Books on Russia
Update No: 300- (01/01/06)
An end to the Time of Troubles?
Russia has for the last decade or two been a power on the wane, a polite
understatement of the case. It dominated Eurasia under Bolshevism and Stalin. No
As a Muscovite joke goes (and Eastern Europe, under communism, was the world's
outstanding factory and repository of political jokes) various functionaries of
the present Communist Party of Russia in their despair at recent miseries decide
to communicate with Stalin by a séance: They get through to the ghost of their
old leader and explain that they have urgent need of his help. He must come
He comes through and replies; "I suppose that you have lost Poland and the
'Comrade, it is worse than that:- We have lost the whole of Central and Eastern
Europe, the Soviet Union no longer exists; and Russia is no longer ruled by a
"I knew that I couldn't really leave things to a lot of hopeless weaklings
like your kind. All right, I will come back. But I assure you:- it is not going
to be Mr Nice Guy any more."
A key date in Russian history was 1613, the foundation date of the Romanov
Tsarist state that was to rule Russia until 1917. It had come after the Time of
Troubles that ensued shortly after the memorable reign of Ivan the Terrible
(1533-84). The first Romanov Tsar was elected, not by the whole people, it is
true, but by the Assembly of Notables, the boyars, who had suffered terribly
indeed under Ivan, as also did the whole of Russia in the Time of Troubles.
Russia had lurched from an over-strong regime, a merciless tyranny, to an overly
feeble and feckless one, which saw the Poles at the gates of Moscow and mayhem
and anarchy rife across the land. Everybody sighed with relief at the return of
a strong hand at the helm, with a measure, but no more, of civic liberty. The
Romanovs were to be popular; the Assembly of Notables had chosen well in 1613.
May not future generations of Russians come to regard the assumption of Putin to
presidential power in 2000 in a similar light?
The recent Time of Troubles under Gorbachev and Yeltsin has been brought to a
close. He was elected, and then re-elected, like the first Romanov ruler, but
from now on the succession is likely to be hereditary.
It will not be a matter of dynasty (Putin anyway has daughters and they are in
their teens). It will be one of having belonged to the inner elite, preferably
the KGB, which Putin notoriously once headed, as did his likeliest successor,
the minister of defence and now first deputy premier, Sergei Ivanov. As Putin
himself has said, there is no such thing as an ex-KGB operative.
It is curious how there is a pattern to Russian history. The original forerunner
of the KGB (set up in 1954 to succeed a series of secret police, the Cheka, the
OGPU, the NKVD, etc) was the Oprichna, set up by Ivan the Terrible no less. A
6,000-strong force of black-clad mounted police, they were used by Ivan to purge
the boyars and other troublesome folk; there wasn't any time of troubles in his
day, at least not without central control.
That Stalin and the Soviet Union were a sort of eerie replica of Ivan's regime
was acknowledged by Stalin himself. On the set of the Eisenstein film, Ivan the
Terrible, he chatted to the young actor in the principal part, who recounted
later in life that the dictator had confided to him that he highly esteemed
Ivan, regarding him as Russia's greatest ruler before himself. He had a
particular regard for the way Ivan set up the Oprichna and then set about the
boyars and their like. But he said that Ivan made one mistake; he did not make
his purges thoroughgoing enough. That is not a mistake anyone could have accused
Stalin of making!
Just as Romanov Tsardom could be seen as the Ivanite regime with a human face,
so Putin and his ilk can be viewed as Stalinism with a human face, albeit with a
visage as seen in a distorting mirror in an Alley of Mirrors.
Stalinism with a humanoid face is a better way to put it.
Stalin had foreign engineers and experts sent home as spies when he brought the
New Economic Policy (NEP), introduced by Lenin in 1921 to a close in 1929.
Foreign investments were taken over, such as the factory making pencils set up
by Armand Hammer. Now Putin is making life difficult, if not impossible, for
foreign, ie Western, non-governmental organizations (NGOs).
Put out; but not put off
Tout ca change; tout c'est la meme chose. Not quite, because foreign
investors are still being encouraged, and persuasively so.
