Virtual Euroset: the company launched MVNO operations
Source: http://vedomosti.ru, 21.03.2007, 49 (1823)
Euroset became the sixth mobile operator in Samarskaya oblast yesterday. The largest mobile dealer launched its operations as MVNO, using the equipment of SMARTS, the regional mobile operator. Other Samara mobile operators were skeptical about Euroset start-up, although the company does not believe in high profits itself.
Several companies in Russia have been already working as MVNO — Matrix Mobile, Megatel (both using the network of Megafon), Korbina Telekom (works over VimpelCom and Tele2 networks). The owners of the Euroset Group are Yevgeny Chichvarkin and Timur Artemiev. The group’s revenue in 2006 was $2.97 billion, EBITDA – $116 million, net profit – $22 millions. Euroset owns more than 5000 mobile phone stores in Russia and CIS (Commonwealth of Independent States).
This month, Euroset will start to offer mobile services in Samarskaya, Saratovskaya, Ulyanovskaya oblasts, Bashkortostan and Mordovia, told the company’s President, Eldar Razroev. Euroset came up with three types of tariffs – Optimalnyi (‘Optimal’, no subscription fee), Delovoi (‘Business’, monthly subscription fee is 165 rubles with 100 minutes airtime included) and Zolotaya Seredina (‘Golden Mean’, after three-minute talk, the rate per minute becomes 1.5 times cheaper). Euroset achieved its leading position as mobile phone retailer when it started working in discounter format, but it won’t use the strategy of price damping in the Telecom market, promised Eldar Razroev. Instead of cutting prices, the company will attract its clients by providing value-added services. Each Euroset subscriber will have an access to special WAP-portal where he or she will be able to download MP3 ringtones, realtones, games, pictures, and etc. for free. Subscriber will pay for the data traffic only. Later the company plans to unite this project with its main business by offering its customers mobile contracts along with mobile phones for lower price.
Euroset does not plan to advertise its operator services for the first two months – it will test the new project first. Yet their mobile store visitors will be offered the SMARTS and Euroset contracts at the first hand, then followed by other operators’ options, says Eldar Razroev.
Euroset does not expect high profits from this project. It plans that its profitability by EBITDA will be the same as the profit of Euroset itself – about 7%. To compare that number with those of the ‘Big Three’ Russian operators, the profitability of MTS, VimpelCom and Megafon is about 50%, and Tele2 (a discount operator) is 27%. Euroset wants to diversify its business and create stronger ties with its clients before entering the share market, explains Eldar Razroev. ‘Yesterday Euroset had 62 subscribers already but the company has enough capacity to hook up several hundred thousands subscribers by the end of the year.’ – he says. He does not reveal the total sum of investments, but he claims that launching the MVNO project on the federal level would take about $20 million.
Euroset is not the first mobile phone dealer trying to become an operator. Two years ago another company, Divizion, launched its MVNO project on the basis of Megafon-Moskva, a mobile phone retail network. But the project did not succeed. According to Divizion managing partner Pavel Karaulov, Megafon did not want to continue the partnership with Divizion due to the lack of available frequencies.
Yet SMARTS is satisfied with its partnership with Euroset. This mobile operator does not have any problems with the frequencies, and by selling traffic to Euroset it saves on attracting and servicing subscribers, explains the head of SMARTS commercial department Igor Nalivaiko.
There were enough mobile operators in Samara without Euroset. The ‘Big Three’ are working here, and so are SMARTS and Volgatelekom, the mobile affiliate of VimpelCom. Most of them are sceptical towards the appearance of new competitor. “Such projects are relevant when businesses struggle on a glutted market for specialized groups of subscribers,”- says Valery Ermakov, the General Director of Megafon regional branch. But, in his opinion, Russian mobile market continues to develop without such projects. By creating MVNO, SMARTS will create a competition for itself, believes Ermakov. “The rates of mobile market growth are slowing down and coming of the new operator with its new offers may liven things up,” – argues ACM-Consulting partner, Anton Pogrebinskyi, while the Director of VimpelCom branch in Samara Sergey Florov reminds that the issue of licensing MVNO in Russia is not resolved yet. But Euroset does not need this license anyway. Technically its subscribers are serviced by SMARTS, says Razroev. And Senior Consultant of iKS-Consulting, Margarita Zobnina says that Euroset has such important advantages as the well-developed retail network, which can be used for servicing its subscribers, and the skills to agressively promote their services.
Not quite MVNO
In Russian legislation there is no such term as MVNO yet. That is why virtual operaqtors cannot receive licenses to provide mobile services. Two years ago Russian Ministry of Information and Communication, Mininformsvyaz, allowed creating the special areas for MVNO prospects evaluation in Moscow, Saint-Petersburg and Tver. Euroset and Narodnyi Mobilnyi Telefon (People’s Mobile Phone) decided to participate in these projects. The results of their operations were demonstrated to Mininformsvyaz in the end of 2006. These results were admirable and this year, according to Leonid Riemann, The Minister of IT and Communications, MVNOs may start receiving licenses.
