VIMPELCOM SEES VOICE GROWTH, TRIALS MOBILE DATA

Reuters
Tue Sep 11, 2007 2:21PM EDT

MOSCOW (Reuters) – Vimpelcom (VIP.N: Quote, Profile, Research) sees
voice services as its main source of growth, the chief executive of
Russia’s second-largest mobile phone operator said on Tuesday.

But it is looking to provide mobile broadband to homes on the outskirts
of the urban centers where it operates, Alexander Izosimov told the
Reuters Russia Investment Summit.

Vimpelcom is trialling a USB modem in Tajikistan, one of several
former Soviet republics it operates in.

Others include Kazakhstan, Ukraine, Uzbekistan, Georgia and Armenia.

"I still think that voice would be a prime driver (of growth in average
revenue per user, or ARPU) for this year and maybe for the next year as
well. Until actively 3G starts kicking in with the broadband, I think
voice will be by far the most pronounced, defining factor for growth."

Izosimov sees Vimpelcom benefiting from being able to deploy its 2G and
3G technologies at the same time, producing cost savings from the use
of common infrastructure. He declined to say which network providers
had been shortlisted to roll out the system, but said negotiations
over price were continuing.

Vimpelcom, owned by two sparring shareholders, is snapping at the
heels of Russia’s largest mobile operator MTS and has overtaken it
in market capitalization thanks to a faster growth rate.

Vimpelcom’s two main shareholders are the telecoms arm of Alfa Group,
an investment vehicle for Russian billionaire Mikhail Fridman, and
Norway’s Telenor (TEL.OL: Quote, Profile, Research).

While Vimpelcom was looking to overtake MTS in terms of revenue, it
would not be locked into a battle with its rival to be top in terms
of subscriber numbers as long as operators did not reveal comparable
figures, Izosimov said.

Based on growth models for other more mature markets, the Russian
mobile sector would continue to see strong growth for some time yet
as Russians used their mobiles more, both for voice and data services,
he added.

Telecom and mobiles should grow for years to come."

Izosimov said Vimpelcom was employing sophisticated data mining to
ensure that the products it offered to subscribers were relevant to
the individual user, thereby driving up ARPU.

During the summer the operator had given users a special offer on
calling the numbers they dialled most frequently, a service for which
it would now charge the full rate, leaving its customers to decide
whether it was a service they wanted.

KISS AND MAKE UP?

Izosimov is convinced that despite a long-running dispute between
Alfa and Telenor, time and changing personalities mean the two will
eventually forget their differences.

Telenor opposes a Vimpelcom move into Ukraine where it already controls
market leader Kyivstar, also co-owned by Alfa.

While a deal was unlikely in the near term, Izosimov believes that
Alfa and its telecom arm Altimo’s stated strategy of wanting to roll
all their holdings into a minority stake in a major telecoms group
is not just a pipe dream.

This could involve Telenor and TeliaSonera (TLSN.ST: Quote, Profile,
Research) combining assets in Russia, Ukraine and Turkey.

"One can speculate that actually Alfa would be a very interesting
catalyst to merge all of it to a single company that would be a
pan-Scandinavian, pan-CIS, Turkey and probably aiming for further
expansion into Asia," Izosimov said.

"Clearly this is not going to happen this year or next year; nobody
is talking about such a short term. But in a longer run it might
happen. There is reasonably high probability," he said.