Agency WPS
TELECOMMUNICATION SERVICES MARKET (Russia)
March 19, 2004, Friday

Zvezda, a Russian-American-Armenian joint venture, is going to build
cellular networks all over Transcaucasia.

Zvezda has recently applied for a GSM-license for Armenia. It also
plans to obtain GSM licenses for two other Transcaucasian countries –
Georgia and Azerbaijan – and unite all networks under a single brand
Kavkazskaya Zvezda (Caucasian Star)

Russia’s Defense Ministry is among LanRusinvest’s major clients, and
until recently, the company used military communication channels in
exchange for the services provided to the Defense Ministry. Now
LanRusinvest leases telecommunication channels not only from Defense
Ministry and Voyentelecom, but also from civil operators Rostelecom
and TransTeleCom, according to V.Zatynaiko, Director General of
LanRusinvest.

Waiting for the GSM license for Armenia, Zvezda began building an
IP-network there. It also plans to launch IP-telephony business in
Georgia and Azerbaijan. “That will allow us provide communication
services with Transcaucasian countries at low rates. Besides, people
living in these countries will have low rates for calls to Russia
through our network, says Zatynako. Zvezda plans to invest about 60
million euros into IP-telephony and GSM projects in Armenia.

According to General Director of Zvezda E.Akobyan, the company has
applied to Georgian Prime Minister Zurab Zhvania with a proposition
to build a unified mobile communications system, which would cover
Georgia and Armenia. Zvezda plans to invest the same amount of money
in Georgia as in Armenia and operate under the single brand name
Kavkazskaya Zvesda in three countries – Armenia, Georgia, and
Azerbaijan. Although the license for Armenia has not been granted
yet, and licenses for Georgia and Azerbaijan have not been even
applied for, Mr Akobyan already gives figures for GSM tariffs in
Svezda network. According to him, incoming and outgoing calls will
cost $0.15/min at $10 /month subscription charge.

Participants of the project do not disclose information about
shareholders’ stakes in Zvezda authorized capital stock. It is known
however, that there are several legal entities and natural persons
among Armenian participants of the project, and also representatives
of Armenian diaspora from the USA and Canada. Alcatel is named as the
most likely provider of GSM equipment for Zvezda networks.

There is only one GSM operator in Armenia so far – local
telecommunication giant ArmenTel, which was recently deprived of its
cellular service monopoly by the Armenian government. This move
enraged Greek operator OTE who had bought 90% shares of ArmenTel six
years ago. ATE filed a lawsuit in London arbitration court against
the decision of the Armenian government who had promised that
ArmenTel’s monopoly would continue for 15 years after the
privatization.

ORIGINAL-LANGUAGE: RUSSIAN