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07
Oct

Russia Reaches 40% Penetration

The total number of cellular subscribers in Russia reached 59 mln as of September 30, 2004, which is a record monthly increase of 3.4 mln users. Total of 22.8 mln subscribers joined Russian cellular networks this year. Current mobile services penetration in the country is at 41% while it was only 25% in December 2003 and 21% in September 2003.

Russian Mobile Subscribers

Mobile Subscribers September 30, 2004 August 31, 2004
Total Russia 59,040,000 55,630,000
  Penetration 40.7% 38.3%
Moscow 14,852,613 14,333,793
  Penetration 87.4% 84.4%
St.Petersburg 5,028,259 4,830,395
  Penetration 79.3% 76.2%
Subscribers outside Moscow and St.Pete 39,159,128 36,465,812
  Penetration 32.1% 29.9%

MTS has the largest market share in Russia, though Vimpelcom is catching up agressively, mainly thanks to successful sales in regions. Vimpelcom has the largest number of regional networks in operation - 72 compared to 63 of MTS (excluding CIS subsidiaries) and 69 of MegaFon.

Russian Cellular
Market Breakdown, September 2004
Russian Net Additions,
September 2004
Top 10 Mobile Operators
# Company September 30, 2004 August 31, 2004
1 MTS 27,600,000 26,440,000
Moscow
6,700,000 6,535,000
Ukraine (UMC)
5,530,000 5,267,000
Belarus
970,000 895,150
Uzbekistan
260,000 244,200
2 Vimpelcom 20,550,000 18,470,000
Moscow
6,645,000 6,430,000
Kazakhstan
676,500 647,000
3 MegaFon 11,487,353 10,508,263
Moscow
1,448,832 1,312,901
Tajikistan
28,000 26,593
4 Uralsvyazinform 1,778,000 1,709,000
5 SMARTS Group 1,600,400 1,555,000
6 Sibirtelecom 759,800 735,100
7 N.Novgorod Cellular 523,300 503,720
8 Ekaterinburg Cellular Communications 326,713 315,840
9 New Telephone Company 211,605 180,920
10 Skylink 182,000 180,100

Moscow and St.Petersburg

Moscow License Area

Despite the overall subscriber increase in Russia in September compared to August, net adds in Moscow, the Russia's largest market, decreased slightly. We believe one of the reasons for that is that more and more families purchase mobile phones for their children in August, before the start of the school year, thus accelerating August sales to a more than usual level.

Moscow Market Breakdown
September 30, 2004

Note: Skylink's (MCC) market share is less than 0.5% as of September 2004
Net Additions in Moscow,
September 2004

St.Petersburg and Leningrad Region

St.Petersburg market demonstrated impressive growth. In our view that was mainly thanks to the resolution of the Vimpelcom's numbering capacity problem which ceased the market development for the company in August. In September Vimpelcom outperformed competitors in St.Pete attracting more than 75 thsd new users.

St. Petersburg Market Breakdown
September 30, 2004
Net Additions in St.Petersburg
September 2004

Beyond Russia

Vimpelcom finalised the acquistion of KaR-Tel (K-mobile), 2nd largest operator in Kazakhstan. That brought 670,000 subscribers in to Vimpelcom portfolio.

MTS' unconsolidated subsidiary in Belarus became the market leader in September. The company started operations in the country in June 2002 while its major rival, GSM operator Velcom, works since April 1999. MTS was a leader in terms of net additions for last 17 months in a row (!) and finally won the largest market share.

Operations of MTS' daughter company in Ukraine (UMC) have also been quite impressive. Monthly net adds were above 200,000 for last 6 months and the company has been outperforming its major competitor, Telenor-controlled, Kyivstar for 9 months in terms of net adds.