Russia now ranks sixth in investment attractiveness ratings by AT Kearney.
It is having a new NEP, led by Putin, who is not a monochrome figure. He was the
person under Mayor Sobchak of St Petersburg who was responsible for foreign
investment and was regarded as very competent at the same. He met Benito
at the time and Gerhard Schröder no less.
People are being offered a new sublime form of corruption, not Western, but
There is no-one who can put it better than probably the greatest chess-player
For a Few Roubles More
By Garry Kasparov
One small step for Vladimir Putin, one giant leap for corruption in the West.
Just days after being pushed out of office as chancellor of Germany, Gerhard
Schröder made sure he wouldn't add to the high rate of unemployment he left
behind. Recently he accepted a top post with Russian energy giant Gazprom, the
company in charge of a controversial gas pipeline project that he actively
supported as chancellor.
The dubious ethicality of this move and the speed with which it was made lead to
many obvious questions about whether or not Schröder abused his office to set
up this deal, especially as he was trailing badly in the polls for most of the
campaign against Angela Merkel. But the groundwork for his new job was laid out
in advance as part of a well-organized operation that brought in capital before
Mathias Warnig, as head of Russian operations for Dresdner Bank, first brought
in a deal to purchase 33% of Gazprombank in August. (Dresdner also helped the
Kremlin pick the bones of the Yukos oil company headed by Mikhail Khodorkovsky,
now in a Siberian jail.) Accordingly, Warnig was given a top position at the
North European Gas Pipeline Company. Finally everything was ready for the
arrival of Schröder. The deal keeps everything in the family as Warnig was a
spy for the East German secret police, the Stasi, at the same time Putin was
running agents for the KGB in Dresden. As Putin himself has said, there is no
such thing as a former KGB agent.
In reality this is the lesser story -- that Germany's most powerful politicians
and businessmen can be purchased the way a Russian oligarch might buy an
aristocratic Bavarian estate to gain entry to high society. The larger picture
is of how Putin has made the nation's energy resources the centre of his ruling
clique that has erased the lines between public and private power and assets.
Does the state run Gazprom or does Gazprom run the state? Putin has made a
priority of further tightening the unholy bond between his regime's internal and
external goals and the company that provides most of the natural gas to Central
and Eastern Europe. They are not state-run companies; they are the state.
Gazprom's chairman, Dmitry Medvedev, was recently named first deputy prime
minister while deputy chief of staff, Igor Sechin, heads the other energy
goliath, Rosneft. That's not the only reason Rosneft is unlikely to be
investigated for its takeover of Yukos's prime asset, Yuganskneftegas, in a
bogus auction one year ago. Taking La Famiglia literally, Sechin's daughter is
married to Attorney General, Vladimir Ustinov's, son. Schröder is not joining a
company; he is joining the Putin administration.
Schröder's country and his Social Democrat Party must censure him for dragging
them through the mud on his way to work. For Schröder's price, Gazprom and
Putin's regime are buying legitimacy in the eyes of the West. By putting the
company on the market and stocking its board with prominent foreigners, he is
also creating a backup plan in case things don't work out on the home front.
After years of dirty dealing, Putin and his cronies can hardly afford to lose
control and risk having their abuses brought to light. So they are attempting to
spread both assets and culpability. While they proclaim the need to shield
Russia from the evils of Western influence, the KGB are themselves comfortable
with capitalist tricks. In times of uncertainty, diversify your portfolio!
These deals also provide the Kremlin with priceless propaganda fodder. They
trumpet their coup abroad and at the same time the state-controlled media will
present it as an example of how the West is only after money and oil.
