Effortel Aims at Slice Of Telecoms Market

Telecoms provider Effortel Russia rolled out ambitious plans Tuesday to spend $850 million over five years on a package of high-end services, including mobile, fixed-line and long-distance telecommunications.

Leonid Melamed, Effortel's majority shareholder and head of the State Nanotechnology Corporation, will provide much of the funding, Effortel CEO Mikhail Susov told reporters Tuesday.

Melamed is not related to his namesake Leonid Melamed, chief executive of the country's leading cell phone operator, Mobile TeleSystems.

"We are also in talks with two strategic investors to raise close to $200 million," Susov said. "We intend to push the company into the top 10, with a capitalization of $1.2 billion by 2012."

Effortel has acquired 15 telecom companies in Russia over the past year and plans to acquire more assets to gain 10 to 12 percent of the broadband and business communications market.

Susov said this would entail capturing 3 percent of the nontraditional market for telephone service providers, which consists of 700,000 households and 55,000 corporate clients.

The company already has licenses for fixed-line and long-distance services in many Russian cities, he said.

As part of its strategy, Effortel would increase its market share by aligning with real estate developers to connect new houses, trade centers and office buildings to a unified network.

Apart from creating a new brand as a fixed-line operator, the company would target only "creditworthy clients," which account for 40 percent of the client base in the areas it covers, Susov said.

Effortel would also offer long-distance calling services, a move analysts said could challenge well-entrenched operators, including Golden Telecom and state-owned Rostelecom.

"Consumers need comprehensive services and not multiple operators providing different services," Susov said. "The present situation, where regional markets are flooded with small players that lack comprehensive solutions, only creates confusion for consumers."

Susov said there were virtually no big players that could provide turnkey solutions in the telecoms retail sector, adding that Effortel was moving to fill the niche.

The inclusion of long-distance services would give Effortel's offering the appearance of an all-in-one package and give it an edge over stand-alone service providers, analysts said.

"Effortel needs long-distance calling services along with triple play and fixed-line services," said Anna Kurbatova, an analyst with UniCredit Aton. Triple play refers to television, Internet and telephone service packaged together.

"Though Effortel's plans are ambitious, its management is full of professionals who are quite confident and focused. Their business plan for coverage of 42 Russian cities is pretty detailed."

Melamed acquired Effortel Russia last year from the founders, Arkady Panich and Mikhail Susov, a former MTS executive. Melamed owns more than 60 percent of Effortel Europe, a Brussels-based firm founded in 2005 as a mobile virtual network operator, while the rest is held by Susov and Panich, Bloomberg reported.