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. Last Updated: 07/27/2016

Cellular Giants to Fight Contraband

With an estimated half of all mobile phones sold in Russia thought to be imported illegally, some of the world’s largest cellular phone makers agreed Monday to fight the problem together.

At a meeting that began Friday and ended Monday, Motorola, Ericsson, Siemens, Samsung and Philips called with a single voice upon the Communications Ministry, the State Customs Committee and the Economic Development and Trade Ministry to tighten import regulations for their products. Contraband telephones, the companies said, are costing the federal budget more than $20 million a year in customs revenue.

Up to 50 percent of the Ericsson models sold in Russia are illegally imported, said Oleg Logunov, sales manager for the company’s Moscow operation. And Samsung manager Rubena Razilova estimated that 30 percent to 40 percent of sales of her company’s phones are also contraband.

In a few regions, such as Ryazan, authorities are taking active measures to combat unofficial imports. As a result the Ryazan department of Glavsvyaznadzor, the state telecoms regulator, has cut the number of unofficial imports to just 5 percent of that region’s market, said the representative of a Moscow distributor of mobile equipment.

However, according to several estimates, unofficial imports exceed 80 percent of the market of certain telephone models in Moscow.

Unofficial telephones are usually supplied to the local market after they are purchased abroad in clearance sales. For example, that is how telephones of the D-AMPS standard were first brought into the country.

As a preventative measure, companies often install a protection device in their phones to prevent them from operating on other networks.

But that device is easy to remove, which is what happens before these telephones are delivered to Russian stores and operators and sold for half of what legally imported phones sell for. Not only do the producers lose out on sales this way, but they also lose consumer confidence because half of all such modified phones stop working after six months, said Logunov.

Suppliers of unofficial phones earn profits of about 30 percent of the asking price, Samsung’s Razilova said.

Ivan Mukhin, an executive at cellular network provider Vimpelcom, said that operators of mobile connections themselves cannot determine whether the telephone came from an unofficial supplier. The operator often merely sells a SIM card. The subscriber might only realize at the moment of the telephone’s purchase that it is unofficial. Or this might be discovered even earlier by a customs official or an official from Glavsvyaznadzor.

"Motorola intends to advise official agencies on how they can identify mobile telephones shipped by official suppliers," said Andrei Bichenko, the manager for production support at Motorola.

Samsung has a different plan: Next month it will offer warranties for its telephone service in Russia but only if the purchaser has a special coupon that comes with the legally imported phone.

Ericsson, however, has canceled the international warranty on its most recent models. This means that guaranteed repair services will only be offered in the country where the telephone was bought.

"When someone buys a telephone from an unofficial supplier, he loses the right to support and a warranty from the producer. In the future, the buyer of an unofficial telephone will pay all the costs for repair and adaptation out of his own pocket," said the head of the Russian office of Benefon, Pia Lekhtinen.