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. Last Updated: 07/27/2016

Belarus Operator Cuts Link With MTS

It has only been a week since Mobile TeleSystems launched its network in Belarus, but Russia's largest cellular operator has already run into trouble with the competition.

Minsk Digital Communications, which operates under the brand name Velcom, pulled the plug last week on all connections with MTS-Belarus -- meaning Velcom's 5,000 subscribers can no longer call MTS-Belarus' 5,000 subscribers and vice versa.

MTS uses the network of Belarussian long-distance operator Beltelecom to connect with other cellular operators in the country.

Velcom, which was Belarus' sole GSM operator before MTS launched operations there last Thursday, cited a lack of a preliminary agreement with MTS as the reason for shutting off the connection.

"World practice and Belarussian legislation stipulate that there must be an agreement about inter-network connection ... in which all the technical and financial conditions of cooperation [between operators] are legally established," Velcom said in a statement posted on its web site.

MTS, however, said such agreements should only be signed if there is direct connection between the two operators.

"Making such decisions should not be up to Velcom, although we are willing to negotiate with them," MTS spokesman Kirill Maslentsin said Wednesday. "Since both operators are using Beltelecom's network to connect their subscribers to each other, there should be free access to it, and the Belarussian Communications Ministry and Beltelecom should be making such decisions.

"Velcom's decision breaks consumer rights of Belarussian cellphone users," he added.

Velcom could not be reached for comment Wednesday due to the Independence Day holiday in Belarus.

Analysts said the cutoff is not a serious threat to MTS's operations in the country.

"It is an interesting situation, but I don't think it will hurt MTS's image in Belarus," said Alexander Kazbegi, an analyst at Renaissance Capital.

"Since 51 percent of MTS-Belarus is owned by the state, they should be able to put enough pressure on Velcom, and I would be really surprised if this situation isn't sorted out in a few days," he said.

"This is a funny situation that I expect will be resolved shortly," said Alexei Yakovitsky, an analyst at United Financial Group.

"[MTS], which managed to secure a license in Belarus, should be in a position to deal with Velcom's tricks," he said. "MTS's brand is powerful, tariffs are attractive, financial resources are unlimited in the Belarussian context and I expect MTS to emerge as a clear market growth leader within a few months."

MTS won an open tender in September 2001 to form the joint venture with state-controlled Belarussian long-distance operator Mezhdugorodnaya Svyaz.

MTS has 49 percent in the venture, while Mezhdugorodnaya Svyaz controls 51 percent.

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