TELECOM FIRMS BATTLE OVER TERRITORY IN NEIGHBOR STATES
By Maria Levitov – Staff Writer

St Petersburg Times
Tuesday, September 19, 2006

MOSCOW – Telecoms firms are vying with each other for market share in
neighboring countries as the domestic mobile market reaches saturation
point.No. 2 mobile operator VimpelCom plans to cover the entire
Commonwealth of Independent States within two years, while market
leader MobileTeleSystems is considering a bid for Bosnia-Herzegovina’s
telecoms company, Telekom Srpske. MegaFon, the top-three firm with
the smallest geographical reach, is also considering expansion.

The need to outbid foreign mobile giants is a big hurdle for
acquisitions abroad, but the country’s top mobile firms must find
new markets to grow, analysts said.

"I think that within two years, all the CIS countries will be
involved," VimpelCom CEO Alexander Izosimov said Friday at an investor
conference organized by UBS.

VimpelCom and MTS have already expanded into less-developed mobile
markets, as mobile-service penetration reached 100 percent in Russia
last month, according to AC&M consultancy’s latest estimates.

Through subsidiaries, VimpelCom is present in Kazakhstan, Tajikistan,
Uzbekistan, Ukraine and Georgia, while MTS has is in Ukraine,
Uzbekistan, Turkmenistan, Belarus and Kyrgyzstan.

"Future competition will require us to be bigger," MTS CEO Leonid
Melamed told the conference.

The rate of profit growth in Russia is slowing for each of the
three largest mobile operators, according to research firm J’Son
and Partners.

MegaFon, which operates in Russia and Tajikistan, has "no set targets
for acquisition," but is eyeing Armenia, Uzbekistan, Azerbaijan and
other countries for expansion, the company’s acting CFO, Raymond Ho,
said on the sidelines of Friday’s conference.

MTS, VimpelCom and MegaFon all have spare cash for acquisitions,
but finding attractive CIS assets is increasingly difficult, said
Yelena Bazhenova, telecoms analyst at MDM Bank.