Vimpelcom sees voice growth, trials mobile data

Vimpelcom 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 centres 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 capitalisation 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.

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.

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 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.

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