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. Last Updated: 07/27/2016

MTS Breaks Into Belarus Market

For MTMTS president Mikhail Smirnov, right, speaking at the ceremony in Minsk on Thursday.
MINSK, Belarus -- Running two months behind schedule, No. 1 cellular operator MTS launched its network in Belarus on Thursday, becoming the first Russian mobile communications company to start operations abroad.

"We have moved beyond being a national operator and become an international operator," said MTS president Mikhail Smirnov at the opening ceremony outside the company's customer center in downtown Minsk. "Communications indeed unite the world."

MTS is only the second GSM operator in Belarus, which has a population of 10 million and a market relatively untouched by cellular communications. Rival GSM operator Velcom has an estimated 200,000 subscribers, according to consulting firm J'son & Partners.

"This is an interesting market, but it's still unsaturated and has to grow fast," Smirnov said. "We expect that this will happen thanks to new subscribers and Russian roamers."

MTS has so far installed one switchboard with a current capacity of 100,000 users -- which will be increased eventually to 360,000 users -- and 20 base stations around Minsk. The company plans to have 70 base stations in Minsk and the surrounding region by September.

By early next year, they aim to cover the highway and railroad connecting Smolensk in Russia to Brest in Belarus, as well as major cities Grodno, Gomel, Mogilyov and Vitebsk.

MTS aims to cover territory in which 90 percent of the Belarussian population lives by 2005, the company said.

A winner of the open tender for Belarus' second GSM license in September 2001, MTS has paid some $10 million into the Belarussian state budget -- as one of the conditions of the deal -- and $5 million for the license.

But the initial launch planned for April had to be postponed when the government temporarily denied registration for a joint venture between MTS and Belarussian long-distance operator Mezhdugorodnaya Svyaz, in which the former owns 49 percent and the latter 51 percent.

"I want to apologize for delays with the launch of the MTS network in Belarus," said Belarussian Communications Minister Vladimir Goncharenko at the opening ceremony.

MTS plans to invest $50 million in its Belarussian venture by the end of this year, $138 million by 2005 and $198 million by 2011.

The tariffs on offer are lower than Velcom's, ranging between 5 cents per minute for calls made to other MTS subscribers in Belarus, to 12 cents per minute for calls to city phone numbers across the republic. Monthly fees will range between $5 and $9.50

MTS declined to give any estimations of the expected number of subscribers, but said the first hour and a half after the launch brought over 100 new subscribers for MTS.

Minsk resident Marina Begunova, 40, became the first subscriber of the new operator.

"I just came to buy three phones for my husband, my father and my brother and got a surprise for myself," said Begunova, holding a large bouquet of flowers and a prize -- her own cellular phone.

Analysts welcomed MTS's joint venture.

"Entering the Belarussian market is not dissimilar to rolling into a big, industrialized, densely populated and urbanized Russian macro-region," said Alexei Yakovitsky, an analyst at the United Financial Group.

"Of all the CIS markets, Belarus appears to be the most lucrative and attractive in terms of synergies arising from its close cultural and economic ties with Russia."

"Unfortunately," he added, "MTS's minority state will prevent it from consolidating its Belarussian joint venture into the company's financial results."

UFG forecasts MTS will have about 100,000 subscribers in Belarus by the end of 2002 and over half a million by 2005, resulting in a long-term market share of 50 percent.