MTS blog


Wednesday, August 19, 2009

Mobile Internet is taking off rapidly in Russia, as all three national mobile operators already operate 3G networks and offer mobile Internet modems. We have been selling the MTS Connect modem in Russia since early 2008 and have sold over 600,000 modems since July 2008, as 3G networks were launched across the country. Currently, we estimate that around 200,000 modems are being sold monthly in Russia by mobile operators, CDMA operators and WiMAX providers, and MTS Connect accounts for around 30% of the total.

Yesterday, we announced a partnership with Intel to support the uptake of mobile Internet solutions in Russia. The first joint initiative under this partnership is a promotion of a bundled offer that will include an Intel-powered netbook, an MTS Connect modem and a special MTS tariff plan.

The first netbook made available under the initiative is Acer Aspire One D250, powered by Intel® Atom™ Processor ( Starting August 18, the netbook will be available across Russia in MTS monobrand retail stores, packaged with an MTS Connect modem, an MTS SIM card with a mobile Internet tariff plan and 600 MB of free traffic.

With a price tag of RUB 14,990 (approx. $470), the new netbook will be an attractive offer to customers in Russia who are looking for greater portability or an entry-level PC solution. As MTS’ 3G networks are already available in 39 Russian cities, the new netbook will let MTS subscribers connect to the Internet with speeds of up to 3.6 Mbit/sec using our HSPA networks. MTS Connect modem allows subscribers to connect to Internet in international roaming and through EDGE/GPRS networks in Russia where 3G is yet to be deployed.

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Thursday, August 13, 2009
On August 11, we disclosed our financial results for the second quarter 2009. As always, we posted a lot of information about the results on our website – the press release, the presentation and the Excel spreadsheet with summary financial information for 2004-2009. In the presentation, we have included detailed slides about our future strategic priorities, logic behind the intent to acquire a controlling stake in COMSTAR-UTS (see the original press release), as well as more insight into our retail development and handset distribution in Russia.

On the conference call, we have commented that there was a general improvement in our operating environment in Q2, aided by seasonal and organic growth factors. The Group recorded 12% q-o-q revenue growth to over $2.0 billion US dollars, driven by 2.8 million new subscribers and a seasonal improvement in usage.

Group OIBDA increased by 15% q-o-q to $953.8 million. Margin on our service revenue was over 50% as growth was aided by the seasonal pick-up in revenue, tighter cost control on SG&A expenses and the appreciation of the Russian ruble during the period. As we have forecasted, our build-out of our monobrand retail has put additional cost pressures on our margins, with the cumulative negative effect on the Group margin of 3.4 percentage points for a total margin of 47.2%. We witnessed significant improvement in the profitability of our Ukrainian business unit as well.

Our revenues in Russia grew 9% q-o-q to 51 billion rubles due to strong subscriber additions and a positive impact from seasonal usage. We are seeing significant subscriber additions through our greater use of alternative sales channels, such as temporary stands, kiosks and so forth. At the same time, we are currently in the build-out stage of our monobrand network, which delivers higher-value customers as ARPUs are 20% higher on average.

Given the changes we see in our markets and the initiatives by which we are fostering growth in our markets, we also elaborated on our strategic direction, introducing our concept of 3i to our shareholders. 3i focuses on three principles that will govern future growth at MTS: integration, Internet and innovation. Be sure to check out our presentation for more information.

With the disclosure behind us, we will be posting more information here on our blog about our new monobrand stores and overall retail strategy, as well as updates about our proposed acquisition of Comstar-UTS, in the coming weeks. Будем на связи (Budem na svyazi!), or we'll be in touch soon!

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Wednesday, July 15, 2009

Windmill powering base station in Karelia, Russia.

In our continuous efforts to improve operating efficiency, MTS is increasingly looking towards alternative solutions to minimize energy consumption. In the coming months, MTS will install pilot base stations in the Crimea peninsula in the Southern Ukraine that will be powered by environmentally friendly wind generators. We have purchased wind turbines from the US-based Bergey Windpower and have already begun the deployment.