Totalitarian regimes everywhere love to tell their citizens that, for all their
professed interest in democracy and human rights, Americans and Western
Europeans are just as corrupt as their own leaders. It does tremendous damage to
the pro-democracy cause in Russia when the former leader of the world's
third-largest industrial nation enthusiastically allies himself with
Using energy as a political weapon is a tried and tested tactic, and with big
Western names out front Gazprom will act with even more impunity. Having failed
to install another Kremlin flunky in Ukraine, Gazprom has now quadrupled gas
prices to Russia's neighbour. The latest threat is to cut off winter gas
supplies entirely if the Ukrainian administration doesn't bow down to Russia's
will. Georgia and the Baltic states are receiving similar treatment: Toe the
Kremlin's political line or get ready for a long, chilly winter. Call it the new
While Schröder's leap was causing small outbursts of indignation, another
supplicant headed to Moscow for a job interview. The Russian press is full of
rumours that Donald Evans, former US commerce secretary and an old and dear
friend of George W. Bush, was offered the position of chairman of Rosneft during
recent meetings with Putin. They are looking to cover their tracks with a big
IPO in 2006 and are shopping around for a prestigious front man to calm Western
fears. Mr. Evans would formally put the Bush administration's heretofore
unspoken presidential seal of approval on the Kremlin's dirty dealings. (In fact
he has just declined the appointment on the grounds of lack of time).
This is the latest Kremlin strategy -- to co-opt and hush the Western nations by
making them complicit in its crimes. When everyone is guilty, no one is guilty,
goes the logic. We have seen the price paid for these see-no-evil policies on
civil liberties and in Chechnya. Now Western leaders will also have to resist
the calls of their bank accounts, not merely the calls of their conscience.
Oil, gas, politics, intimidation and repression, all are mixed together while
one hand seeks to soap the other clean. When Putin and his friends are swept out
and independent courts are established in Russia, Schröder and other foreigners
trying to make a quick rouble may find that oil leaves stains that are terribly
difficult to remove. Out, damned spot!
Russneft to export oil through Glencore to 2014
Russneft will export oil through the trading company Glencore International AG,
until 2014, a Russneft bond prospectus read. Russneft borrowed 8.78 million
roubles from Glencore International subsidiary, Intersil Limited, in 2003 to buy
shares in 16 companies, according to the prospectus, New Europe reported.
One guarantee for the loans was an agreement with Glencore International,
whereby oil for export produced by the companies acquired would be sold through
Glencore starting January 1 2004 for 10 years. The loans were also secured with
the shares acquired and an unconditional guarantee of 49 per cent of Russneft
common shares and 40 per cent of voting and preferred shares in Vareganneft. The
prospectus said Intersil Limited was the only Russneft creditor at the end of
the second quarter of 2005. Russneft owes it 23.77 billion roubles. Glencore
International reported that former Slavneft president Mikhail Gutseriev owns the
Russneft parent company.
Shell interested in Kyoto protocol projects in Russia
Royal Dutch/Shell is interested in implementing Kyoto Protocol projects in
partnership with Russia and Russian companies, Garth Edward, trading manager of
environmental products at Shell International Trading, said at the Moscow
Business Dialogue held by Interfax and the Royal Institute of International
Affairs (Chatham House), London.
Edward said Shell would be concentrating on long-term relations with Russia in
this sphere. It is also interested in delivering specific projects of its own or
with partners in Russia, Edward said. They include reducing the amount of
associated gas being burned off and buying emissions quotas in joint projects
with Russian companies. Edward said that Shell was prepared to buy emissions at
21.5 Euro per tonne, which is the average price for Europe. But Shell, like
other international companies is waiting for the Russian government to reach the
Although Russia has ratified the Kyoto protocol, it has still not set national
rules for trade in emissions, nor has it created the institutions responsible
for any transactions, Edward said. Russia could be a key player in this market
and its inability to trade quotas is costing it around 10 billion Euro a year,
Edward said he thought Russia as a sovereign emissions vendor, should also look
at the Kyoto Green Investment Schemes, because public opinion suggests that
European countries are not prepared to buy hot air and would like guarantees
that the money raised by selling quotas will be spent on environmental projects.
