OREANDA-NEWS. "MegaFon" plans to reach and even overtake both peers from the Big Three in amount of revenue by the end of 2008. So far the Company manages to grow faster than the market, therefore the analysts consider these plans be realistic. Industry experts say that the change of leadership in the market will happen already this year - VimpelCom will replace MTS.

“By the end of 2008 "MegaFon" intends to reach MTS and VimpelCom in revenue amounts”, Sergey Soldatenkov, CEO of MegaFon, said yesterday. In 2006 MegaFon’s revenue was 3,7 BUSD, 56% growth to 2005. This year the Company expects to grow in revenue by another 25%. MTS projects 15-17% growth of its revenue in Russia. VimpelCom does not give any forecast for revenue. In terms of net income in Russia for 2006 MegaFon is already ahead of VimpelCom with its level of 812,8 MUSD vs. 811,5 MUSD.

In 2006  MegaFon overtook the competitors in the growth rate of subscriber base. Out of 26 mln. of new additions in Russia the Company’s share was 30%, while VimpelCom had 12% and MTS had 16%. However in the future MegaFon will have to increase revenue by winning the customers from other operators, as the real mobile penetration in the country is about 70%, by the end of the year it will reach 80% and practically will not grow afterwards. Another factor that will help the Company to narrow the gap from other competitors is the growth of average monthly revenue per one customer (ARPU). MegaFon’s number is better than for competitors  - 13,3 USD (ARPU of MTS in Russia is 8,5 USD, and VimpelCom’s ARPU is - 8,9 USD).

Irina Astafieva, analyst from J’son&Partners, believes that the plans mentioned by Mr. Soldatenkov are quite realistic: “Based on the existing growth rates we expect that VimpelCom will overtake MTS in terms of revenue in Russia in the middle of this year and MegaFon will do it in late 2008. MegaFon and VimpelCom have a more dynamic response to market changes. Behavior of MTS is more conservative”.

Margarita Zobnina, senior consultant in iKS-Consulting, also thinks that MegaFon has any chance to become number one in terms of revenue: “MegaFon launched several successful tariff plans in the market that were targeted at business-users, as a result it feels very well in the corporate sector, which has positive impact on ARPU. Low growth rates in MTS may be considered the legacy of the previous management. For several years the company has not been developing appropriately and now considerable time will be needed to repair the situation”.


MTS says that the company has quite successful strategy that should provide for the growth. “We plan to grow through marketing initiatives that will be incentives for usage, including higher usage of  value-added services as well as acquisition of customers via segmented offers”, explained Irina Osadchaya, press-secretary of MTS.

Conflict of shareholders is one of the factors that may impede delivery of the plans declared by MegaFon. In April Alpha-Group once again blocked MegaFon’s restructuring as it did not support  the merger of the subsidiary - Mobicom-Center. And the license for rollout of 3G network, which has been received recently by the operator, is issued for MegaFon. According to Anna Goriainova, adviser to CEO for international legal affairs, it may create problems for rollout of 3G network in the Central region. She said that if Alpha-Group continued to block the merger of Mobicom-Center, MegaFon would have to employ more complicated legal schemes for deployment of 3G network in this region.

Market Share of Mobile Operators in Russia, %:
MTS – 33,7%
VimpelCom – 31,7%
MegaFon – 19,5%
Other – 15,1%