contract with a foreign company may cause applying sanctions (for example, penalty) against Big 3 operators, in particular MTS. However, experts are sure there won’t be a court examination. Taking into account financial crisis Apple will reconsider the contract. Besides, being public companies MTS and Vimpelcom will not allow court examinations in order not to discredit themselves and shake their partners faith.

Telenor’s shares in Vimpelcom may be sold on auction

The court bailiff AFSSP has decided to define the process of the sale of Vimpelcom’s shares, which belong to Telenor. They attracted an expert to access the shares value and the procedure of their sale. According to Telenor’s authorities, such action gives them a possibility to take retaliatory measures to avoid the sale of the asset on auction.
We note until Telenor’s cassations are not considered in courts, the shares can’t be sold. Otherwise, there will be a serious conflict, causing negative consequences for both parties. The holding’s authorities hope they will manage to keep the asset. According to Telenor, the decision of 8th Arbitration court of Omsk is illegal and the company will use this opportunity to protect its rights in court.
According to lawyers, attraction of the specialist for the asset assessment indicates that bailiffs want to execute all the formalities as well as make the assessing procedure open and legal. The decision of FSSP has certainly put off the terms of the shares sale and has given Telenor the chance to take retaliatory measures.
However, experts do not exclude Telenor’s asset may be sold before the cassation is considered.

Bailiffs hold Telenor’s shares

The Norwegian Telenor has been given a break. The chief court bailiff Artur Parfenchikov declared his service was not planning to offer Telenor’s shareholding in Vimpelcom (26.6%), for sale in the nearest time
Telenor’s shares in Vimpelcom were arrested by the bailiffs on March 11th 2009 after on March 2nd 8th Arbitration Court of Appeal of Omsk had ordered to exact 1.73 bn USD from Telenor in favour of Vimpelcom, answering the claim of Farimax. According to Telenor, the offshore company Farimax is connected with Alfa Group and acts in Alfa’s interests. Farimax and Alfa Group deny it.
Telenor is defending its shares in the Arbitration Court of Moscow, where the company is trying to suspend the court procedure, and in the Federal Arbitration Court of West Siberian Region in Tyumen, which refused to suspend execution of the decision, made by the Omsk Arbitration Court. In Tyumen Telenor’s cassation considering is scheduled to May 26th. The Arbitration Court of Moscow is planning to consider Telenor’s cassation on June 3rd.
Telenor’s lawyers warned repeatedly that the company’s shares might be sold on RTS anytime. The bailiffs have already charged off RUR 730 000 and 700 USD from Telenor’s accounts. Besides, the bailiffs have assessed Telenor’s share on RTC (according to the assessment of the exchange it is 1.8 bn USD). Moreover, previously the bailiffs wanted to execute the court decision as soon as possible, explaining that the government was interested to obtain around 120 mn USD of executive duty from Telenor.
Experts remind the RF Prime Minister Vladimir Puitn was asked by the Norwegian Prime Minister Jens Stoltenberg not to allow the sale of the Norwegian company’s shares until the court examinations were completed. In Ukraine, where Telenor and Alfa Group are shareholders of Kievstar (56.5% and 43.5% of shares accordingly) Alfa Group suggests creating a unified company on the base of Vimpelcom and Kievstar, which will be controlled by the partners on a par, except the shares, traded on NYSE. However, the offer does not suit Telenor, at least until the court examinations are completed.

Sky Link, Tele2, SMARTS and Svyazinvest’s Irkutsk subsidiary may lose GSM frequencies

Roscomnadzor has refused the operators’ request to put off the start of services in those regions, they possess licenses in, though the networks have not been ready yet. The order was signed by the regulator’s head Sergey Sitnikov.
Tele2, Sky Link, SMARTS and Baikalinvest (Sibirtelecom’s subsidiary) has submitted the applications about postponing the terms. In 2007 these companies won the competition, carried out by the supervising body, and obtained the licenses. They had to start providing communications services within a year, according to the conditions of the competition. Each of the operators has to execute all the conditions otherwise, the license will be cancelled.
In 2007 Tele2 won the licenses for work in 17 regions, but the network will be only launched this summer and only in the Tomsk region. The company will try to start the rest 16 networks by the end of 2009. President of Tele2 Russia Donna Cordner promised the company would invest in the networks 82-98 mn USD in 2008 and 130-163 mn USD in 2009.
According to experts, the main reason is unclear results of the court examinations regarding the results of the competitions. Summa Telecom tried to contest the results, though failed. However, during the court examination Sky Link could not start its networks construction and then crisis came and it was difficult to attract investments. Analysts remind SMARTS has not used one license for work in Kabardino-Balkariya, but currently the company does not have money for the network construction there.

DelataPay owes Megafon

Megafon’s Moscow subsidiary CJSC Sonic Duo has brought a claim to the Arbitration Court of Moscow against Delta Telecom, owning the payment system DeltaPay. The operator demands of Delta Telecom to pay off the debt on subscribers’ payments. The amount is equal to RUR 57.65 mn.
We note Delta Telecom started its own system of payment receiving in 2004. According to the data from Delta Telecom, in 2008 the turnover of DeltaPay was over RUR 30 bn and the total number of transactions exceeded 230 million. Over 15 000 points of payment receiving are registered in DeltaPay.
Delta Telecom might not pay off its debt to Megafon, analysts say. Analysts remind that on July 4th 2009 the RF President Dmitry Medvedev signed the law “On Activity on Reception of Payments of Natural People, Carried out by Payment Agents” and amendments to some corresponding legislative acts. According to these documents, operations on payment reception are allowed to be carried out not only by providers of services, but also by operators, their payment agents and subagents. The law and the amendments will come into effect from January 1st 2010.

Svyazinvest’s share in MGTS was diluted

The general annual meeting of MGTS shareholders has decided not to pay dividends for 2008 and spend this money on the company’s development. Thus, the structure of the company’s shareholders has changed: currently Comstar possesses 56% of voting shares instead of 66.88% and Svyazinvest’s shareholding is equal to 23.3% instead of 28%. So, Svyazinvest cannot now block decisions, made the MGTS’ board of directors, which are unfavourable for the holding.
Svyazinvest voted against payment of the dividends as the company did not agree with the sum of dividends, worked out by MGTS’ board of directors. They suggested paying only 5% of net profit as dividends while Svyazinvest insisted on payment of 10%.
According to analysts, previously Svyazinvest, possessing three seats in MGTS’ board of directors against eight seats of Comstar’s representatives, could submit the decision, which was unprofitable for it, to the agenda of the meeting of shareholders and block it as the holding possessed 25% of votes there. Now the holding does not have the right of veto upon the decisions, taken on the meeting of shareholders. According to experts, Svyazinvest’s shareholding was not diluted intentionally and Sistema does not have any reasons to take some important decision against the will of Svyazinvest.

4. Power and Business

Roscomnadzor will limit personal data

Roscomnadzor offers to limit information, provided to operators of personal data as well as to make the requirements to personal data protection more detailed.
Personal data protection is a new direction of the department’s work. In December 2008 Rossvyazcomnadzor was reformed into Roscomnadzor and head of Rossvyazcomnadzor Mikhail Boyarskov was replaced by Sergey Sitnikov. Then the department was also charged with IT sphere.
This March Minister of Communications Igor Shegolev charged Roscomnadzor to introduce new standards in the field of personal data protection. According to him, the new standards are necessary to prevent outflow of information in information systems.
The department has included the offers on development of the conception of the law about making changes in the federal law “On Personal Data” to the plan of works for 2009. The new law with the new requirements, including technical ones, to personal data protections, is coming in force from January 1st 2010.
The law is strict enough regarding terms as well as the list of security measures, experts say.

