Vodafone leaps into Russia with MTS alliance

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Vodafone leaps into Russia with MTS alliance

By CAROLINE GABRIEL

Published: 30 October, 2008

READ MORE: Vodafone | Russia

Western operators are increasingly keen to put their stakes in the ground of the rapidly expanding Russian/CIS market, and this week has seen good news for Vodafone, which has signed a strategic agreement with Russia's largest cellco MTS, but bad tidings for Telenor, which saw a court freezing its shareholding Russia's second cellco, Vimpelcom.

Vodafone and MTS will work together on offering high end services in Russia and the CIS states, and will also collaborate on future technology developments. The agreement does not include any equity stakes, but seems to be far ranging and potentially very significant. Although MTS has huge scale and growth opportunities as 3G rolls out across Russia, it will benefit from the wealth of experience Vodafone has in areas such as data services, mobile internet and enterprise convergence, where the Russian market remains immature. Vodafone, for its part, will gain a high level of influence and brand penetration in a key territory, without upsetting currently nervous shareholders by spending money on a bold acquisition, and can add MTS to its pool of buying partners, improving its procurement power when selecting devices.

Under the agreement, MTS has exclusive access to a range of products, services and devices from Vodafone, which it will offer in Russia, Ukraine, Uzbekistan, Turkmenistan and Armenia. The partners will take a co-branded approach and Vodafone will open an office in Moscow to support the new alliance. In addition, MTS will be able to draw on Vodafone's expertise in building and developing 3G networks and mobile broadband products, the UK-based carrier said, and will focus on improving customer relationship management and operational efficiency.

MTS has 87m subscribers, including over 60m in Russia itself and these will be added to Vodafone's roaming network.

Meanwhile, Norway's Telenor, which has extensive interests in Russia and the surrounding states, found this week that a Siberian appeals court had ordered the 'arrest' of its 29.9% shareholding in Russia's second biggest cellco Vimpelcom. The court froze the shares following a lawsuit by a Vimpelcom minority shareholder, the British Virgin Islands-registered Farimex, which had filed a suit claiming damages against Telenor for holding back Vimpelcom's planned expansion into Ukraine.