Demand for reduced emissions from oil, energy and electricity companies is
strong on the world market. Some 12,000 facilities are involved in trading in
Europe, and institutional and speculative investors are at work as well, Edward
Rosneft considering new acquisitions
Russia's Rosneft is considering making new acquisitions, primarily oil and gas
production assets, first Vice President for Economy and Finance Sergey Alexeyev
recently announced at a meeting in Moscow, Interfax News Agency reported.
"We are planning some acquisitions. Investment is targeted at oil and gas
production," he said. Rosneft is not considering the purchase of RUSIA
Petroleum stock, which has a licence to develop the Kovykta field. "Kovykta
is not under consideration, as the project has not yet reached the investment
phase," he said. Gazprom has not offered to buy 20 per cent of Rosneft's
Sakhalin-1 project, Alexeyev said. "We plan to retain Sakhalin-1. I have
not seen a Gazprom offer. Why would Gazprom need Sakhalin-1?" he said. As
for the recent Rosneft acquisition of the stock of Verkhnechonskneftegaz, which
develops the Verkhnechonsk oil and gas condensate field in the Irkutsk region,
Alexeyev said, "we will implement this project together with TNK-BP."
He said Verkhnechonskneftegaz shareholders had welcomed the move.
Rosneft recently acquired 25.94 per cent of Verkhnechonskneftegaz stock from
Interros. The company has the same shareholder makeup as RUSIA Petroleum. TNK-BP
owns about 63 per cent of its shares, Interros about 25.8 per cent, and the
Irkutsk regional administration about 11 per cent. Interros also plans to sell
RUSIA Petroleum stock. Earlier Rosneft comments on RUSIA Petroleum stock were
that "eastern Siberia is a strategic region for the company."
Gazprom said it would like to acquire a share in Sakhalin-1 and will make an
irresistible offer to Rosneft. Gazprom deputy CEO and Gazexport head Alexey
Medvedev said that the acquisition of shares is not the only way to join the
project. He said that Gazprom may get a right to Sakhalin-1 gas exports.
The Russian government has not decided how it will be paid in the production
sharing project, either with money or gas. Should it choose gas, Gazprom will
attempt to become the gas exports operator, Medvedev said.
However, a source in the industry and energy ministry said the government was
more likely to choose money. The Chaivo, Odoptu and Arkutun-Dagi oil fields will
be developed on the northeastern shelf of Sakhalin under the Sakhalin-1 project.
Gazprom, Japan sign cooperation agreement
Russian gas giant Gazprom, the Japanese Agency for Natural Resources and Energy
and the Japanese Economics, Trade and Industry Ministry signed a framework
agreement on cooperation in Tokyo on November 21st, Gazprom's press service
said, Interfax News Agency reported.
The agreement was signed at the end of talks between Russian President, Vladimir
Putin and Japanese Prime Minister, Junichiro Koizumi.
In accordance with the agreement, Gazprom will coordinate its actions with the
Japanese agency when launching cooperation with Japanese companies in
scientific, technical and production matters. The agency, in turn will provide
support to such companies in setting up and developing partnership relations
with Gazprom and carrying out joint projects.
The two sides will hold comprehensive discussions on setting up new forms of gas
processing and gas chemicals production in eastern Russia and organising exports
of natural gas, oil and gas-chemical and gas-processing products from Russia to
Japan, including gas-processing products based on the gas-to-liquid (GTL) and
dimethyl ether engines (DME) technologies.
The two countries will also study the possibility of building such production
facilities in Russia with the use of Japanese technology and financing from the
The agreement also envisions mutual cooperation in projects that involve
investment from Japanese companies in developing hydrocarbon resources in
eastern Russia and Gazprom investments in Japan as well as the creation of joint
ventures in Russia that will produce equipment and materials for the Russian oil
and gas industry. A joint coordination committee will be set up to carry out the
terms of the agreement.
As part of his visit to Japan, Gazprom CEO, Alexei Miller, held a number of
meetings with the heads of Japanese companies, such as the president of
Mitsubishi Corp., the president of Sumitomo Corp., the president of Sojitz
Corporation and the president of Mitsui & Co. Miller said at the meetings
that Gazprom and such Japanese companies had accumulated a great deal of
experience from their fruitful cooperation and said this could be used to carry
out new projects.
