MTS Shakes Up St. Pete Market

ST. PETERSBURG — Predictions by telecoms-industry specialists that the arrival of Moscow-based Mobile TeleSystems, or MTS, will change St. Petersburg's cellular-communications market appear to be coming true.

North-West GSM, the region's only Global Mobile Standard service provider, is continuing to broaden service and tariff options for its subscribers ahead of the arrival of MTS this autumn.

MTS, meanwhile, voluntarily surrendered some of its 900-megahertz bandwidth in Moscow and the surrounding region to the Communications Ministry, a move that industry analysts see as a trade in return for which MTS will receive clearance to move into the northwest. The ministry has been trying since last summer to free up some bandwidth in the capital to Sonic Duo, which has been granted the city's third GSM license.

At the end of May, MTS, which is Moscow's — and Russia's — largest cellular provider, announced the $50 million purchase of Telecom XXI, which holds the second GSM license in the Northwest. The company plans to finish its network and begin operations in October.

While MTS general director Mikhail Smirnov said at the time that the company didn't foresee a serious price war in the area, he did say lower tariffs, along with a range of new services, were part of the company's plan.

North-West GSM appears to be following much the same strategy, rolling out new payment plans and services of their own. The approach is bearing fruit, as its subscriber base has jumped by over 55,000 in the last two months, with the total now standing at about 380,000.

In May, it rolled out the first of its new programs, signing up subscribers to new, 10-digit federal numbers with a connection cost of $50 and usage tariffs of $0.15 per minute.

In the middle of July, North-West GSM further altered its tariff plans, no longer signing up subscribers to its "basic" and "business" tariffs, but rather setting up a new billing system called "basic+" with the same connection fee as "basic" of $75, but charging tariffs between $0.17 and $0.25 per minute. Under the basic program, the tariffs had been from $0.22 to $0.33. Using the federal numbers, the company is also offering the "GSM-light" plan, with a $35 connection fee and tariffs from $0.08 to $0.32 per minute, depending on the time of day.

The company says subscribers who signed up under the old plans can remain with the same services or switch to one of the new programs and that the new "light" tariff program was created with people using prepaid cards in mind.

North-West GSM has also been adding services, including, the setting up of a new company information service along with an automated entertainment channel, which will feature jokes, according to the company's Internet site.

MTS has yet to announce tariff policies here, but has seen changes all the same. The company gave back 3.2 megahertz of bandwidth on the 900 megahertz frequency, but still holds the rights to use 11.4 megahertz in the capital.

Why they gave the bandwidth back remains an interesting question.

Smirnov said earlier this year that the company didn't really need the bandwidth and only reacted as it did last year to the ministry's attempts to grab some of it back "as a matter of principle."

MTS, which has American Depositary Receipts listed on the New York Stock Exchange, and must, therefore, report significant changes in structure to the U.S. Securities Exchange Commission, told the commission that the frequency had been returned so that the ministry could carry out research on the operations of providers in the cellular market.

Last week, Eva Prokofyeva, while not commenting on the rumors that Anti-Monopoly Ministry approval was conditional on handing over the bandwidth, said the move was based on the nature of the licensing agreement. "We gave the bandwidth back because the agreement only granted its use for a certain period of time," Prokofyeva said.

"We don't need the bandwidth," she added. "We want to have normal and rational relations with regulatory bodies."