Market News


Vimpelcom Leads in Moscow, MTS Expands in Russia

Russian mobile networks enlisted 1.6 mln new subscribers in August, which represents a slight decline from July numbers (1.75 mln) reflecting traditionally weak sales in the last summer month.

Top 10 Cellular Operators

Company August 31, 2003 July 31, 2003
Total Moscow Total Moscow
MTS* 13,280,000 4,390,000 12,270,000 4,290,000
Vimpelcom 8,530,000 4,835,000 7,960,000 4,650,000
MegaFon** 4,942,745 593,643 4,653,450 513,257
SMARTS Group 915,000   860,000  
Uralsvyazinform 869,800   789,329  
Siberia Telecom 352,744   324,443  
N.Novgorod Cellular 279,087   268,142  
Tomsk Cellular Communications 183,904   169,926  
Ekaterinburg Cellular Communications 161,490   155,600  
Tatincom 118,606   120,239  

* including UMC of Ukraine (2.4 mln) and MTS Belarus subscribers (250,000)
** including 8,500 in TT-Mobile (Tajikistan)

MTS finally completed SibChallenge deal (135,000 subscribers) and also acquired Primtelefon (91,000 subs) - a strategic asset for MTS providing access to Far Eastern territories. We have included both companies into MTS subscriber base displayed in the table above. With these transactions closed, only a few attractive independent cellular operators left in the country.

Russian Mobile Subscribers

Mobile Subscribers Aug. 31, 2003 July 1, 2003
Russia 28,480,000 26,880,000
  Penetration 19.6% 18.5%
Moscow 9,870,000 9,505,000
  Penetration 58.1% 55.9%
St.Petersburg 2,971,000 2,841,000
  Penetration 47.2% 45.1%

Russian Cellular Market Breakdown

Moscow Market

Megafon demonstrated strong growth in subscriptions for the second month in a row thanks to the new (and heavily promoted) O'Lite pre-paid tariff plan. Vimpelcom was again a winner in Moscow while MTS slowed down the pace. Nevertheless, we believe that MTS will be able to restore its share in net additions soon.

Moscow Net Additions, August 2003

Cellular Subscriptions Soar in July

July added 1.75 mln to the counter of cellular subscribers in Russia which is a record monthly growth to date. As of July 31, 2003 Russian operators served 26.88 mln users. Regional networks continue to outperform Moscow increasing the growth pace.

Top 10 Cellular Operators

Company July 31, 2003 June 30, 2003
Total Moscow Total Moscow
MTS* 12,270,000 4,290,000 11,490,000 4,135,000
Vimpelcom 7,960,000 4,650,000 7,455,000 4,435,000
MegaFon** 4,653,450 513,257 4,255,000 440,300
SMARTS Group 860,000   807,700  
Uralsvyazinform 789,329   739,060  
Siberia Telecom 324,443   298,331  
N.Novgorod Cellular 268,142   248,025  
Tomsk Cellular Communications 169,926   158,400  
Ekaterinburg Cellular Communications 155,600   143,500  
SibChallenge 135,000   128,000  

*including UMC of Ukraine (2.2 mln) and Belarus subscribers (210,000)
** including 8,100 in TT-Mobile (Tajikistan)

MTS, the prominent market leader, is approaching 10 mln milestone in Russia. The company also controls Ukrainian Mobile Communications with 2.2 mln users and has a JV in Belarus that enlisted 210,000 users by the end of July.

On August 6 Vimpelcom announced that it has reached 8 mln subscribers. Recently launched network in St.Petersburg attracted 23% of new subscribers in July which is a good result for the new market entrant. Vimpelcom now has more than 80,000 subs in St.Pete and the region.

MegaFon, third-largest Russian operator, also did a good progress in July attracting 23% of all new users in the country. It is likely that the company may break through 5 mln in August.

Please note that we did not consolidate SibChallenge subscriber base into MTS numbers despite the recently announced acquisition. We plan to start the consolidation as soon as the deal is officially closed.

Russian Cellular Market Breakdown, July 2003

Shares in Net Additions, July 2003

Moscow Market

In Moscow the miost significant news of the months is MegaFon's leap from 8% to 16% in net additions. Vimpelcom retains its leading position with MTS following the race.

