By Maria Levitov Staff Writer
Rival mobile operators MTS and VimpelCom are racing to snap up smaller operators around the former Soviet Union as the unprecedented expansion in their home market begins to slow.
Alfa-Telecom, the investment unit of Alfa Group, a VimpelCom core shareholder, announced this week that it would buy Uzbekistan's GSM operator Buztel, while Kommersant reported that MTS is negotiating a $55 million deal to buy Turkmenistan's only mobile operator, Barash Communication Technologies, or BCTI.
"I can neither confirm nor deny the deal," said MTS spokesman Andrei Braginsky. "We are not only looking at Central Asian markets but are considering all CIS countries for expansion."
This summer MTS acquired a 74 percent stake in Uzbekistan's mobile operator Uzdunrobita, expanding the company's operations from its presence in 71 Russian regions, Belarus and Ukraine.
"We are actively expanding into the other regions of Russia as well," Braginsky said.
MTS has received a seven-year, $150 million loan from the European Bank for Reconstruction and Development to provide service in the country's Far East, Siberia, Volga and Southern federal districts, the company announced Wednesday.
In contrast to Russia's mobile market, the underdeveloped Central Asian markets have unprecedented growth potential. "Expansion into [Central Asia] is logical because the Russian market will reach capacity in about a year," Aton's telecom market analyst Nadezhda Golubyova said, projecting penetration in Russia to reach 65 percent by the end of 2005.
In the coming years, Kazakhstan's mobile market may grow at least four-fold to reach 60 percent penetration, while the Uzbek and Turkmen markets will grow more than tenfold to 20 percent penetration, said Anton Pogrebinsky, an analyst with ACM Consulting.
VimpelCom bought out Kazakh mobile operator Kar-Tel this August. VimpelCom spokesman Mikhail Umarov declined to comment on the Buztel deal, which analysts estimate to be worth $7.5 million to $12 million.
Umarov did say that expansion is part of VimpelCom's strategy, calling CIS countries "priority" regions.
"While Turkmenistan and Uzbekistan are more attractive in terms of potential market penetration, they have higher political risks," Pogrebinsky said. "Kazakhstan's market has the greatest potential [in Central Asia] because of the country's economic growth and investment climate," he said.
Kazakhstan's economy grew 9 percent in 2004, compared to Turkmenistan's 7.5 percent and Uzbekistan's 2.5 percent, according to the International Monetary Fund.
Kazakhstan has attracted the region's most foreign investment, a total of $13 billion over the past three years. Its mobile market penetration is approximately 15 percent, compared to 1.8 percent in Uzbekistan and less than 1 percent in Turkmenistan, Pogrebinsky said.
"Central Asia may have faster rates of growth, but the purchasing power there is lower [than in Russia]," Troika Dialog telecom market analyst Yevgeny Golossnoi cautioned. "Increasing your subscriber base is not the only way to grow your revenues."
Offering high value-added services, like data transfer or mobile Internet, can help companies to continue growing when the growth of subscriber base starts to slow down, Golossnoi said.
In Russia, the number of mobile subscribers and market penetration doubled each year between 2001 to 2003, according to Troika Dialog. This year the market will grow 90 percent, the consulting firm projects.
http://www.moscowtimes.ru/stories/2004/12/16/043.html
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