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. Last Updated: 07/27/2016

Mobile Majors Dial Into Last Frontier

Russia's third-largest mobile operator MegaFon launched a network covering the Far East on Wednesday, joining a race with its Moscow-based peers to extend services into the country's least-tapped regional market.

"The commercial launch of MegaFon's Far East network completes the first phase of construction of a unified national network," Sergei Soldatenkov, chief executive of TeliaSonera-backed MegaFon, said in a statement.

Russia's top three operators, Mobile TeleSystems, Vimpelcom and MegaFon, have spent the past few years expanding beyond the capital and its environs.

The regions are some of the world's fastest-growing mobile markets. New clients from the provinces helped operators more than double their clientele last year and are expected to help them grow at least 50 percent this year.

The operators also believe they need to cover all of Russia to serve business clients with interests across the country.

MegaFon's statement followed a report that Vimpelcom, at risk of being shut out with no license for the region, was set to buy a Far East operator for $85 million to fill the gap in its license territory.

Vedomosti quoted a source close to the negotiations as saying the purchase price would cover 85 percent of Dal Telecom International, the nation's No. 9 operator with about 240,000 clients. Vimpelcom was not immediately available for comment. Neither was Dal Telecom, which last week denied any talks.

The Far East region is a tough one for mobile operators. Besides being sparsely populated and economically disadvantaged, it is bristling with military installations that have rights to most of the frequencies required by GSM operators.

That has limited operators' access to licenses and frequency spectrum.

The purchase of Dal Telecom is seen as Vimpelcom's only way to the Far East.

Vimpelcom recently said the regulator said a final "no" to its request for a new license in the Far East and it would have to acquire a local company.

It lost a recent bid to buy a state-controlled 50 percent stake in an operator already 50 percent controlled by its largest rival MTS. MTS got the stake for $31 million, even though newspapers reported Vimpelcom bid more.

The mobile operators' increased activity in Russia's Asian territory has coincided with new bids by Asian telecoms equipment makers to get contracts in Russia.

China's top telecoms equipment maker Huawei Technologies is MegaFon's main supplier in the Far East, which borders China's northeast corner, making MegaFon the first of Russia's top operators to make major equipment orders with Chinese suppliers.

MegaFon said that of a total $400 million in capital expenditures last year, MegaFon spent $12 million in the Far East and will spend $30 million this year out of a planned $650 million.