MCC, the market outsider, is about to launch its IMT-MC network in 450 MHz under SkyLink brand.

Moscow Market Breakdown, July 2003

Moscow Net Additions in July 2003


Regions Accelerate

With 1.6 mln new users subscribed to mobile services, June became one of the most successfull months for Russian mobile operators. The healthy growth was mainly fueled by booming regional markets.

Total number of cellular subscribers reached 25 mln milestone while Moscow market grew over 9 mln subscribers. We expect that by the year-end 2003 Russian cellular market will expand to 32 mln users.

Top 10 Cellular Operators

Company June 30, 2003 May 31, 2003
Total Moscow Total Moscow
MTS* 11,490,000 4,135,000 10,815,000 3,945,000
Vimpelcom 7,455,000 4,435,000 6,951,000 4,235,000
MegaFon** 4,255,000 440,300 4,009,393 407,936
SMARTS Group 807,700   758,400  
Uralsvyazinform 726,000   659,500  
Siberia Telecom 298,331   234,619  
N.Novgorod Cellular 248,025   233,100  
Tomsk Cellular Communications 158,400   145,799  
Ekaterinburg Cellular Communications 143,500   129,800  
SibChallenge 128,000   120,000  

*including UMC of Ukraine (2 mln) and Belarus subscribers (170,000)
** including 7,200 in TT-Mobile (Tajikistan)

Although MTS remains a strong leader in regions, Vimpelcom's regional expansion becomes more and more aggressive - the company managed to outnumber MTS in net additions on many regional markets. St.Petersburg is the most developed market outside Moscow with mobile services penetration about to hit 40%.

St.Petersburg Market, June 2003

Net Additions in Regions, Including St.Petersburg

Vimpelcom has more than 50,000 users in St.Petersburg - the number that the company reached in 2.5 months of operations in the city. The company also enlisted its subscriber #7,000,000 in June.

Russian Cellular Market Breakdown, June 2003

NOTE: The chart above includes only Russian subscribers, all CIS networks are excluded from the calculation.

Moscow Market

Total market size in the Moscow license area has reached 9 mln users bringing cellular penetration in the region to 53%. According to the preliminary results of 2002 nation-wide census, population of Moscow and region is 17 mln. Since the final results of the census are not available, we shall use the preliminary data from now on.

In June Vimpelcom became a leader in Moscow net additions regaining the position lost to MTS in December 2002.

Moscow Net Additions in June 2003


Summer Season of Mobile Sales Opens in May

May brought additional 1.27 mln of subscribers to Russian mobile networks. The opening of 'summer mobile sales' season in major cities and growth of regional networks resulted in above average net additions.

Starting the present issue we include into our ranking consolidated numbers of cellular subscribers of Siberia Telecom, Svyazinvest subsidiary that controls Eniseytelecom (Krasnoyarsk), Baykalwestcom (Irkutsk), STeK GSM (Kemerovo), Ulan-Ude Cellular Communications and several smaller networks. We believe that the company may consolidate its cellular assets into a single operator pretty soon.

Top 10 Cellular Operators

Company May 31, 2003 April 30, 2003
Total Moscow Total Moscow
MTS* 10,815,000 3,945,000 10,215,000 3,750,000
Vimpelcom 6,920,000 4,220,000 6,580,000 4,090,000
MegaFon** 4,004,199 409,000 3,820,199 403,170
SMARTS Group 758,400   703,900  
Uralsvyazinform 659,500   601,800  
Siberia Telecom 234,619   230,000  
N.Novgorod Cellular 233,100   212,700  
Tomsk Cellular Communications 145,799   135,278  
Ekaterinburg Cellular Communications 129,800   126,700  
Tatincom 126,000   124,868  

*including UMC of Ukraine (1.91 mln) and Belarus subscribers (140,000)
** including 6,500 in TT-Mobile (Tajikistan)

MegaFon enlisted its 4,000,000 subscriber in May while MTS demonstrated impressive growth in regional sales with more than 400,000 new subscribers joining the company in areas outside Moscow.

Vimpelcom announced results of its first month of operations in St.Petersburg. The company attracted more than 25,000 subscribers which is in line with its management projections. Vimpelcom's total subscriber base almost reached 7 mln in May. We expect that the company will enlist its 7,000,000th user in the first week of June.

