Dec 05, 2006: CEO Forum with Leonid Melamed of MTS

Mobile TeleSystems’ CEO and President  Leonid Melamed was the featured guest at the Dec. 5 AmCham Russia CEO Forum – a speaker series designed to facilitate dialogue between high-level Russian and American executives and to enhance Russia’s profile as a prime investment destination. Following his remarks at the forum, Melamed spoke with AmCham News about his company and its plans.

Could you please briefly describe MTS?

MTS is known as one of the 10 largest mobile phone groups in the world by both subscribers and market capitalization. The company is also one of Russia’s leading brands and corporate citizens.

We began our operations in Moscow in 1993, raising our first base station one year later. We now boast a network that extends from the Baltic Sea to the Pacific Ocean, providing GSM 900/1800 coverage to nearly over 70 million subscribers in five countries, including Russia, Ukraine, Uzbekistan, Turkmenistan and – through a joint venture – Belarus. We are leaders by subscribers and revenues in each of the markets we operate, except Ukraine, where we are a strong number two.

Our network spans continents and we also have an investor base spread from North America to Asia to Europe. In 2000 we listed Level III American Depository Receipts. We take this commitment to U.S. capital markets very seriously as it plays a key role in realizing our long-term financial strategies, a fact recognized by Standard and Poor’s, which has rated MTS a leader in transparency and corporate governance for the past few years.

What are MTS’ key goals and objectives?

Among the goals achieved by the end of 2006 are the adoption of new 3+1 Strategy with a clear focus on leadership, growth and value; the establishment of the new MTS Group organizational structure; and, most evident to your readers, our successful launch of the MTS brand throughout our areas of operation. We have retained and enhanced our market leadership in most countries in which we operate, and we have instituted numerous internal controls to help us better govern our company, optimize our costs and promote efficiencies throughout the organization.

As for the next steps, our primary goal is to build upon our position as the leading national mobile phone operator in the CIS. In addition, we intend to take advantage of opportunities to expand our network coverage in the Russian Federation and other countries of the CIS. To achieve this, we are now employing a segmented-approach to marketing in order to maximize the value we bring to our subscribers. We are investing heavily in our network, anticipating that as our markets mature, new data-driven products and services will promote loyalty and usage among our customers.

How would you evaluate Russia's mobile communications market?

Russia’s mobile communication market is still a growth-oriented market. There are still new subscribers to acquire; however, the biggest growth potential for the market, that we see, is increased usage by our existing mobile subscribers. In addition, the adoption of new innovative value-added services also provides significant growth potential for the upcoming years.

How would you compare the Russian telecom market with other markets in the region?

Compared to the other markets in the CIS Region, Russia is the most developed with the highest penetration, followed closely by Ukraine. However, other CIS countries will follow in the coming years and their market structures – competition, players and technologies –in some cases will not be very different from Russia. Looking at the other BRIC (Brazil, Russia, India, China) countries, Russia is – based on both real and nominal penetration figures – probably the most mature market in comparison to India and China. It is also the most homogeneous in terms of the predominance of the GSM standard, whereas in India and Brazil, some CDMA operators play significant roles. In addition, Russia has three nationwide operators, whereas in the other BRIC countries, operators often operate only in some regions and the markets are more geographically fragmented.

What are MTS' plans for international expansion?

Our group structure is geared towards increasing our footprint, as leveraging scale is integral to our strategy. However, MTS follows a deliberate approach to M&A activity, employing clear financial metrics in determining a potential acquisition’s value. Naturally, operating in the CIS gives us a clear advantage in this region, and the natural economic, historical and cultural ties justify our focus in this region. At the same time, our experience curve gives us clear advantages in understanding network deployment and subscriber acquisition in low-penetrated markets. With such markets in Asia, the Middle East and elsewhere, we would certainly consider looking beyond our home base if the opportunity proved attractive enough.