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Russia and Ukraine - the battleground for GSM and CDMA

Delegates at the Russia & CIS Com congress in Moscow on 3-4 June 2008 will enjoy an opportunity to learn more about a sector undergoing major changes. For the Ukraine and Russia are currently a battleground for growing GSM and CDMA mobile operators.

For example, a recent Ukraine Mobile Market Update identifies the Ukrainian mobile market as one returning to growth in 3Q07, following a fall in subscriptions in 2Q07. Net additions were down 26% over 3Q06 but as penetration had reached 116% by end-3Q07, subscription growth of 35% in the year to end 3Q07 was higher than might have been expected. As in 2Q06, Kyivstar accounted for the lion's share of net additions, claiming 1.5 million, or 50% of the total figure, in 3Q07. However, MTS Ukraine experienced a drastic decline in its growth, with its share of net additions dropping from 30% in 3Q06 to just 3% in 3Q07.

It seems that that Astelit (branded Life:) GSM) has gained most from this disappointing performance by MTS. Astelit has, in fact, forged ahead, accounting for 43% of market growth in 3Q07. At the end of the quarter its subscriptions stood at 7.6 million, pushing its market share up 2.4 percentage points to 14.2%. Astelit's total subscriptions have been boosted by the high number of users with multiple SIMs and by inactive subscriptions, and the operator says its active-subscription base stood at just 4.7 million at end 3Q07.

Although this figure appears fairly low, it also signifies that the proportion of Astelit's subscriptions that are active has been growing. At end 3Q06 Astelit had 1.9 million active subscriptions, accounting for just 41% of its total subscription base, while at end 3Q07 the proportion had risen to 62%. Astelit does have one of the lowest ARPU levels in the market but in the first nine months of 2007 its ARPU steadily increased, rising from US$2.50 in 1Q07 to US$3.60 in 3Q07. Again, the ARPU of Astelit's active subscription base is significantly different from that of its registered base, standing at US$5.80 in 3Q07. However, even Astelit's active-subscription ARPU is substantially lower than that of MTS or Kyivstar.

The rise in Astelit's ARPU helped it record positive EBITDA for the first time in 3Q07, with the figure standing at US$2.9 million for the quarter. This result put Astelit ahead of its target, as it had originally stated that it planned to record positive EBITDA in 4Q07. Astelit's EBITDA result has been helped by strong growth in revenues of 260% in the year to end 3Q07. Encouraged by this, and less than three years after launching in Ukraine, Astelit is looking to expand overseas and has announced plans to launch an MVNO in Italy in 2Q08. According to Astelit, statistical data indicates that more than 200,000 Ukrainians live in Italy, and it is hoping to capitalise on this presence by offering its service in partnership with Hutchison 3G Italy.

Participants at the June conference will gain from privileged access to Tansu Yegen, the company's CEO, who is a confirmed member of the panel of speakers. He will be on hand to describe the company's plans and to field questions from conference participants - and will not be the only CEO representing a Ukrainian operator. Also present will be Tsvika Pakula, General Director, PeopleNet, Ukraine and Michael Chobanyan, Managing Director, CDMA Ukraine. The former competes with GSM-standard rivals Astelit, Kyivstar, MTS and Golden Telecom in the mobile space, using a CDMA2000 network and 1x EV-DO. The presence of Messrs. Pakula and Chobanyan is a clear signal to the CIS region's telcos that all are most welcome to gain from two days of networking and high-value insights.

This year's Russia & CIS Com is not only gathering delegates from the mobile/wireless space. Also expect to meet representatives of the Russian Federation's many different kinds of fixed-line operators and cable MSOs.

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