1st multiplex is ready

Roscomnadzor in cooperation with the federal state-owned unitary enterprises Main Radio Frequency Centre and RTRS has prepared the plan of frequencies distribution to introduce the first package of programmes (the multiplex) of digital TV and radio broadcasting across Russia.
The Ministry of Defense has already endorsed the frequency-territorial plan for 1st multiplex in the Far East federal region and the Siberian federal region, except the Krasnoyarsk region. The list of TV and radio channels, included in 1st multiplex, was defined at the end of 2008. Broadcasting the channels of 1st multiplex will be free of charge across Russia.
The frequency plan for 2nd multiplex, which will include around 10 channels more, is planned to be submitted by the end of 2009, according to Roscomnadzor’s representatives.
According to analysts, though Roscomnadzor is ready to start granting licenses for networks construction, RTRS has been just preparing objects for operation, not starting the process fully. Currently the federal special-purpose programmed is expected to be confirmed and, according to some data, it must be confirmed in the nearest time.

MTS is allowed to merge with Comstar

MTS has obtained the approval from FAS for the acquisition of 100% of Comstar. Currently the final decision on the amount or structure of the possible transaction has not been taken yet.
Analysts are not sure if Comstar’s value will be overestimated of underestimated intentionally. The price will be probably the market one or higher a little. Recently this figure has been around 4-5 USD for GDR. Currently Comstar’ capitalization is over 1.9 bn USD. At that the company will have to obtain loans, analysts say. MTS will spend quite a big sum on payment of dividends and paying off the debts. Although these money can’t be enough, taking into account that MTS will have to pay off the big debts in 2010, it will be more profitable to make the transaction this year.

Russian returned to the idea of keeping your telephone number when you change your operator

The Ministry of Communication has returned to discussion of the question about phones numbers portability in Russia. In the nearest time in Russia a first pilot zone will be created to work out the principle of MNP (Mobile Number Portability), which implies the transfer from one operator’s network to another one without changing a mobile number. Currently the Ministry of Communication is deciding which region is the most suitable for such a zone creation. One of the most probable variants is Tatarstan.
This question has been already discussed for around 3 years. Previously the Infocommunication Union at the Ministry of Communications created the working group on the matters of mobile numbers portability. The initiatives were supported by the Ministry of Communications. The decision about creation of pilot zones will be taken by the Science and Technical Council at the Ministry of Communications, which is going to meet this summer.
According to analysts, MNP is unprofitable for big operators as it strengthens competition, increases outflow of subscribers and results in additional costs. On other hand, MNP is a chance for discounters and local participants to increase their market share. The idea of MNP will be realized in Russia in 1-2 years. It may also include some exceptions, decreasing its value for a subscriber. The similar situation can be observed with MVNO: they can formally obtain a license and work, but cell operators are not obliged to provide them with an access to their networks as it has not been mentioned in the legislation.

Informatization of the society will cost RUR 152 bn for the government

The government is going to spend around RUR 152 bn to support the strategy of information society development in 2009-2011, according to Advisor to the RF President Leonid Reiman. Speaking at the Economic Forum in Tver he noted that the main objective of the programme is to connect state bodies to the Internet and create the electronic circulation of documents. Another important issue is the transfer of state bodies to new forms of communications with citizens and creation of portals of government services as well as centres of telephone information servicing the population.
In February 2008 President confirmed the strategy of information society development.The information society creation and development are aimed at enhancement of citizens’ life quality, providing competitiveness of Russia, development of economic, social, political and cultural spheres, improvement of the system of government control on the basis of IT and telecommunications technologies. The strategy has been worked out until 2015.
According to experts, the information society is another step in IT development, following the programme Electronic Russia. First of all, to realize the strategy it is necessary to confirm the special-purpose programme and define the programme participants. Big telecoms companies, system integrators and software developers will act as the key participants of the programme. Most of the money will be spent on organization of communications and introduction of infrastructure solutions.

The government and AFK Sistema arranged the procedure of Sistema’s withdrawal from Svyaznvest

The government has made the agreement with AFK Sistema about redemption of the corporation’s blocking shareholding in Svyazinvest, according to the letter, sent by Minister of Communications Igor Shegolev to the RF Prime Minister Vladimir Putin.
In accordance with the conditions of the transaction, AFK will give 25% + 1 share of Svyazinvest and 50% of Sky Link to the government and receive in exchange 23% of OJSC MGTS. Besides, VEB will take Sistema’s debt worth RUR 26 bn to Sberbank.
Sistema’s major owner Vladimir Yevtushebkov offered Vladimir Putin to redeem Sistema’s shareholding in Svyazinvest in October 2008. He offered to use this shareholding to pay off Sistema’s credit worth RUR 26 bn to Sberbank on condition that Sistema would obtain 28% of MGTS’ shares (finally Svyazinvest’s voting shareholding in MGTS has been diluted from 28% to 23.3% because MTGS’ shareholders voted against payment of the dividends for 2008). In May-April Ernst & Young assessed the value at RUR 12 bn and the value of 25 + 1share of Svyazinvest, owned by Sistema, at RUR 23.7 bn.
The value, submitted by Ernst & Young, is three times as less than Sistema asked for (1.9 bn USD) and almost two times as less than Sistema paid for the share in Svyazinvest to Leonard Blavatnik’s Access Industries (1.3 bn USD).
The negotiations about the acquisition of Sky Link by Rostelecom (51% belong to Svyazinvest) began last year and in March the operator sent the application to FAS about the acquisition of the operator. However, two years later the application was withdrawn.
According to analysts, such scheme is more profitable for Sistema. The current market value of Comstar’s shareholding in Svyazinvest is 773 mn USD and the stake of Svyazinvest in MGTS has been assessed at 342 mn USD. Comstar’ debt to Sberbank was 825 mn USD, so 50% of Sky Link were assessed at 395 mn USD without taking into account the debt. Experts remind VEB stated not long ago that it was going to redeem KIT Finance’s stake in Rostelecom at RUR 230 per share. So, 50% of Sky Link were assessed at 170 mn USD, though this price is considered as overestimated as well.

Calls between Moscow and the Moscow region will be considered as local ones

From July 2010 the calls between Moscow and the near Moscow region will be considered as local ones. The draft order has been confirmed by the Ministry of Communications. Currently Moscow subscribers, using numbers with “495” and “499” codes are paying separately for calls with owners of numbers with “496” and “498” codes. Such calls are considered as intrazone calls. (in Rostelecom RUR 1.5-2.38 per minute; MTT RUR 1.9-2.0 per minute and Centertelecom RUR 2.15 per minute)/
In a year the fee will be only taken for calls between Moscow codes and the Moscow region code “496”. Calls between 495, 499 and 498 codes will be paid as local ones. Currently the unlimited tariff plan of MGTS implies the monthly fee of RUR 380 (Centertelecom – RUR 200 + for subscribers with 496 codes and RUR 240 for 495 and 498).
After the order is signed by Minister of Communications it will be sent to the Administration of the Moscow region, the Federal Service on Tariffs, FAS, the Ministry of Justice and other interested departments. However, the document can’t be changed considerably. Abolition of the fee for calls from Moscow will cause changes in dialing inside the zone. Subscribers will have to dial “8” and a 3-digit code. To be ready for it MGTS will have to spend over RUR 600 mn of extra money. The company will have to improve its network, i.e. to complete digitization, for which they are planning to use the most modern technology IMS. On the whole MGTS has 4.8 million of numbers, 1.8 million of which are only digital.
11-digit numbers have been built into the current programme of modernization. Central Telegraph will not need additional investments, as its network is digital entirely in Moscow and the Moscow region.