"Cooperation with Japan has played an important role in the realisation of
the Blue Stream (gas pipeline) project, and the possibility of creating
additional gas transportation capacity in this area in now being studied.
Japanese companies can take part in a tender to deliver pipes for the underwater
section of the North TransGas pipeline.
Finally, Japanese equipment and technologies may be used in carrying out the
Shtokman project. This is far from the complete list of possible areas of
cooperation," Miller said.
Japan ranks fourth in the world in terms of energy consumption, but has
practically no energy resources of its own. The country annually consumes about
80 billion cubic metres of gas, or 13 per cent of total Japanese energy
consumption. Japan imports almost 100 per cent of the gas it uses in the form of
liquefied natural gas (LNG) and ranks first in the world in terms of imported
LNG. In 2004, Japan imported 54 million tonnes of LNG, or 75.6 billion cubic
metres. Japan's main providers of LNG are Indonesia, Malaysia and a number of
Middle Eastern countries.
Investment climate in Russia improving - EBRD chief
The investment climate in Russia is improving consistently, Jean Lemierre, head
of the European Bank for Reconstruction and Development (EBRD), said recently at
the Moscow Business Dialogue held by Interfax and the Royal Institute of
International Affairs (Chatham House), London. The trend is positive, although
questions still arise, Lemierre said. He said net capital inflow in the second
quarter was a good signal that Russian money was being repatriated.
He said the key issues to developing the Russian economy are to diversify the
economy, continue reform to strengthen the rule of law, develop the financial
infrastructure and set up transparent institutions to strengthen democracy,
Interfax News Agency reported.
Lemierre said he did not know very many successful economies that were built on
oil and gas. He said investments are only effective when they are long-term and
create jobs, thus developing society and strengthening social stability. It is
quite easy to find financing for two to three years, Lemierre said.
However, companies need to have possible financing for five to ten years and
there has been gradual progress in this direction, he said. He also said that
the EBRD's efforts to invest in the most diverse sectors of the Russian economy
and encourage the development of financial infrastructure had the support of the
Russian government and Central Bank. Lemierre said he was confident of seeing
significant progress in cooperation between the state and private sectors in
Russia in the years to come.
Investment in IT sector needs boost, say experts
Investment in Russia's Information Technologies (IT) sector needs to be
increased, representatives of big Russian IT companies said at the Moscow
Business Dialogue held by Interfax and the Royal Institute of International
Affairs (Chatham House), London.
The IT sector is one of the most promising for investment, said Mikhail Krasnov,
president of the Verysell group of companies. Among the most attractive IT
segments for investment are system integration and consulting, offshore
programming and development of corporate computer software, he said.
A number of IT companies have already announced plans for IPOs, including IBS,
Yandex, Compulink and Sitronics, Krasnov said. The market is ready to support
IPOs from at least 10 Russian companies, he said. Verysell is thinking about an
IPO in the mid-term perspective, he said. The Russian IT market is rapidly
expanding, there is growing interest by Russian companies for strategic
alliances with leading IT corporations and it has the possibility to become a
leader in certain segments of the IT market, Krasnov said.
Corruption, tax risks, a lack of property protection and a shortage of financing
and operative transparency of companies are among the risks on the Russian IT
market, Krasnov said.
The IT market is being held back because it is often seen as automated, and not
as a resource to improve business competitiveness, said Mikhail Leshcha,
president of Compulink. Big projects require more players on the IT market, he
said. There will be three to five groups remaining by 2010 that will offer the
entire range of services with a potential annual turnover of US$1 billion, he
There is also an acute shortage of IT specialists in Russia, which increase IT
development costs and, as a result, reduces the investment attractiveness of
offshore programming, said Alexei Golosov, president of FORS-Development Centre.
One of the priority tasks now is to set up large centres to develop programming,
including IT parks, he said. Experts estimate investment in the IT sector was
US$1.9 billion in 2004 and it is expected to grow to US$5.8 billion by 2009.
