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. Last Updated: 07/27/2016

Bids Close for 3G Operating Auction

Russia's three major mobile operators, MegaFon, Mobile TeleSystems and VimpelCom, are bidding to obtain third-generation licenses, which experts believe will decongest the saturated market for GSM mobile phones while offering users an array of new services.

The operators announced their intention to initiate their bid Monday, company representatives said on the closing day for applications.

Corbina Telecom and Summa Telecom, which are regarded as new players in mobile phone market, have also submitted applications for the auction. Another bidder is Network Telecommunication Company, a joint venture between SMARTS, the Russian subsidiary of Tele2, and NTS.

Third-generation, or 3G, mobile technology gives operators the ability to transfer voice and nonvoice data, thereby allowing consumers to use services such as e-mail, instant messaging and video-telephony on their cell phones.

The Federal Communications Agency announced the auction in December and required each applicant to pay a 2.6 million ruble ($100,000) fee and meet criteria on infrastructure capacity and financial ability to clear allocated frequencies. The three winning bids, to be announced on April 20 will also be expected to have commercial operations up and running by 2009.

Because of their tight hold on the market and strong and stable consumer base, many analysts believe that the likely winners will be the country three largest operators.

"If all criteria announced last year are followed, the likelihood of an outsider winning is remote," said Vladimir Kupeyev, an Alfa Bank telecoms analyst.

The country's largest cellular operator, MTS, has unveiled plans to invest around $200 million in 2007 on the deployment of its 3G network.

Speaking at a news conference earlier this month, the firm's vice president for IT, Sergey Aslanyan, expressed confidence that MTS would win the auction.

Experts say Russian mobile operators' scramble for 3G licenses is a venture into uncharted territory since some of them lack the huge capital outlay and necessary experience to make the technology viable.

"No one knows whether or not this will be a profitable venture and it is pretty much unclear whether there will be demand for this service or not," said Nadezhda Golubyova, a telecoms analyst at Aton Capital.

The experience of countries where 3G has already been deployed does not hold out great prospects for demand and profitability of the technology in Russia, Golubyova said.

But Vladimir Kupeyev disagreed, saying the main reasons for 3G's poor performance in Europe were high fees and low-quality handsets.

"GSM has outlived its usefulness and consumers are already looking for ways to get more from their phones, like watching videos and sending e-mails," Kupeyev said. "Since the three major contenders will focus on big cities, where there are more businesses and a higher standard of living, 3G investment will pay off."