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. Last Updated: 07/27/2016

Telecoms Regroup as Svyazinvest Breaks Up

While bigger cellular players continue their triumphant march from big cities to the regions, state-controlled holding Svyazinvest is going through major reorganization, and alternative fixed-line operators are consolidating their business in the fight for market share.

Russia had 10.18 million mobile subscribers in March, equal to 7 percent of the country's population, as estimated by consulting firm J'son & Partners. The number of subscribers is predicted to reach 13 million by the end of this year, Communications Minister Leonid Reiman said at a telecommunications conference in early April in Moscow.

The lion's share of this market is divided between the "Big Three" cellular operators. Mobile TeleSystems has more than 3.5 million subscribers, Vimpelcom has 2.663 million and Megafon has 1.243 million, as estimated by J'son & Partners.

MTS and Vimpelcom each hold licenses for five out of the seven "super regions" into which Russia's 89 regions are divided. MTS operates in 29 regions out of the 46 for which it holds licenses and plans to start operations in the remaining 17 by the end of 2002. The company's 2001 profits leaped 120 percent year on year to $207 million, while revenues rose to 67 percent to $893 million.

Vimpelcom's $500 million budget for regional expansion has allowed the company to launch its services in 16 regions, while it plans to start operating in all 50 regions for which it has licenses by the end of this year. Vimpelcom posted net income of $47 million in 2001, compared with $77.8 million loss the year before. Revenues rose 54 percent to $422.6 million from $274.1 million in 2000.

Megafon, the only national operator holding licenses for all seven super regions, has most of its subscribers, or 926,538 users, in St. Petersburg's North-West GSM. It also operates in Moscow, as well as in the Central, Southern and Volga super regions, and has plans to develop in other regions as well.

Meanwhile, total revenues in fixed-line telecommunications grew by 5 percent in 2000 and 2001, Reiman said.

Svyazinvest, which owns stakes in the 76 regional fixed-line telephone operators, is going through reorganization. Dozens of smaller operators are being consolidated around the stronger players, which are to become the seven super-regional operators. The reorganization is to be finished by the end of the year. The government in early April approved the sale of 25 percent plus 2 shares in Svyazinvest, although the sale is not planned to take place until the reorganization is finished.

Leading alternative telecommunications company Golden Telecom has strengthened its position, having signed a deal with long-distance monopoly Rostelecom to take 100 percent of their joint venture, Sovintel. Under the agreement, Golden is to purchase Rostelecom's 50 percent stake for $56 million, while Rostelecom is to receive a 15 percent stake in Golden and representation on its board of directors.

Golden's revenues increased by 24 percent to $140 million in 2001.

Investments in Russia's telecoms industry in 2001 totaled $2 billion, with approximately $1.3 billion coming from Russian investors, Reiman said.