The Information Technologies & Communications Ministry forecasts that IT
services will be US$10 billion in Russia by 2010 with an annual growth of 67 per
MINERALS & METALS
Sual, RusAl to invest in Komi Aluminium
RusAl, Russia's biggest aluminium producer, and Sual, the country's number two
producer, will invest US$720 million in the Komi Aluminium project in 2006,
Vladimir Kremer, director general of the Komi Aluminium company, said at the
Moscow Business Dialogue held by Interfax and the Royal Institute of
International Affairs (Chatham House).
Kremer said investment in phase one, which involves the development of a bauxite
mine and rail road, would be US$150 million and would be received by January.
Phase two, involving the construction of a 1.4-million tpy alumina refinery,
will cost US$720 million, including refinancing for phase one. The whole project
will cost US$1.2 billion, Kremer said. Investment since 1997 has amounted to
US$200 million, he said, adding that 60 per cent of the money had been borrowed.
The Sredne-Timan bauxite field in Komi is currently producing two million tonnes
of bauxite a year and will raise output to three million tonnes in 2006.
The railway will be able to carry 80 million tonnes of cargo per year by the end
of 2008. The first alumina to be produced by the refinery near Sosnogorsk should
be shipped in the fourth quarter of 2008. Kremer said the project would generate
US$45 million-US$50 million in annual taxes for budgets at all levels. Russia
has a shortage of 3.7 million tonnes of alumina, and the Komi project will
reduce that to 2.3 million tonnes, Kremer said.
RusAl and Sual signed an agreement on equal participation in the Komi Aluminium
project in April this year. The agreement stated that the partners would finance
the project on a parity basis, using borrowed money and internal funds.
SUAL mulls US$300m Eurobond in 2005
Russia's number 2 aluminium producer, SUAL Group, is thinking of issuing US$300m
in Eurobonds as early as this year, said Iosif Bakaleinik, senior vice president
of SUAL-Holding, Interfax News Agency reported.
"The likelihood that we issue (the Eurobonds by the end of 2005) is more
than 50%, but a more definite decision on the timing will depend on the state of
the market," Bakaleinik said. Bakaleinik also said that SUAL's investment
programme for 2006 had not yet been finalised, but requests for some US$300m had
been received. "Some of them might be granted, but some might have to wait
until later, the discussions are under way. The (final) amount may be
lower," he said. Moody's Investors Service has affirmed the global scale
rating, namely the Ba3 corporate family rating, of SUAL International Ltd (SUAL),
the agency said recently in a press release.
Concurrently, Moscow-based Moody's Interfax Rating Agency assigned the Russian
number 2 aluminium producer an Aa3.ru national scale rating. The outlook on the
global scale rating remains stable.
According to Moody's and Moody's Interfax, the Ba3 global scale rating reflects
the company's global default and loss expectation, while the Aa3.ru national
scale rating reflects the standing of the company's credit quality relative to
its domestic peers.
Headquartered in Moscow, Russia, SUAL is a leading manufacturer of primary
aluminium with 2004 revenues of US$2bn (70% from export activities).
Alrosa to launch exploration campaign in Russia, abroad
Alrosa is about to launch an extensive programme of geological exploration in
Russia and abroad, Alexander Nichiporuk, president of Russia's Yakutia-based
diamond monopoly, said at a meeting in Mirny attended by Kamil Iskhakov, the
Russian president's envoy in the Far Eastern Federal District, New Europe
Nichiporuk said Alrosa would be exploring in Northwest Russia, Angola and
Canada, among other regions. Alrosa and Yakutia's government are discussing
proposals to optimise exploration in the republic, Nichiporuk said.
Alrosa has received the rights to eight properties in Northwest Russia and could
join forces "with one of the world's biggest diamond companies" to
develop them, he said. Alrosa mines around 23 per cent of the world's diamonds.
