MTS Joining Cellular Market

Lured by high prices and strong demand in the Moscow mobile communications market, Russian-Western joint venture Mobile Tele Systems will launch the city's fourth cellular service this July, betting that state-of-the-art technology can give them a competitive edge.Demonstrated for the first time at the Expo Com '94 technology exhibition in Moscow this week, the Mobile Tele Systems (MTS) network will be the first network in Russia operating under Europe's most widely used and most modern mobile telephone technology -- the digital GSM-900 standard. GSM networks are more secure, use smaller handsets and give users access to a range of modern services like call waiting, voice mail and call forwarding. "GSM is the standard of the future -- our calculations are that within 10 years there will be 100,000 users of the network in Moscow and the Moscow region," said Martin Bogelsack, head of international business development at DeTeMobil, a German firm.He said that MTS -- a joint venture between the Moscow Local Telephone Network (MLTN), ASVT (Russia), DeTeMobil, Siemens, and an American company called TDSR -- had invested "several million" Deutsche marks in the project, which the company expects to recoup in about three years. MTS hopes to sign on 3,000 subscribers by the end of this year, Bogelsack said. U.S.-Russian joint venture Moscow Cellular, the leader in the market, claims 6,000 subscribers, well ahead of Russian firms AMT, with about 2,000 subscribers, and Vimplecom with several hundred subscribers.Equipment suppliers agree that the potential for cellular communication in Moscow is large enough to support the new competition."The market here is vast," said Anatoly Kopylov, Russian country manager for Motorola. "Demand for mobile communications here is so strong that the high prices in Moscow are likely to hold. I would expect that for the next one to two years prices in Moscow will continue to be among the highest in the world." "Demand is big enough in Moscow to support three different technologies," said Erik Jennes, managing director at AT&T Network Systems International. "There is a serious shortage of telephones and a far greater willingness to spend available money on communications." The other two network standards now used in Moscow are NMT-450 (Moscow Cellular) and AMPS-800 (Vimplecom). A local call using Moscow Cellular costs almost the same as a call to Europe on the state network. Yet despite this, Bogelsack said it is not part of the MTS strategy to undercut the other providers' rates: "We do not want to start a price war -- what we have is a superior product and this is at the center of our strategy."Nonetheless, MTS and Moscow Cellular are both gearing up for a major marketing campaign to attract new customers during the critical first months of the new network's lifetime. MTS is offering each new subscriber to their service a 50 percent discount on its basic tariff for the months of July and August. In response, Moscow Cellular is offering any new subscriber this month with free local calls until June 30.