Rossvyaz reduces tariffs for public Internet

The Federal Agency of Communications (Rossvyaz) offers to reduce tariffs for universal services of communications (UUS) on Internet access provision. Rossvyaz analyzed tariffs for UUS in Internet access provision and found out that the tariffs were almost 10 times as much than the market tariffs for communication services on data communications and Internet access provision. Calculating UUS tariffs has been detailed in the Rules for State Regulation of Tariffs for Universal Services, confirmed by the RF government’s order.
According to the department, Internet-tariffs in the frameworks of UUS in the Central Federal Region are equal to RUR 3.82-10.04 for 1 Mb while the market tariffs for natural people, introduced by various operators in this area, are equal to RUR 0.13-0.81 for 1 Mb.
The high tariffs have been caused by the insignificant volume of services of Internet access and consequently incomes of operators of universal servicing.
Rossvyaz has sent the changes in calculation of tariffs for UUS on Internet access provision to the Ministry of Communications for the further coordination with other departments and submitting the document to the RF Government.
According to analysts, the current tariffs for UUS on Internet access provision make the access to information through points of collective access almost unavailable for most of the population, especially in rural area. Such high tariffs contradict ideology and principles of the universal servicing system and its social objectives.

TV signal propagation will be partially subsidized


The Conception of the federal special-purpose programme of digital TV and radio broadcasting development will be considered by the government in July, according to Minister of Communications Igor Shegolev. Minister also informed the government was planning to subsidize signal propagation in those areas, where it is unprofitable for big companies. The corresponding sums are being built into the department’s plans.
However, according to analysts, it is very hard to work out a transparent procedure, when the government would subsidize private companies in exchange for their work in the “problem” regions. Unprofitable regions are probably the regions, which are not densely populated. So they are the whole Far East and Siberia, where big regional centres are only of interest for commercial TV channels.

5. Economics of Innovations

RKSS entered the market of equipment for information security

The Russian Corporation of Communications (RKSS) is planning to compete with the key participants of the market of equipment for information security. The sphere of security has been defined as the key direction of the company’s activity. RKSS has emphasized meeting the demand of state-owned enterprises as well as big corporate clients of critical industries. UTM-system (a unified threat management system) may become one of the announced products. The company is planning to start working with contracts at the end of 3Q2009 and at the end of the year it is planning to produce a number of telecommunication appliances. The company does not possess its own production capacities and uses foreign component base, processing technology and software. The company has such managers as Andrey Badalov, a member of the Expert Council of State Duma Committee on Security; Vasily Arkhangelsky, director on information security of CJSC Gollard and chief engineer of the state special-purpose programmed “Electronic Moscow”; Andrei Zverev, director general of OJSC Russian Electronics, controlled by Rostehnologii. (15/07/09)/
According to analysts, the market of equipment for information security has a strong tendency for the growth of demand. Besides, experts also note the growth of administrative resource in the development of this sector. Security is traditionally one of the key subjects for the government. However, making RSSK a competitive company on the market of information security will be quite difficult, analysts say.

The Council on Radio was created at the Ministry of Communications

The sector of mass media will become an independent branch of economics. This decision was made by representatives of top-management of Russia’s largest radio stations and members of the regulator at the joint session of the Council on Radio at the Ministry of Communications. It will allow to work out the joint offers on economic support of the sector. Currently the group of representatives at the Ministry is just a part of the Council on Mass Communications, which is being formed and will become a body, working out changes to the legislative base to make mass media a separate branch of economics.
In April 2009 Deputy Minister of Communications Alexander Zharov already stated about the initiative to support some products of mass media, including radio, as, for example, the slowdown of advertising on radio has reached around 40%. According to the results of 2008, the 6% drop was fixed instead of the expected growth by 20.3% of radio advertising. So, in 2009 the RF government will have to assign RUR 1.5 bn to support social projects on TV and radio.
Lawyers have different opinions on creation of the Commission on Mass Media at the Ministry of Communications. According to some analysts, the new council can’t solve any problems of the market in crisis conditions. However, some experts assess the Council creation as positive though they note that its work effectiveness will depend on its goals and objectives as well as members, it will include. The Council must consist not only of representatives of the regulator and the largest radio stations but also of representatives of companies, working in regions.


Svyazinvest and Big3: outlooks of a joint infrastructure construction

Before the forthcoming reorganization of the holding Svyazinvest’s authorities have offered to construct a joint network for provision 3G services and services of the following generations with Big3 operators. Developers of the idea are planning to found a new company, controlled by Svyazinvest. Svyazinvest will have to provide services of communications to operators-partners. According to authors of the idea, such a measure would contribute to doubling networks elimination and could improve the quality of services provided. We note the scheme of joint use of the network infrastructure has been already developed in West Europe, the USA and India.
Big3 operator have different opinion on this initiative. MTS’ authorities are ready to start such joint project on conditions which are profitable for the company. According to Vimpelcom, it is early to speak of the project’s outlooks and conditions since the holding’s reorganization is a long process and the company has not received any concrete offers yet. Megafon is planning to continue developing independently the infrastructure for communications of new generation.
Analysts have different opinions on Svyazinvest’s initiative as well. According to some of them, this project will give Big3 operators a possibility to reduce costs on their own networks construction and maintenance as well as contribute to 3G networks development. It will also result in subscriber base growth and popularization of mobile Internet. However, such a programme is not profitable for Big3 operators, other experts say. The cell companies possess the well-developed infrastructure and can’t share profit from the service provided with the state-owned holding.
Svyazinvest’s project may be only realized after the holding is reorganized.

4G operator may appear in Russia

An operator of 4G communications (LTE) may appear in Russia. Such initiative was stated by the Association of Regional Operators of Communications (APOC). The federal 4G network is supposed to be constructed at the expenses of Svyazinvest in cooperation with regional operators and private investors. Regional operators will be able to get an access to new network as MVNO. The investments in construction of the new infrastructure may be equal to 1-2 bn USD.
LTE format has been confirmed as the next after UMTS. It is broadband mobile communications with high speed of data communications. Mobile operators will start developing 4G networks in the world from 2010. In January 2008 LTE format was considered by the international partnership association Third Generation Partnership project (3GPP). According to their forecast, by 2015 the income of operators of LTE networks will reach 150 bn USD and take 15% of the world market of mobile services. In Russia the interests of 3GPP are represented by the Infocommunication Union (ICO), which has already started studying the new format and its outlooks for the Russian market.
The federal LTE operator creation has been offered to be divided into several stages. The first stage will include creation of a new legal entity, where regional operators and Svyazinvest will participate. Private investors that are owners of Svyazinvest’s MRKs’ shares will also take part in the new organization foundation. The next stage will contain the agreement about partnership, including conditions for realization of the project on a network construction.
Construction of the new generation network will include construction of an entirely new infrastructure as well as modernization of the existing equipment. The new company is planned to be managed due to creation of regional subdivisions, responsible for micro regions. The unified LTE operator wants to provide the whole range of new generation services for the country’s needs in the frameworks of strategic initiatives realization. Thus, the operator creation might be considered as one of the national projects with a big strategic priority.
Experts do not support the idea of the federal LTE operator creation. Firstly, a large number of the project participants will complicate the process of decision making and management. Secondly, the project can’t be realized without either participation of Big3 operators or serious support of the government.
On other hand, 4G services may be unclaimed for Russia’s population. Taking into account financial crisis a small part of the population will be able to afford expensive 4G devices and pay quite big money for communications. Currently even 3G services recoupment remains vague.