The other major producers are De Beers, Rio Tinto and BHP Billiton. Nichiporuk
said Alrosa was negotiating the acquisition of rights to five viable properties
in Angola, where exploration has taken place and where between 10 and 15
kimberlite pipes have been studied. Nichiporuk also said that an Alrosa
delegation would visit Canada in the near future. The company is starting to
explore a property in Canada measuring 26,000 square kilometres where kimberlite
pipes have already been discovered, he said.
Meanwhile, Alrosa said its uncut diamond stockpiles will be worth US$850 million
at the end of 2005, Nichiporuk said. Nichiporuk said the stockpiles were not
falling in size and that Alrosa was acting to increase their liquidity. He also
said that Alrosa would have net profit of around 15 billion roubles in 2005 and
sales of US$2.8 billion.
Nichiporuk said the company would continue to finance construction of the
Udachny and Mir deep mines and was assessing the viability of building a mine at
the Aikhal pipe. Alrosa has also decided to build a mine at the Nakyn diamond
field. The company will, at the beginning of 2006, submit a five-year
development plan to its supervisory board. The main aspects of the plan are a
sustained level of mine production, cutting and stabilising costs and reducing
Nichiporuk also said that Alrosa, Unified Energy System (UES) and the
Yakutenergo power utility were discussing ways to optimise the use of the
diamond company's energy-related assets. Sales efficiency has grown 45-50 per
cent in recent years, Nichiporuk said. "In conditions where the European
Union is asking us to reduce sales to De Beers considerably, we are now totally
prepared to work independently with leading cut diamond producers and jewellers,"
Alfa Telecom changes name to Altimo
Large Russian private investment company Alfa Telecom has changed its name to
Altimo, company CEO, Alexei Reznikovich, said at a presentation of the new name
for representatives of the investment community in London, New Europe reported.
The company said in a press release that the presentation of the new corporate
image and Altimo name in London reflects the company's attempts to attract
global partners from among the large international telecoms companies that are
interested in working on developing markets in Eurasia. The market
capitalisation of Altimo assets is over US$8 billion. Its investment portfolio
includes shares in two of the three largest mobile operators in Russia - OAO
VimpelCom (32.9 per cent) and OAO Megafon (25.1 per cent); one of the top three
Ukrainian operators - ZAO Kievstar GSM (43.48 per cent), and also in the
telecoms holding company Golden Telecom.
Mobile TeleSystems net profit grows 2.7% in Q3
Mobile TeleSystems (MTS), the number one mobile operator in Russia and the
Commonwealth of Independent States in subscriber numbers, net profit grew 2.7
per cent year-on-year to US$347.4 million in the third quarter of 2005, which
was lower than forecasts by analysts polled by Interfax on November 22nd.
Analysts expected net profit to grow 4.6 per cent-10 per cent to US$354-379
MTS revenue grew 27.5 per cent to US$1.384 billion in the third quarter,
Operating Income Before Depreciation and Amortisation (OIBDA) rose 16.2 per cent
to US$737.6 million and the OBIDA margin was 53.3 per cent, against 58.4 per
cent in the third quarter of 2004, MTS said in a press release. Analysts
forecast revenue would be an average of US$1.41 million, OIBDA would be US$755
million and the OBIDA margin would be 53.6 per cent. The monthly Average Revenue
Per User (ARPU) was US$8.9 in the third quarter, against US$14 in the third
quarter of 2004 and US$9.3 in the second quarter of 2005. Average monthly
traffic per user (MOU) fell to 130 minutes, compared to 168 minutes in the third
quarter of 2004 and 134 minutes in the second quarter of 2005. The subscriber
acquisition cost (SAC) was US$19, against US$21 in the third quarter of 2004 and
US$18 in the second quarter of 2005.
The number of MTS subscribers rose by 6.29 million in the third quarter of 2005,
including by 4.78 million in Russia, 1.42 million in Ukraine and about 89,000 in
Uzbekistan. The number of subscribers MTS lost fell to 2.9 per cent from 6.8 per
cent in the second quarter of 2005, but grew to 6.2 per cent from 5.7 per cent
in Ukraine. MTS expects this figure to drop to 2.5 per cent in 2005.