In line with our reputation for innovation, MTS is the first operator in Ukraine to explore the potential of energy solutions friendly to the environment. The first base stations will be installed in Crimea and later in the Western Ukraine, as strong winds in these regions are present throughout the year. Such alternative energy solutions allow us to economize spending as electricity costs rise or deploy network solutions in areas underserviced by a lack of power infrastructure.

We have long been exploring alternative energy sources in Russia. For instance, as pictured above, one of our base stations in the northern Karelia region is powered by wind, while in the southern Krasnodar region we have deployed solar cells. In the Moscow region, we are testing unique solutions with hydrogen power cells.

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Thursday, July 09, 2009

Today we have brought 3G to the underground world of Moscow. The first 3G network in the Moscow Metro was launched on Universitet station, named after the nearby Moscow State University.

Moscow Metro is the main public transport of the capital carrying about 9 mln passengers on a typical week day (2008 data, source: Moscow Metro Annual Report 2008). We are certain that gaining access to fast data connections through 3G will appeal to passengers, as they can read the latest news, send emails or browse the Internet using their mobile devices. In order to spur the uptake in familiarity and usage of 3G-enabled services, we decided to launch the first phase of the network on the station where the younger educated crowd is commuting to one of the most prestigious universities in Russia. In fact, we have noticed that in the Russian cities where 3G networks have already been launched, students and young people are some of the heaviest users of the new services enabled by 3G.

Our CTO Andrei Ushatskiy noted today that MTS was the first operator to bring mobile networks to the Moscow Metro in 2000, and that we continue to bring innovative solutions to our customers traveling underground. We are planning to expand 3G networks in the Moscow Metro and cover all the stations on one of the busiest lines, Koltsevaya (Ring Line), during this Fall.

For more information about our 3G network expansion in Russia, please see our post from June 22.

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Tuesday, July 07, 2009

Here are the two MTS ads that are currently airing in Russia - one about the joint launch of Nokia N97 and the other touting summer roaming offers. Check it out!

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Monday, June 22, 2009

Over a year ago, MTS announced the launch of its first 3G networks in Russia – in Saint Petersburg, Sochi, Yekaterinburg and Kazan. We have since brought next-generation mobile networks to all seven federal districts of Russia with presence in 32 of largest cities and plans to have over 40 cities covered by the end of 2009. In the cities where we already launched 3G, we continue to add new base stations and expand coverage. During Q1’09, we almost doubled our coverage area in Russia.

The uptake of 3G services is very encouraging:
  • Traffic volume in 3G networks increased 3.2 times q-o-q in Q1’09;
  • Data revenues generated in 3G networks grew 2.7 times q-o-q in Q1’09;
  • Half of the current 3G users consume around 1Gb of traffic per month;
  • Number of 3G users doubled every quarter.

In May 2009, we unveiled the first indoor 3G network in Moscow by launching in Expocentre, one of the largest exhibition centers in Eastern Europe. We are planning to provide 3G network coverage in 35 largest business and shopping centers in Moscow in 2009, including the Domodedovo International Airport, as part of our eventual full network roll-out.

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Monday, June 01, 2009

On May 22, 2009, we have disclosed financial results for the first quarter of 2009. A wealth of information about the results is available on our website – the press release, the presentation and the excel spreadsheet with summary financial information for 2004-2009. Of particular interest, we suggest reviewing the slides in the presentation on the decomposition of our revenue dynamics in Russia and OIBDA margin dynamics for the Group, as well as MTS Russia retail development.

In Q1, Group’s revenues fell 24% year-on-year to $1.8 billion US dollars.  The primary driver for this loss was the depreciation of our core currencies as the Russian ruble declined year-on-year by 40% and the Ukrainian hryvna by 52% versus the US dollar.  In each of our markets of operation, we continue to see an impact on consumption patterns due to sustained global macroeconomic volatility, but overall usage and subscriber additions remain strong and in line with seasonal expectations.