1st virtual operator was granted a license

The first license for providing cell communications services as MVNO has been granted to Narodny Mobilny Telefon (NMT) by Roscomnadzor. The operator was created with the participation of the Moscow government. The order about the license granting has been already signed. As a result, NMT has got a possibility to work in 17 regions of Russia, including Moscow and the Moscow region.
According to the MVNO scheme, a virtual operator uses a frequency range and a part of equipment of another company. The order, allowing the MVNO scheme use, was signed in December 2008. In Western countries such projects became popular at the end of the 90s.
NMP is planning to cooperate with Sky Link and SMARTS. Sky Link will provide the operator with frequencies and subscriber numbers in the Moscow region. SMARTS capacities will be used by the operator in other 15 regions. The operator is planning to cooperate with Sky Link in CDMA range. The operator is planning to provide services of cheap roaming between CDMA and GSM as well as cheap IP-telephony in remote areas. Besides, the operator is planning to introduce various services, such as payment for services by a text message.
NMT is planning to spend around 5 mn USD at the first stage of the project, though the sum may be reduced due to crisis conditions. Currently it will be difficult for the operator to obtain loans. The conditions about profit distribution between NMT and the operators have not been discussed yet.
According to experts, the project is logical due to the requirements of the market. In crisis conditions a lot of subscribers prefer to reduce their costs on mobile communications and NMT’ project may be in demand. On other hand, even this project-discounter requires big money for its services promotion and advertising.
NMT’s project realization will face some problems, experts say. It will be hard to attract investments in crisis conditions. The company’s planned sales also remain disclosed.

Are problems with GPS a chance for GLONASS?

From 2010 the American navigation system GPS may malfunction. This information is included in the report of the GAO at the US government. Theoretically it might help the Russian GLONASS to take more beneficial position in the sphere of satellite communications.
The reason for the possible failures in the work of GPS is irrational modernization of the US Air National Guard: the budget for replacement of 31 satellites of the group has already exceeded 870 mn USD, though the project won’t be completed on time. The first satellite is planned to be launched in November 2009, three years later than it was planned before. The US ANG is planning to improve the situation, putting into operation satellites of new generation. However, they have not developed the strategy yet.
The situation with GPS might influence the Russian navigation system GLONASS as one of the competitors of the American navigation group. After being criticized by the government the departments, which supervise the programme of GLONASS development, launched new satellites into orbit in accordance with the schedule. Currently they have faced the problem of commercialization. GLONASS is not very popular in the civil sector and it can be developed in different ways, including cooperation with the European Galileo as well as creating normative documents, which will limit the use of navigation appliances, not supporting GLONASS.
According to analysts, the problems of the American GPS will be certainly solved, and the state of affairs will hardly influence GLONASS, if the RF government does not work out the strategy for the satellite system commercialization and its services popularization in the civil sector. To do it the government should attract foreign specialists.
The Russian GLONASS can’t be called competitive, experts say. the government should think over the strategy of the system’s promotion in the civil sector. It is necessary to create a convenient and easy to use navigator, so that the Russians can assess its advantages in comparison with GPS.

Angstrem wants to create a joint venture for production of chips

Anatoly Chubais, director general of Rosnano has made an offer to Intel company. The offer concerns a technological partnership that can be made between Intel and the Russian plant of microelectronics Angstrem, where Rosnano is one of shareholders.
At the meeting between Anatoly Chubais and president of Intel Paul Otellini they discussed the acquisition of the technology of chips production from Intel. During his trip to the USA Anatoly Chubais also met representatives of AMd concern, a competitor of Intel. The results of the meetings have been disclosed yet.
The acquisition the US license for production of the latest technologies is possible with the permission of the US State Department. All innovative technologies are protected by the special law. The state corporation may become a co-investor in creation of the joint venture for production of chips on technology “90 nanometres”. Angstrem’s competitor Sitronics wants to create such production, too.
Angstrem has had the plans of chips production for a long time. Around two years ago the concern wanted to develop the technology of 130 nanometres, acquiring the plant in Dresden for 462 mn USD. The company used the credit worth EUR 815 mn for the acquisition. To produce more advanced chips Angstrem has to invest around EUR 100 mn more.
Creation of hi-tech production of chips in Russia is a strategic objective. To make such production profitable they need the market in Russia and overseas. Angstrem can only produce the most advanced microchips after the company arranges about the market for chips with other companies.
According to experts, such production would impact positively the innovation economics development in Russia. Such production corresponds with long-term goals of the government. The production creation is only possible with the governmental support and support of foreign corporations as currently there is a great gap in this field in Russia compared to the leading countries.
On other hand, experts note quite tough competition and saturation on the hi-tech market. The world market has been already divided between such giants as Intel and AMD. So, it will difficult for Russia to create a competitive hi-tech production on its territory.

Operators obtained permission to launch 3G networks in Moscow

MTS, Vimpelcom and Megafon have obtained Roscomnadzor’s permission to put into operation 1st stage of 3G network in Moscow. MTS have already launched 3G in Expocenter. According to the company’s plans, they are going to launch 3G network in 35 largest business centres, transport centres and public places. MTS are also planning to provide offices of the Moscow largest enterprises, stations of the Moscow underground with 3G communications. Megafon is planning to launch 3G in Moscow in 4Q2009. By 4Q2009 the network will be already launched in buildings of Moscow as well as other towns of the Moscow region. Vimpelcom has launched 3G network in its office.
According to analysts, 3G network construction will be profitable for Big3 operators since 3G ARPU is 50-100% higher than ordinary ARPU. Currently 3G users make up 10-20% of the total subscriber base (15% in Moscow). Penetration of 3G handsets is around 5-8%. By the end of the year the number of 3G phones is going to be 10%. According to experts’ forecasts, Big3 operator will take around 60% of the 3G market.

MTS will offer to replace modems by 3G-routers
Within the period of 3G networks introduction MTS continue experimenting with new products. In August the operator will introduce a 3G-WiFi router, which is able to provide Internet access for the group of 10-15 users.
This solution is first of all designed for the market of regional users, both private and corporate clients. The price for one router will depend on the model. The router will be sold with a tariff plan. On the whole, the price for Internet traffic in this tariff plan will be 15% lower than the price in the most popular tariff plan “MTS Connect-2”.
According to analysts, such routers may be of interest to a few users, though the operator’s plans on selling 10 thousand devices per year are quite real. Dial-up users might be interested in the operator’s offer, the demand will be limited in this group, exerts say. According to experts’ estimates, less 10% of the Russia’s subscriber base of broadband Internet access are now connecting through dial-up. The subscriber base of broadband access users has reached 11.25 million houses in Russia, according to the results of 1H2009.

6. Personnel Changes

The cellular company Megafon is quitted by 1st deputy director general Aleksey Nichiporenko. After his quit Megafon is going to eliminate its subsidiary Megafon International, headed by Nichiporenko since February 2008.
Aleksey Nichiporenko is the last of the managers, working in the company since it was founded and called North -Western GSM. The team of managers has quitted the company within last year and half. In particular, in February 208 Andrei Klimov, PR director of Megafon, working in the company since 1994, left the company. In April 2008 Megafon was quitted by deputy director general on external economic relations and administration Igor Nikodimov, who became administrative director of North-Western GSM in 1994. At the end of summer 2008 the operator was quitted by Viktor Kvitsinski, working as deputy director general on techniques and development for recent 4 years (he also started working in the company as director on exploitation in 1994).
Aleksey Nichiporenko’s quit is connected for the most with Megafon’s denial of international expansion. Historically the operator was the first of the Russian cell companies, which started working overseas. In September 2001 the company created a subsidiary in Tajikistan, which works under MLT (Mobile Lines of Tajikistan) brand on the Tajik market. Megafon’s share in TT-mobile has been still 75% of shares and the rest 25% are controlled by Tajiktelecom.
The board of directors of MTS has confirmed 9 candidates for 9 seats in the new board to be elected at the annual meeting f shareholders. The list of the candidates includes Anton Abugov, 1st vice president of AFK Sistema, head of the Complex for Strategy and Development; Aleksey Buyanov, senior vice president of AFK Sistema, head of Complex of Finance; Ghiani Mohanbir Singh, independent member of MTS’ board of directors; Sergey Drozdov, senior vice president of AFK Sistema, head of the Property Complex ; Tatyana Yevtushenkova, advisor to president of Sberbank; Ron Zommer, 1st vice president of AFK Sistema Telecom, head of the business unit” Telecommunication Assets”; Daniel Eldon Crowford, independent member of MTS’ board of directors; Paul James Ostling, independent member of MTS’ board of directors; Mikhail Shamolin, president of MTS.

