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. Last Updated: 07/27/2016

Cellular Majors Duel for Samara

No. 2 mobile company Vimpelcom on Tuesday launched a GSM network in Samara, squaring off with nationwide operator Megafon and local firm SMARTS for the region's half-million cellphone users.

Samara has a relatively well-to-do population with a high level of cellular penetration, analysts said.

"This is a key region not only in the Volga Federal District, but also for our national network," said Alexei Mishchenko, general director of Vimpelcom-R, the company's branch in charge of regional expansion.

Vimpelcom already had a local subsidiary in the region operating in the less popular DAMPS digital-analog standard.

Megafon and SMARTS were undaunted by Vimpelcom's entry.

"Healthy competition helps develop the market and strengthen the operators," said Valery Yermakov, general director at Megafon's Volga branch.

"We are sure that the entry of a second nationwide operator into the Samara market will give an additional impulse to market development," he said.

Gennady Kiryushin, general director of SMARTS, said that "without competition there will be neither dynamic development nor serious growth in numbers."

SMARTS has never been a monopoly in the region, he said.

Megafon has 47 percent of the market, or 220,000 subscribers, according to ACM Consulting. SMARTS, the country's fourth-largest operator, has 150,000 subscribers. Svyazinform, which operates in nondigital NMT-450 standard, has 2,000 subscribers.

Vimpelcom controls Beeline-Samara, which has 103,000 subscribers in the DAMPS standard, after buying a 1 percent stake for $500,000 at the end of October to boost its ownership to 51 percent. Beeline-Samara is Vimpelcom's oldest regional subsidiary, but the two companies had considered launching two different GSM networks in the region before the October acquisition.

Alexei Yakovitsky, an analyst at United Financial Group, said Vimpelcom will likely transfer its Beeline-Samara subscribers to the new GSM network as quickly as possible.

"At the same time, Vimpelcom will most likely keep the DAMPS network in place for some time, just like it has done in Moscow," he said.

Vimpelcom plans to have 50,000 subscribers by the end of the year in the entire region, not including Beeline-Samara's clients, said Sergei Shvaikin, general director at Beeline-Samara.

Vimpelcom has installed one switchboard with a capacity of 150,000 subscribers and 100 base stations covering Samara and Tolyatti, the region's two main cities, Shvaikin said. The company is to add another 40 base stations in the first half of 2003.

Notably absent from the market is Mobile TeleSystems, the country's largest mobile company and the third nationwide operator.

Anton Pogrebinsky, a consultant at ACM, said if Vimpelcom uses the appropriate development strategy, the company should be able to grab a large chunk of the local subscribers before MTS gets in.

MTS does not have a GSM-1800 license for Samara or the Volga Federal District, but holds GSM-900 licenses for the Saratov region and has applied for GSM-900 licenses for the Astrakhan, Samara and Ulyanovsk regions, MTS spokeswoman Yeva Prokofyeva said.

The company plans to launch a network in Saratov, she said. She declined to specify when.

Megafon launched its network in Samara in November 2001, while SMARTS has been in the region since April 1996.

UFG's Yakovitsky said Samara is one of the biggest and most profitable cellular markets in the country. "It is also a highly competitive market, with two strong GSM players," he said, referring to Megafon and SMARTS.

Some 14 percent of the local population has a cellphone, while the national average is 11 percent, according to ACM Consulting.

Pogrebinsky forecast that 60 percent of Samara's population would have cellphones by 2007.

"Although there are more cellular subscribers in the Samara region than in many others, we expect a further growth to take place there because of the relatively high level of income and industry development in the region," he said.

The State Statistics Committee said that the average monthly income in Samara in July was $139 compared with $94 nationwide.