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. Last Updated: 07/27/2016

Belarus to Get $21M From MTS Venture

As winner of an open tender for Belarus' second GSM license, Mobile TeleSystems will pay $21 million into that country's federal budget, government officials said Tuesday.

MTS has a $200 million, 10-year investment plan for the new operator, a joint venture that will be 51 percent owned by state long-distance provider Mezhdugorodny Svyaz.

Set to launch in mid-April, the new company is expected to make a big splash on Belarus' nascent cellular market, which currently has one operator each on the GSM and outdated NMT-450 standards. Though less than 0.5 percent of the country's 10 million people have mobile phones -- Belarus' average monthly salary is less than $100 -- annual subscriber growth is well over 100 percent.

"If 2 million Belarussians today have cars, then why don't they buy themselves mobile phones?" said Belarussian Communications Minister Vladimir Goncharenko, Reuters reported.

MTS will initially pay $15 million to the government and another $6 million over five years beginning in 2003. The company said the first payment includes around $3 million for a private fund to support new technology, although Belarus officials could not confirm this.

The government defended the fairness of the contest, which began in April. "During the tender, we heard all kinds of things ... rumors about lobbying. I would like to say that, from the beginning, MTS looked better than the rest," Goncharenko said.

Belarussian President Alexander Lukashenko said the contest was "open and public" and that he "liked the fight and competition" by the applicants, which led to increasing the original license price of $5 million, Interfax reported

By August, five applicants remained in the bidding, including an Austrian firm, a Saudi firm and two other Russian companies -- Vimpelcom shareholder Alfa Eco and Northwest GSM, Russia's third-largest operator behind MTS and Vimpelcom.

By 2005, MTS is required to install 3,306 transmitters, a tender spokesperson said. He said the company itself foresees 455,000 subscribers by 2007, though analysts were slightly more bullish, with Renaissance Capital forecasting half a million by 2004. United Financial Group estimated that MTS will have half of the market by that time.

MTS' main competitor will be GSM operator Velkom, with around 85,000 subscribers. NMT-450 operator Belcel has less than 20,000 customers and reports miniscule growth as subscribers are gravitating to European-standard GSM.

UFG telecoms analyst Ari Krel suggested MTS would end up investing less than the $200 million declared. "The internal rate of return of the project is quite low for them," he said. "Either we're not fully factoring in fantastic synergies from business subscribers and roaming revenues and the like ... or this $200 million cap-ex figure is excessive."

MTS spokesperson Eva Prokofyeva said that development in Belarus would mirror their buildup in the Russian regions, where typically the company covers larger cities and main roads before moving on to less populous areas. Tender terms call for the company to cover 90 percent of Belarus by the end of 2005.