Ron Zommer has decided to quit the board of directors of Motorola after he was appointed 1st vice president, head of the business-unit “Telecommunication Assets” in AFK Sistema. He is leaving the board of directors from July 29th. He declared about the quit from Motorola on May 18th, when Sistema declared about his appointment.

Vyacheslav Yakhin has been appointed vice president on marketing and advertising of Euroset. Previously he headed the Marketing Department in OJSC Aeroflot. On the new position his objectives include assessing the brand, forming the advertising policy and creative conceptions, strengthening the company’s leading positions on the market and its share increase.
The former vice president on marketing and advertising Dmitry Patratski quitted Euroset last December after Sergey Yuschenko, director general of the company had been replaced and the company’s shareholders had been changed. Currently Alexander Malis is director general of Euroset.
The operator Sistema Shyam TeleServices Ltd. (SSTL), a subsidiary of AFK Sistema in India, has declared about changes in the board of directors. Ron Zommer, 1st vice president and head of the business-unit “Telecommunications Assets” has become chairman of the board of directors of SSTL. The board of directors also includes Mikhail Shmolin, president of MYS; Madhukar Saxena, which was holding high positions in the banking and regulating sectors of India, as an independent director.
The Russian cell retailing company Euroset has declared about elimination of the position of 1st vice president on finance and administration in the frameworks of the company’s restructuring. The position was introduced in the company in November 2008 after the company had changed its shareholders. The position was created for the time of new managing structure forming. The position was taken by Vitaly Podolsky, he supervised financial and strategic directions as well as auxiliary services, including IT and law.
Euroset’s financial director Alexander Papin, working in the company since 2002, has been still responsible for financial maters.
Director general of CJSC Sonic Duo Igor Parphenov has been appointed deputy director general of OJSC Megafon on the Capital Region. This decision was taken by the only shareholder of Sonic Duo OJSC Megafon.
Igor Parphenov will work as director general of Sonic Duo until Sonic Duo is eliminated from the Unified State Register of Legal Entities due to consolidation of Sonic Duo with Megafon. The decision about consolidation was taken by Megafon’ authorities on November 25th 2009.

The board of directors of OJSC Rostelecom has included Anton Khozyainov in the board, simultaneously the board of directors terminated early the powers of the board’s member Andrei Gaiduk, who had worked as 1st deputy director general, financial director of Rostelecom. Gaiduk does not possess any shares of Rostelecom.
From 2002 till 2008 Anton Khozyainov was holding the position of financial director in different investments funds. From January till February 2009 he was working as advisor to director general in CJSC MC NTT. From February 20009 till April 14th 2009 he was working as deputy financial director in Rostelcom.
AFK Sistema has declared about nomination of 13 members to the company’s board of directors, which will be confirmed on June 27th 2009. Two candidates Rajiv Mehrotra and Robert Kochyaryan have been nominated as independent directors. Rajiv Mehrorta founded the Indian Shyam Group of India, which owns Sistema Shyam TeleServices in cooperation with AFK Sistema. Robert Kocharyan was president of Armenia from 1998 till 2008.
It is not the first case, when a former head of the country is appointed to the board of directors of a company with Russian participation. In particular, in 2006 the former chancellor of the Federal Republic of Germany Gerkhard Shreder was appointed chairman of the Committee of shareholders of Nord Stream AG (responsible for the gas project Nord Stream). And in 2008 ex-Prime Minister of Finland was invited as an independent consultant to the company.
Shareholders of OJSC Giprosvyaz have elected the board of directors, which consists of 7 people. The board of directors includes Georgy Romski, advisor to director general of Svyazinvest; Aleksey Lokotkov, deputy director general of Svyazinvest; Mikhail Leschenko, advisor to Minister of Communications; Natalya Feoktistova, head of the Department for Corporate Management and Legal provision of Svyazinvest; Alexander Provotorov, 1st deputy director of Svyazinvest; Nadezhda Philippova, deputy director general of Svyazinvest; Elena Umnova, deputy director general of Svyazinvest. On may 28th at the first meeting of the new board of directors Alexander Provotorov was elected chairman of the board of directors.
On June 30th at the annual meeting Rostelecom’s shareholders elected a new board of directors, consisting of 11 people. The board of directors includes Yevgeni Yurchenko, director general of OJSC Svyazinvest (owns the control shareholding of Rostelecom); Mikhail Leschenko, advisor to Minister of Communications; Alexander Provotorov, 1st deputy director general of Svyazinvest; deputies director general of Svyazinvest Aleksey Lokotkov, Elena Umnova, Vladimir Bondarik and Viktor Savchenko as well as Sergey Kuznetsov, the member of the national Register of Independent Directors at the Russian Union of Industrialists and Entrepreneurs, the former head of Rostelecom’s board of directors.
The board of directors also includes Konstantin Malopheev, managing partner of the representative office of MarCap Advisors Limited and Ivan Rodionov, professor of the Higher School of Economics, who are members of the board of directors of Svyazinvest. Maxim Tsyganov, a only candidate from the investment bank KIT Finance, has kept his seat in Rostelecom’s board of directors.
Previously Rostelecom’s board of directors included 3 representatives of the investment bank and 1 representative of the bank’s partner on investments in Rostelecom, the managing company Leader. Another member of Svyaznvest’s board of directors Marlen Manasov has withdrawn his candidature.
At the first meeting of the board Yevgeni Yurchenko was appointed chairman of the board of directors and Alexander Provotorov was appointed his deputy.
A new position of executive director, responsible for operating management of the company, will appear in the management of the 4th Russia’ largest cell operator Tele2. Dmitry Strashov will be appointed Chief Operating Officer. Previously Strashov headed Philips Consumer Electronics in Russia. He was transferred to Philips in 2000. Before Philips he had worked in Electrolux Home Appliances in Russia. Then the share of Philips was less than 4% on the Russian market of consumer electronics. Currently, according to the data from Philips, the company’s share is 15% and according to the results of 2008 the share of Russian Philips is 18% in the total sales of the corporation.
One of Dmitry Strashnov’s achievements in Philips is his decision to start assembling TV sets in Russia (around 70% of Philips TV sets, sold in Russia, are now being assembled in the Kaliningrad region). Besides, in 2007 Royal Philips Electronics was the first of the leading producers of electronics, which started importing directly. Previously the position of Chief Operating Officer did not exist in Tele2 Russia. Such position has been also introduced in OJSC Vimpelcom since April 2009. Currently this position has been taken by Boris Nemsich. In Vimpelcom CEO makes strategic decisions and COO is in charge of the operator’s current activity.

