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. Last Updated: 07/27/2016

VimpelCom, MTS Dispel Tie-Up Talk




Fears that a tie-up between old rivals VimpelCom and Mobile Telesystems were about to take the steam out of Moscow's cutthroat cellular phone market were scotched Tuesday when both sides declared that they were committed to independence.


VimpelCom, which runs the Beeline cellular network, has never had any intention of forming any kind of commercial alliance with Mobile Telesystems or MTS, VimpelCom chief operating officer Stanislav Shekshnya said at a news conference Tuesday.


MTS likewise had "no knowledge of any plans [to work jointly with Beeline]," Igor Timofeyev, director of marketing for MTS, said in a telephone interview Monday.


Talk of cooperation between the two arch rivals had been fueled by concerns regarding Beeline's bottom line, but Shekshnya also said Tuesday that VimpelCom had successfully weathered the financial crisis and fully expected growth earnings for 1999.


"As a whole, we're satisfied with the results of 1998. Of course, the crisis has created certain difficulties, but we've been managing them," he said.


Last year's crisis brought VimpelCom's meteoric rise to a shuddering halt as what had been one of Russia's greatest success stories ended 1998 with a $4.7 million loss.


However, earnings remained strong, with most of the operating loss coming from two monumental one-off charges. In addition to the $25 million VimpelCom lost when Russia defaulted on its treasury bills, or GKOs, last August, the exchange rate fluctuations that came afterward cost the company another $48 million.


Compared to those worries, a 12 percent drop in subscribers and a drop in average usage per customer that Shekshnya attributed to the deterioration of Russia's economy were minor irritations.


The company is hoping that a series of fresh initiatives will continue to boost revenues and market share for the company. In March alone, VimpelCom reported adding 10,000 new subscribers to its network, 70 percent of them signed up under its new Bee-Plus plan, which involves lower rates and pre-paid calling cards.


Though Beeline also lost 5,000 old subscribers in March, some analysts said that under current economic conditions, simply posting a net increase is a propitious sign. Industry experts credited VimpelCom's expectations of growth as being realistic, at least up to a point.


"We do not expect rapid growth, and feel that operating revenues and operating income will be lower than in 1998. However, we do not project a net loss for [VimpelCom in] 1999," said Yury Krapivin, a telecoms analyst at MFK Renaissance.


VimpelCom stock, which trades on the New York Stock Exchange for approximately $15 per share, has retained strong, if volatile demand, and most brokerages continue to, cautiously, recommend the stock.


"Of course we're still waiting for the first-quarter results to be announced," said Dmitry Sedov, a telecoms analyst at CAIB, but "for now, our recommendation is to hold" VimpelCom stock.


Moscow's mobile-phone market has been a hotbed of competition since VimpelCom won a second GSM-900 license late last year for Beeline affiliate Impuls, putting it in direct competition with MTS.


An enraged MTS threatened to sue VimpelCom at the time but has yet to take any such action. MTS declined Monday to comment on the matter.


Since VimpelCom received the license, Moscow's cellular phone market has turned into a consumer's paradise, with Beeline, MTS and the third operator, Moscow Cellular Communications wooing customer's with ever more wild bargains.