Our Russian business delivered year-over-year growth of 7.5% despite both the ruble volatility and increased competitiveness in the market.  In general, consumption of higher-value products, like roaming, long-distance and mobile-to-fixed calling was significantly lower in the beginning of the period, due to an overall drop in business activity, but these figures stabilized during the last month. We do see migration trends to lower-value tariffs as customers are more conscious of their spending.  Otherwise, we see usage trends in the future following seasonal patterns until the overall macroeconomic environment changes significantly.

Recently, we announced our dividend for FY2008.  In line with our policy, we will pay out 60% of our net income or a total of 39.4 billion rubles or roughly $1.2 billion.  This year, we will also not pay dividends to those shares repurchased through our mandatory buy-back offer in August 2008.  This equals roughly 1.9% of total shares outstanding.  This will in turn increase the dividend yield by about 15 basis points.  This translates to a greater shareholder benefit from our share buyback program.

Balancing growth and shareholder returns is a cornerstone of our financial and operating strategy.  This is a clear differentiator for MTS as an investment.  Our recent actions - relatively modest investments in proprietary distribution, tapping local credit markets and successfully refinancing our existing debt – are aimed to both ensure growth and sustain profitability, both of which allow us to make substantial returns to shareholders both now and in the future.

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Tuesday, April 07, 2009

We have recently signed a partnership agreement with FC Zenit St. Petersburg, one of the most successful football clubs in Russia. As the official partner of the club, MTS will provide Zenit with mobile communications services and will participate in various projects aimed at promoting the club.

Zenit has recently become one of the most recognized Russian sports brands, winning both the 2008 UEFA Cup and the 2008 UEFA Super Cup. We decided to become partners with Zenit due to its unique appeal in St. Petersburg and growing presence in the international football community.

MTS has a long and successful history of supporting sports. Most recently, we were the general partner of the Russian Olympic Committee and the official mobile communications provider of the Russian team during the 2008 Summer Olympic Games in Beijing. We have also supported Olympic Committees across the CIS countries where our network is present – in Ukraine, Uzbekistan, Armenia and Belarus.

MTS banners have already appeared at Zenit’s home stadium in St. Petersburg as was evident during a recent game with the Italian side Udinese Calcio in the 2009 UEFA Cup competition (

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Tuesday, April 07, 2009

We are delighted to inform you that MTS was recognized at a ceremony hosted at the Radisson SAS Slavyanskaya in Moscow, Russia, and was awarded three “Crystal Headsets.” Our macro-region North-West call center (located in Saint Petersburg) and its head Ms. Elena Kopshar won in the “Best Internal Relations in a Call Center” and “Best Team Leader” nominations respectively. Our colleagues at the MTS Ukraine call center won in the “Best Call Center Infrastructure” category.

MTS Russia has a total of 10 call centers with over 3,000 employees servicing subscribers in 11 times zones and responding to an average of 16 million calls per month. Our North-West macro-region call center has a total of 250 employees and is responsible for subscribers in nine federal regions making up Russia’s North-West. MTS Ukraine has a total of 3 call centers located in Kyiv, Lvov and Donetsk with over 1,000 employees.

Photo: Team spirit training by the North-West call center.

Photo: Head of North-West call center, Ms. Elena Kopshar.

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Tuesday, April 07, 2009

Given the size of Russia, it comes as no surprise that we are constantly adding new communities to the coverage map of MTS. In 2008, our network extended to over 900 communities in Russia with a population of over 1,000 inhabitants. We have deployed over 4,700 additional base stations representing an increase of over 20% of the overall base station count.

The westernmost location of our network is Baltiysk, a seaport town in the Kaliningrad Oblast. The northernmost point is Borisoglebsk, a town in the Murmansk Oblast bordering Norway. One of the most unique locations is in northern Russia, in the Nenets Autonomous Okrug on the shores of the Barents Sea, which can be reached only by air.

The easternmost location is in Anadyr, the administrative centre of Chukotka Autonomous Okrug, the extreme north-eastern region of Russia. Our network’s southernmost location is in a small village in Dagestan, bordering Azerbaijan. The highest point where a MTS base station is located is in Dombai, a ski resort at Mount Elbrus, the highest mountain in Europe.

Factoids on Google Maps:

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