Anton Kolpakov, recently working as head of the Far East MRK of Svyazinvest, has been appointed director general of OJSC Rostelecom for 2 years. Konstantin Solodukhin, heading Rostelecom since November 2007 is going to rest. It is still unknown if Konstantin Solodukhin will work in Svyazinvest. Currently the company has different objectives: Rostelecom does not have to compete with MRKs and the companies are planning to merge. It is unknown who will head Dalsvyaz. This question will be settled at the annual meeting of Dalsvyaz’s shareholders on June 10th, when a new board of the company will be elected.
Pavel Tereschenko, deputy director general on business development of Rostelecom has been included in the Council on Matters of Use and Development of the Information-telecommunication Network Internet in the RF.
The Council was created by the Ministry of Communications of the RF as a permanent deliberative body, intended to contribute to making decisions, connected with use of Internet in Russia, in cooperation with the Ministry of Communications and representatives of interested federal bodies and public organizations.
The Council’s key objectives are to form initiatives and develop programmes and projects, to work out the policy on use and development of the Russian segment of the Internet, to prepare offers on the legislative base improvement.
According to the decision of MGTS’ board of directors, included in the group of companies Comstar-UTS, of May 29th 2009, Vladimir Lebedev has been appointed for the position of deputy director general, technical director of MGTS. Previously this position was held by Leonid Ukhlinov.
Being technical director of the company Vladimir Lebedev will have to continue development MGTS’ technical base, adjust activity of operational services, coordinate work over improvement of the company’s information systems as well as control following new standards of quality of services provided.
Vladimir Lebedev started his career in the Computer Bureau COAN USSR, where he took part in creation of the 1st Soviet microchip KRONOS (32 bit). In 1990 he founded the Soviet region of the telecommunication network FidoNet. From 1993 he worked as an engineer in the Institute of Systems of Informatics SO RAN.
From 1995 till 2000 Lebedev participated in the project of creation and development of the Stock Exchange RTS, holding the position of technical director of the Technical Centre of RTS. In 2000 he was transferred to the Moscow representative office of Lucent Technologies, where he held positions from manager of technical support of sales to deputy technical director. From December 2004 to December 2005 he worked as director of the Directorate of Engineering Development of the Russian subsidiary of Equant, an international operator of communications. Lebedev was transferred to MGTS after resigning from the position of president of the Moscow system integrator CPM Ltd.
At the annual meeting shareholders of OJSC Central Telegraph elected a new board of directors. The new board of directors consists of Yevgeny Yurchenko, director general of OJSC Svyazinvest; Alexander Provotorv, deputy director general of Svyazinvest; advisors to Minister of communications Mikhail Leschenko and Sergey Lukashov,; Alla Grigoryeva, deputy director of the Department for Corporate Management and Legal Provision of Svyazinvest; ex-Minister of Communications Valdimir Bulgak; Viktoriya Chernousova, representative of the Federal Agency for Management of Federal Property. Yevgeny Yurchenko has been elected chairman of the board of directors.
On June 9th 1st Vice Prime Minister Igor Shuvalov confirmed a directive to the members of Svyazinvest’s board of directors, the representatives of interests of the RF.
According to the directive, the members of Svyazinvest’ s board of directors, the representatives of interests of the RF must raise a question about election of the chairman of the board of directors, nominating Advisor to the RF President Leonid Reiman for this position.
The representatives of the interests of the RF in Svyazinvest’s board of directors also must vote for Leonid Reiman during the election. We remind Reiman’s candidature was also supported by the Ministry of Economic Development.

