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. Last Updated: 07/27/2016

Vimpelcom Triples Its Subscriber Base

Leading mobile-phone company Vimpelcom nearly tripled its subscriber numbers in 1999, company officials said Thursday.

Vimpelcom had 352,000 subscribers as of Dec. 31 of last year, according to company statistics.

At a press conference where he announced year-end sales results, deputy general director Nikolai Pryanishnikov said sales had grown radically after the company, which markets its cell phones under the Beeline brand, introduced its $49 prepaid phone package in October.

Following subscriber losses due to the August 1998 financial crash, Vimpelcom adopted an aggressive sales strategy, with emphasis on gaining market share and subscribers at the expense of per-customer profits.

By its own estimate, Vimpelcom increased its share of the market by 10 percentage points, with most of the gains being made in the fourth quarter.

Pryanishnikov said 1999 financial results would be released only after the first quarter of this year. Vimpelcom's figures can generally be considered reliable because of strict reporting requirements of the New York Stock Exchange, on which it is listed.

However, he said revenue per subscriber was about $100 a year.

Tom Adshead, a telecoms analyst with Troika Dialog brokerage in Moscow, estimates that Vimpelcom and arch-rival Moscow Telephone Services, or MTS, now have the Moscow cell-phone market evenly divided between them at about 43 percent each.

The remaining niche is occupied by Moscow Cellular, which, like MTS, is part of the Sistema holding, which is considered to be closely linked to the Moscow city government. Most of Vimpelcom's gains in market share appear to have been made at the expense of Moscow Cellular rather than MTS, according to figures given at the press conference.

Meanwhile, MTS held its own press conference Wednesday, claiming 400,000 subscribers as of Tuesday, according to a Troika Dialog report. However, the report went on to say that subscriber statistics released by MTS are typically padded with "delinquent" subscribers who do not use their mobile phones.

MTS, which analysts say has focused on the upper end of the cell-phone market, has also brought prices down, but not as radically as Vimpelcom.

The lowest priced phone deal currently offered by MTS costs roughly $130.

Although tens of thousands of new customers have signed on for cell-phone service since October in response to declining prices, analysts say the service providers will likely have to wait before seeing a tangible payoff in increased earnings and profits.

Vimpelcom posted $13.4 million in losses through the first three quarters of 1999. MTS does not release financial results.

"Vimpelcom has been in transition for the last 12 months," Adshead said. "However, their business model is sound."

Indications are that investors generally agree with this assessment.

In October, stock prices hit a low of $12 per share on the New York Stock Exchange, but immediately began growing after Vimpelcom introduced its low-end phone package. The year end price was $46.

Adshead said Vimpelcom's focus on the low end of the market would likely pay off as it expanded its network into the regions alongside MTS this year.

Both companies have announced aggressive regional expansion plans.

"When MTS shows up in the regions, it will find its market niche is already taken by the local providers, who also focus on the upper end of the market," he said. "On the other hand, Vimpelcom will be able to show up and undercut the established players, which is important, because spending power is much lower in the regions."