Russian Cellular Market Breakdown, May 2003

The chart above includes only Russian subscribers, all CIS networks are excluded from the calculation.

Moscow Market

Traditionally, many Muscovites start commuting to their summer houses located in areas around Moscow in May, which results in growing share of pre-paid subscriptions of Moscow-based providers. Since cellular became an affordable service for the mass market, it remains a killer application for those commuting to dachas which usually do not have fixed-line phones installed.

This year the growth in subscriptions started early, already in May, with seasonal promotions and active advertising campaigns by all operators. MTS and Vimpelcom were more active and demonstrated better results than MegaFon that lacks a competetive coverage outside Moscow.

Moscow Net Additions in May 2003


MTS Steps Over 10 mln Threshold

Russian cellular sector expanded by 1.125 mln new users in April 2003. The growth is mainly fueled by the further proliferation of services on regional markets.

MTS celebrated its 10,000,000 subscriber during Svyaz-Expocomm'03 annual communications exhibition held in Moscow. This milestone (achieved mainly thanks to recent acquisitions and aggressive regional expansion) positions MTS on par with leading European operators.

Top 10 Cellular Operators

Company April 30, 2003 March 31, 2003
Total Moscow Total Moscow
MTS* 10,215,000 3,750,000 9,510,000 3,545,000
Vimpelcom 6,580,000 4,090,000 6,170,000 3,940,000
MegaFon** 3,820,199 403,170 3,635,940 387,706
SMARTS Group 703,900   671,850  
Uralsvyazinform 601,800   551,400  
N.Novgorod Cellular 212,700   201,630  
Tomsk Cellular Communications 135,278   123,630  
Ekaterinburg Cellular 126,700   114,700  
Tatincom 124,868   122,864  
SibChallenge 113,875   102,700  

*including UMC of Ukraine (1.86 mln) and Belarus subscribers (105,000)
** including 6,238 in TT-Mobile (Tajikistan)

Russian Cellular Market Breakdown, April 2003

The chart above includes only Russian subscribers, all CIS networks were excluded from calculations.

Moscow Market

Vimpelcom retains leading positions on Moscow market with approximately 50% market share.

Although MegaFon and Vimpelcom managed to win back ~6% of net additions from MTS in April, MTS' share in new subscriptions remains dominant as the company slowly catches up with Vimpelcom in the Moscow License Area.

MegaFon's Moscow sales are recovering from March problems but the company attracted twice less new subs compared to its January figures.

Moscow Net Additions in April 2003


Steady Growth Continues

Russian cellular market grew by more than 1.1 mln users in March, 2003. Russian mobile companies had 21,115,000 subscribers as of the end of March 2003, which translates into 14.5% penetration of mobile services in the country.

Top 10 Cellular Operators

Company March 31, 2003 February 28, 2003
Total Moscow Total Moscow
MTS* 9,510,000 3,545,000 7,320,000 3,385,000
Vimpelcom 6,170,000 3,940,000 5,847,000 3,846,000
Megafon** 3,635,940 387,706 3,445,000 382,278
SMARTS Group 660,000   619,940  
Uralsvyazinform 551,400   516,600  
Taif-Telcom*** 332,246   313,648  
N.Novgorod Cellular 201,630   191,000  
Tomsk Cellular Communications 123,630   114,311  
Tatincom 122,864   120,584  
Ekaterinburg Cellular 114,700   104,300  

*including UMC of Ukraine (1.82 mln) and Belarus subscribers (65,000)
** including 5,538 in TT-Mobile (Tajikistan)
*** 240,000 active subscribers; Taif-Telcom will be consolidated into MTS starting from end-April 2003 following the recent acquisition.

Russian Cellular Market Breakdown, March 2003

The chart above includes only Russian subscribers, all CIS networks were excluded from calculations.

Moscow Market

The month was successfull for MTS in Moscow while Megafon delivered disappointing results. Vimpelcom also loses its positions in the capital. If the trend persists, MTS may catch up with Vimpelcom in 2-3 months on the Moscow market.

Megafon's weak performance in March may be explained by the lack of direct Moscow numbering capacity that the company rents from other operators. The shortage was terminated in the end in the month. In addition, Megafon launched a new marketing campaign in order to stimulate sales.

Moscow Net Additions in March 2003