On June 16th 2009 Arkady Moreinis is resigning from his position of director on working out and development of the projects of Rambler Media (Rambler). He will be engaged in development of own projects. So far Rambler Media has not informed about new appointment for this position.
On June 10th Vimpelcom elected a new board of directors. In includes again Mikhail Fridman, the major owner of Alfa Group; Oleg Malis, senior vice president of Altimo and Aleksey Reznikovich, director general of Altimo. Telenor’s representatives in the new board of directors are Ole Bjorn Syulstad, head of the Russian subsidiary of Telenor; Kjell Morten Johnsen, director general of Telenor Serbia; Jan Edvard Thygesen, executive vice president on Central and Eastern Europe. Aleksey Reznikovich has been elected chairman of Vimpelcom’s board of directors.
Leonid Novoselski, head of Gradient, Joe Lunder (headed Vimpelcom in 2001-2003) and Hans Peter Kohlhammer, director general of Kohlhammer Consulting, have beed included in Vimpelcom’s board of directors as independent directors.
Aleksey Ostapchuk, director general of the State Enterprise Space Communications (GPKS), has not worked in the company anymore. The order about termination of his powers was signed by Valery Bugayenko, head of Rossvyaz. Since June 12th 1st deputy director general of GPKS Yury Prokhorov has been acting as director general of the company.
According to the law, directors general of state-owned unitary enterprises, controlled by Rossvyaz, must be appointed according to the results of competitions. Aleksey Ostapchuk headed GPKS on June 11th 2008 in accordance with the results of the competition, held by Rossvyaz.
Yury Prokhorov has reach experience of work in the space sector. He was working for around 10 years in the state-owned unitary enterprise GKNPC named after M.V. Khrunichev, holding leading positions. He was transferred to GPKS from OJSC Intellect Telecom, included in AFK Sistema.
According to Aleksey Ostapchuk, his resignation was a violation of the legislation and he is going to contest it in court.
Anton Terekhov is resigning from the position of marketing director of Rambler Media. During his work Terekhov set close interaction between the departments of marketing and products, realizing the marketing support of some initiatives, including launch of such products as Mobile Rambler and My Rambler, adjusted the process of traffic management.
Personnel changes began in Rambler last year. In autumn 2008 Nikita Sergienko replaced Arthur Akopyan on the position of the company’s financial director. At the beginning of 2009 the shareholder of Rambler Media, Prof-media group, decided not to prolong the contract with the company’s director general Mark Opzumer and appointed Olga Turischeva for this position. After the new director general had been appointed, Nikita Sergienko quitted the company. Later at the beginning of June the company was quitted by Aleksander Moreinis, director on working out and development of projects.
Sky Link’s shareholders have elected new chairman of the company’s board of directors, he is Ron Zommer. The new board of directors consists of 7 people, including chairman.
Ron Zommer has been cooperating with AFK Sistema, which owns 50% of Sky Link’s shares, since 2003. Currently he is 1st vice president and head of the business-unit Telecommunication assets of AFK Sistema, the member of the board of directors and the board of AFK as well as chairman of the board of directors of Sistema’s Indian subsidiary Sistema Shyam TeleServices. Besides, he is also a candidate to members of MTS’ and Comstar-UTS’ boards of directors.
Ron Zommer has replaced Vitaly Savelyev, the former 1st vice president of Sistema, head of the Complex of Telecommunication Assets Development in the holding. In April 2009 Savelyev quitted Sistema and headed Aeroflot.
Apart from Ron Zommer the new members of Sky Link’s board of directors are Igor Busarov, deputy director of the Financial Department, head of the Department of Active Operations of the Complex of Finance and Investments of AFK Sistema, and Sergey Ivanov, director of the Department for Telecommunication Assets Strategy of AFK Sistema. They have replaced Vladimir Uvankin, director of the Department for Corporate Property and Department of Property complex and Dmitry Krylov, director of the Marketing Department of the Complex pf Telecommunication Assets Management, who continue working in the company.
Anton Abugov, 1st vice president of AFK Sistema, head of the Complex of Strategy and Development; Stanly Cramton, president of the Russian Telecommunications Development Corporation; Vikto Ustyuzhanin, director general of MS-Direct and Gulnara Khasyanova, director general of Sky Link, have been re-elected to the new board of directors.
At the annual meeting MTS’ shareholders elected the company’s new board of directors, consisting of 9 people. The board of directors includes Anton Abugov, 1st vice president of AFK Sistema; Aleksey Buyanov, senior vice president of Sistema, head of the Complex of Finance; Sergey Drozdov, senior vice president of Sistema, head of the Property Complex; Mikhail Shamolin, president of MTS; Tatuana Yevtushenkova, advisor to president of Sberbank; Ron Zommer, 1st vice president of AFK, head of the business-unit Telecommunication Assets as well as Mokhanbir Ghiani, Daniel Crowford and Paul Ostling as independent directors.
Thus, the company’s board od directors has not changed almost, except Ron Zommer, who has replaced Vitaly Savelyev, quitting the company due to his appointment to Aeroflot.
Yevgeny Bolshakov, director general of Svazinvest’s subsidiary Giporsvyaz, is forming a new team of top managers. Aleksey Semin has been appointed deputy director general of Giprosvyaz. Artem Shatrakov has been appointed for the position of financial director and Elena Doronina has taken the position of deputy director on human resources.
Yevgeny Bolshankov has been appointed head of Giprosvyaz by the company’s board of directors at the end on May 2009. Previously this position was held by Anton Yevgenyev, appointed in July 2008. Bolshakov had been holding this position in 2000-2006.
The new director general of Rostelecom Anton Kolpakov is forming a new team of top managers. The company has been quitted by Georgy Cherny, director of the Sales Department of Rostelecom; Pavel Tereschenko, deputy director general on business development; Stanislav Miron, deputy director general on the network development. Pavel Tereschenko has already started working as deputy director general on IT at the President Library named after B.N. Yeltsin.
On June 27th AFK Sistema held the annual meeting of shareholders. During the meeting they confirmed the annual report for 2008 and decided not to pay dividends for 2008.
A new board of directors of AFK Sistema was elected at the meeting. Currently it consists of 13 people instead of 10 ones. So, the new members of Sistema’s board of directors are Leonid Melamed, president of AFK Sistema, Rajiv Mehrotra, the member of the board of directors of Sistema Shyam TeleServices and Robert Kocharyan as an independent director. The board of directors also includes Alexander Goncharuk, Alexander Gorbatovsky, Vladimir Yevtushenkov, Ron Zommer, Dmitry Zubov, Vyacheslav Kopyev, Steven Newhouse, Robert Skidelsky, Sergey Cheremin. Vladimir Yevtushnkov has been elected chairman of the board of directors.
On June 29 2009 in Moscow the session of the board of directors of Svyazinvest was held. In the frameworks of the agenda they considered the following questions: about election of the chairman of the company’s board of directors, about Rosimuschestovo’s appeal about the increase in purchases of Russian products.
According to the results of the session, Leonid Reiman was elected chairman of the holding’s board of directors. They also decided to charge Svyazinvest’s board to develop and submit to the board of directors the unified technical policy and programmed of the increase in use of domestic equipment of communications, domestic technologies, materials and appliances, used for construction of networks and objects of communications in the frame works of the company’s general strategy of development.
We remind Leonid Reiman’s candidature for the position of chairman of Svyainvest’s board of directors was supported by the Ministry of Economic Development and then confirmed by the Ministry of Communications.
Pavel Kuznetsov, director general of OJSC Central Telegraph (CT), heading the company for two years, is quitting the company. From July 2nd 2009 he will be replaced by Igor Zabolotny, director general of MTT, whose candidature was confirmed by the CT’s board of directors.
Igor Zabolotny’s appointment is not the first replacement in Svyazinvest’ structures. For recent months directors general have been replaced in Rostelecom, Dalsvyaz, Sibirtelecom, Volgatelecom and the South Telecommunication Company. According to director general of Svyazinvest Yevgeny Yurchenko the holding’s objectives are to consolidate assets and create a unified operator, so it is necessary to change management in the holding’s subsidiaries.
Previously Igor Zabolotny worked in MTT, where he held positions of acting director general and director general.
The shareholders of Comstar-UTS have elected a new board of directors. The board of directors has been presided by 1st vice president of AFK Sistema Ron Zommer.
The company’s new board of directors includes Anton Abugov, 1st vice president of AFK Sistema; Anna Goldin, vice president of AFK Sistema; Sergey Drozdov, senior vice president of AFK; Ron Zommer, 1st vice president of AFK; Sergey Ivanov, director of the Department for Strategy of Telecommunication Assets; Sergey Pridantsev, president of OJSC Comstar-UTS; Ingve Redling, head of the bilateral working group on IT between Sweden and Russia; Dmitry Ustinov, head of the Financial Department of AFK Sistema; Thomas Holtrop, the member of the board of directors of Gruner and Jahr.
Comstar’s board of directors has been quitted by 4 people: Anatoly Akimenko, vice president of Access Industries (Eurasia); Andrei Matyukhov, director of the Department of Portfolio Strategy of the Complex of Strategy and Development of AFK Sistema; Vitaly Savelyev, head of the Complex of Telecommunication Assets Development; Viktor Dauman, executive director of InterMatrix Global Strategy Ltd.
The board of directors of OJSC Sitronics has elected again Juval Almog chairman of the company’s board of directors. A new board of directors of the company was elected at the annual meeting. Apart from Juval Almog, managing director of Coral Capital Management, the new board of directors includes Anatoly Ballo, deputy chairman of VEB; Sergey Boyev, vice president of AFK Sistema; Anton Abugov, 1st vice president of AFK; Aleksey Buyaniv, senior vice president of AFK; Kirill Poltayevsky, director of the Department of Strategy of the business unit Hi-Tech and Industry; David Khidasheli, executive vice president of the Complex of External Relations of Sistema; Denis Muratov, ex-vice president of AFK; Sergey Aslanyan, president of Sitronics; Nihad Hurem, 1st vice president on development of new products and technologies; Dmitry Gayev, head of the Moscow Underground.
The shareholders of CJSC Synterra have elected the same board of directors, consisting of 7 people. The board of directors consists of Aleksey Ananyev, chairman of the board of directors of Promsvyazbank; Vitaly Slizen, director general of CJSC Synterra; Ayur Dorzhiev, lawyer of Synterra Cyprus Limited; Sergey Kharitonov, 1st deputy chairman of the Consulting Council of Teckhnoserv A/C; Arthur Akopyan, managing director of Sloane Square Capital Partners; Igor Mangul, representative of the group Promsvyazcapital; Yevgeny Vasilyev, head of the macro region North-West, created on the base of CJSC PeterStar.
Aleksander Oganyan has been appointed director general of the group of companies Optima. The former director of Optima Anatoly Mazurets quitted the company.
This March Oganyan was appointed 1st deputy director general, director on operating activity of Optima. Then he became the 4th deputy director general. he was responsible for execution of the company’s projects.
The operator of integrated telecommunication services Comstar-UTS has announced about appointment of Maxim Chernov for the position of marketing director. The company’s marketing director subordinates directly to the company’s president. This position was introduced in 2009 instead of the position of vice president on marketing, which had been held by Sergey Nazarov since June 2007.Iin February 2009 Sergey Nazarov was transferred to the position of director general of MGTS.
After graduating from the economic institute in 1998 Maxim Chernov held positions of chief economist, commercial director and deputy director on realization at an industrial enterprise. In 2001 he was transferred to OJSC Electrosvyaz in the Kostroma region, where he worked as manager, engineer, head of the Marketing Department.
In 2002-2005 he held the position of head of the Marketing Department in the Kostroma subsidiary of Centertelecom. In 2005 he was appointed head of the Marketing Department, created on the basis of three subsidiaries of the Upper Volga subsidiary of Centertelecom. In 2006 he was transferred to Centertelecom’s mother company for the position of head of the Department on Work with Population and Legal Entities.
In 2007 Chernov was transferred to Comstar-UTS for the position of director of the Department of Tariff Policy and Promotion of Communications Services to Corporate Clients. From February to July 2009 he worked as acting vice president on marketing, director of the Department of Comstar-UTS.
Igor Gorbatov has been appointed director general of OJSC Armada. He made the contract for three years. Previously he worked as deputy director general in the company. The position of director general was previously held by Aleksy Kuzovkin, who has taken the position of chairman of the company’s board of directors.
Vladimir Zarubin has been appointed director on the space programmes and projects of GPKS. He has headed the newly created subdivision of the company - - the Service of Space Programmes and Projects pf GPKS. He will supervise matters of the orbital satellite group development, means of management and control of space crafts.
The RF President Dmitry Medvedev has signed the order, according to which Minister of Communications Igor Shegolev has been included in the Commission on Modernization and Technological Development of the RF Economics at the RF President.
The order about making changes in the Commission was signed on July 11th 2009 and published on July 14th 2009. The Commission also includes Sergey Sobyanin, Vice Prime Minister, head of the RF Government Apparat; Vladislav Surkov, 1st deputy head of the Administration of the RF President; Arkady Dvorkovich, Assistant to the RF President; German Gref, president of Sberbank; Elvira Nabiullin, Minister of Economic Development; Sergey Ivanov, Vice Prime Minister; Sergey Kiriyenko, director general of the state corporation Rosatom; Mikhail Kovalchuk, director of the Russian Scientific Centre Kurchatovsky Institute; Yury Milner, chairman of the board of directors of Digital Sky Technologies Limited; Mikhail Prokhorov, president of Group ONEKSIM; Andrey Fursenko, Minister of Education and Science; Viktor Khristenko, Minister of Industry and Trade; Sergey Chemezov, director general of the state corporation Rostekhnologii. The rest two seats are taken by Anatoly Chubais, head of Rosnano and Leonid Reiman, Advisor to the RF President, chairman of Svyazinvest’s board of directors.
The key objectives of the Commission are to consider matters, concerning working out the state policy in the field of modernization and technological development of Russian economics as well as to coordinate activity of the federal executive bodies, executive bodies of the RF subjects and local executive bodies.
Dmitry Strashnov has been appointed new president of Tele2 Russia. He has replaced Donna Cordner, who quitted the company. Strashnov worked in the company as director on operations for three months
No changes are expected due to the new appointment. The company will continue working, focusing on regional expansion. Within the following 6 months Tele2 is planning to start providing its services in 11 new regions of Russia.
Since July 14th 2009 Denis Chuiko has been appointed 1st deputy director general of the federal state-owned unitary enterprise Post of Russia. In 2002-2003 he worked as head of the State institution GU GCMPP. In 2003-2006 he held the position of 1st deputy director general of Post of Russian and simultaneously was the member of the board of directors and later chairman of the board of directors of the Interregional Commercial Bank of Development of Communications and Informatics. In 2007-2009 he worked as director general of the Unified Post Corporation.

