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. Last Updated: 07/27/2016

Telecoms Eye Fertile Future in Regions

The biggest opportunities for telecommunication services lie not in the well-developed Moscow market but in newer, as yet untouched areas in the rest of Russia, according to participants at this week's Svyaz-Expocomm exhibition.

The growth prospects range from cellular telephones for the unwired suburbs springing up in the Moscow region to local, long-distance or international services for the whole country, according to some of the 600 telecom companies that have come to Moscow to show their wares.

"Two years ago our business outside of Moscow comprised 5 percent of the company's activities. Now it is currently at 15 percent, and in two years we expect the service provided in Moscow versus the regions to even out," said Gennady Shakhmatov, regional manager of Comincom, which has interests in telecom service providers in 20 regions as well as in the Moscow phone operator Combellga .

The new frontier begins just outside Moscow in the market for cellular phones. While growth has slowed in Moscow for Moscow Cellular, Beeline, and Moscow Telesystems, the three cellular phone companies are finding a largely untapped market in the Moscow suburbs, with their fast-sprouting rows of luxury "kottedzhi."

Alexander Manoshkin, manager of marketing and business development for Moscow Cellular Communications, said that the percentage of families that have a regular telephone is low in the Moscow region, and installing regular phones can be unaffordable.

Manoshkin said that installing a regular phone costs from 8 to 12 million rubles ($1600 to $2420) in many areas in the Moscow region as opposed to 5 million rubles, the cost to obtain a basic mobile phone.

He said that Moscow Cellular Communications already offers service to 80 percent of the Moscow oblast and will be able to provide full coverage by the year 1997. Twenty percent of the company's current clientele use the phones at their dachas, he said.

Manoshkin said that cellular phone companies are not only hoping to attract as clients businesses, which form the main users of cellular phones, but residential clients as well. He said that cellular phones could be shared by several customers on a "party-line" basis to cut costs.

Olga Makrukh, head of operations for Beeline Cellular Communications, said her company was following a similar strategy. She said that Beeline has 25 base stations in the Moscow region and expects to cover the whole of the Moscow region by the year 2000. "The real area of growth for our company lies outside the city of Moscow," she said.

Mobile Telesystems is also building a network to cover the entire Moscow region by the year 2000.

The wider market stretches beyond the Moscow region to other centers where demand is growing both for cellular phone services and for regular phone services using a mixed system of satellite, fiber-optic and existing telephone cables, providing competition to Russia's current phone network.

"We are now starting to move full speed ahead with providing telephone services outside of Moscow," said Ivan Shadsky, regional sales manager for TeleRoss, which works in conjunction with Sovintel to provide long-distance service to 12 regions across Russia. "That is where the real growth will be."

He said that the company plans to have service available in 25 regions of the country by the end of the year through its own system of satellite hook-ups and fiber-optic cables.

Dmitry Kamenskii, technical director of the U.S. company Lucent Technologies, said that, despite their ambitions, few service providers can guarantee reliable high-level communications functions outside of Moscow.

"They say they can provide quality data and video services outside of Moscow, but in reality we are not there yet," he said .

Moreover, as in Moscow, expansion in the rest of Russia will remain concentrated in the cities and among the more profitable business sector that can afford the rates.

"Most of the new telecommunication companies operating in the Russian market are offering long-distance and international service to the urban business sector," said one equipment supplier. "The majority of ordinary Russians living in rural areas will only get a telephone in the next ten years," he said.

In the meantime, some companies said that, while the Moscow market is become increasingly tighter, there are still openings. "There are niches that are still available," said Vadim Erokhon, sales manager for the Comstar company, a British joint venture that provides local, long-distance, and international phone service in Moscow.

The company recently received the rights to distribute 75,000 numbers that run through the "232" phone exchange. Erokhon said that the company has sold 10,000 of these numbers in the past six months.