OREANDA-NEWS. April 16, 2010. We met with Svyazinvest’s Deputy CEO, Mikhail Leschenko, who elaborated on the company’s vision for developing its mobile assets, one of the key matters for evaluating the potential competition landscape in Russia’s mobile market, reported the press-centre of VTB Capital.

For the long term, Svyazinvest sees its mobile business on the same level as the Big Three. To achieve this, Svyazinvest sees four major directions for its mobile assets’ development:

i Structuring current mobile assets. Some facets of the company’s business: marketing, pricing, roaming, procurement, financing, and billing are all likely to be affected first, structuring the assets into a unified operation. Yet, Svyazinvest understands that the structuring would not be enough to compete equally with the Big Three.

ii M&A activities have i) a potential tie-up with Megafon and ii) acquisitions of other regional operators (with Tele2, SMARTS, MOTIV, NTK as the biggest potential targets). Svyazinvest’s management understands that the tie-up with Megafon is the preferred option (as it would put Svyazinvest-Megafon back as the biggest telecom operator).

iii Development of new technologies with the awarded WiMax frequencies potentially to be converted into LTE.

iv SkyLink. Svyazinvest plans to get control over the operator by summer of 2010 and will develop the CDMA business and new GSM business according to each particular region’s business case.

Overall, we see Svyazinvest taking a pragmatic approach on investments into mobile, which is unlikely to lead to destructive overinvestment and overcompetition. MNP, which is promoted by Svyazinvest, might help the holding, but is unlikely to considerably change the situation, if the network quality is not at least comparable with the Big Three (requiring USD billions and is unlikely to pay off given the low price level and rather high competition level). We continue to see the tie-up of Svyazinvest and Megafon as the best option for the mobile market.