7. Figures and Facts

The annual income of WiMAX networks in the world will decrease by 25% to around 15 bn USD, according to analysts’ forecasts.
RUR 260 mn will be invested in development of telecommunications in the Kaliningrad region by North-Western Telecom in 2009.
In May 2009 Centertelecom’s subscriber base of broadband access services exceeded 820 000 users. The company’s fitted capacity of broadband access is equal to over 1 million of ports.
Sales of mobile phones might decrease by 30-35% in Russia in 2009.
The volume of communications services provided in the Vologda region was equal to RUR 1.645 bn in January-April 2009. Thus, it has increased by 11.3%.
In 2008 MTS purchased iPhones at 65.4 mn USD. Within next three years the operator has to purchase iPhones at 848 mn USD, according to the contract.
In Moscow a users spends monthly RUR 615 on broadband access services on average. (RUR 642 in regions).
Russian has taken 4th place in the world according to a number of unique Internet users (31.3 million people). The result is almost two times as much, compared to 2008. As of June 2008 17.5 million of people used the Internet, according to comScore.
350 mn USD are planned to be invested in 3G networks by MTS in 2009.
In Russia the number of houses, provided with broadband Internet access, increased by 1.6% in April 2009.
321 scheduled inspections on control over keeping to the RF legislation in the filed of personal data are planned to be held by Roscomnadzor in 2009.
In 1Q2009 Sintronics’ net loss was equal to 40 mn USD
RUR 700 mn are planned to be invested in regional development by Comstar-UTS in 2009
In 1Q2009 the turnover of the Russian market of moment payments, carried out via payment systems, was equal to RUR 141 bn, 22% growth.
200 mn USD are planned to be invested in creation of a new federal WiMAX operator in Russia by Icon Private Equity

In 2009 Centertelecom intends to increase its revenue by 9%. In 2008 the operator’s revenue was equal to RUR 34.79 bn, so in 2009 the company is expecting to obtain no less than RUR 37.9.
RUR 700 mn will be invested in development of telecommunications in Novosibirsk by Sibirtelecom in 2009.
42% companies across the world have cut their budgets for 2009, according to the survey of 900 directors on IT, carried out by Gartner.
In April 2009 penetration of cellular communications in Russia reached 136%.
RUR 350 mn are planned to be invested in development of telecommunications in Dagestan by Summa-Telecom in 2009
KIT Finance is going to sell 30% of shares in Rostelecom for RUR 50.278 bn to ACB
Currently penetration of PC Microsoft is 24% in Russia. The company is planning to double its turnover in Russian within three years.
The RF cellular operator’s subscriber base increased by 1.2% in may 2009.

As of April 1st 2009 net debt of North-Western Telecom was equal to RUR 16. 593 bn.
In 1Q2009 Russia’s revenue from data communications services increased by 34%
IN 1Q2009 CAPEX of Russian operators of communications reduced by 4.8%.
In 1Q2009 revenue of Russian telecommunications operators increased by 11.2% to RUR 304 bn.
34% of Russia’s population use the Internet regularly.
In 2008 Mail.Ru increased its net profit by 29.4%
In January –May 2009 the turnover of telecommunications enterprises in Karelia increased by 13.3% to RUR 1.721 bn.
Centertelecom has obtained a credit worth RUR 3 bn from Globex bank.
In 2008 MTS increased net profit by 40%.
RUR 700 bn were given by Rostelecom to Centertelecom and Central Telegraph as financial support.
In 2015 15 billion of devices will be connected to the Internet.
In May 2009 the number of “home” Internet subscribers increased by 1.7% in Russia.
In 1H2009 the retailing sales of mobile phones dropped by 36% in Russia.
In 1Q2009 revenue from communications services in Russia were equal to RUR 3.044 bn.

According to the results of 2008, the market of digital pay TV was equal to 196 mn USD. The revenue from services of pay television was around 25%. The subscriber base of digital pay television reached 4.1 million houses, i.e. 34% of the total Russia’s base of pay television.
By 2010 penetration of the Internet in regions will exceed 20%.

In May 2009 penetration of cell communications reached 136.8% in Russia.
The telecoms market of the North-West federal region increased by 10% to RUR 36.8 bn in 1Q2009
Sitronics and Rosnano are planning to invest RUR 16.5 bn in production of chips 0.09 micron.

Tele2 has acquired 25.5% of the cellular operator Udmurtskaya Sotovaya Svayz for 300 mn kronas. Currently the company possesses 100% of the operator.
MTS are going to invest RUR 2.1 bn in the chartered capital of the subsidiary of CJSC RTK
According to the data from the Ministry of Economic Development, tariffs for local communications will grow by 11% in Russia in 2010.
According to the results of 2Q2009, Nokia’s net profit has reduced 3.8 times to EUR 278 mn.


Sources: Vedomisti, Prime-TASS, RBK Daily, Comnews, Cnews, Interfax, Commersant.


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