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MTS Loses Leadership
CIS and Eastern Europe’s biggest cellular operator, Mobile TeleSystems (MTS) lost leadership to VimpelCom yesterday. For the third quarter in a row, MTS posts poor financial and operating results, having yielded to the rival in a number of key indicators. Regardless, investors don’t appear rattled. They have been inspired by promises of new MTS President Leonid Melamed, who acknowledged faults of the management and pledged to improve fundamentals in the near term.
MTS has reported surprisingly weak indicators for the third quarter in a row. It is not just that MTS fundamentals are lower than the ones posted by rivals. It is that they even fail to meet expectations of the market.
Most of the analysts view the Q1 results unveiled by MTS yesterday as the poorest of several years. Despite the growth in subscriber base by 2.86 million during first three months of this year, the revenues shed 3.3 percent and ARPU declined 15 percent to $6.2. In ARPU, MTS lost to VimpelCom for the first time during their opposition and despite the monopoly standing on the cellular market over its green years. Then, MTS was able to attract users with monthly bills of hundreds of dollars.
The reasons of losing the greatest advantage of a pioneering player are no secret – unjustified blow-up of subscriber base, marketing errors and insufficient controllability.
For MTS, inadequate alertness in making decisions and insufficient flexibility of management and manpower policy root in the fact that it has only one principal holder, AFK Sistema, which is wholly controlled by a single person – Vladimir Yevtushenkov, explained Alfa Bank Vice President Andrey Bogdanov. The problem wasn’t evident when the market was booming, but became critical once it matured. MTS failed to keep some heavy corporate clients and blew up subscriber base, which led to the hefty losses in financial indicators.
Unlike the usual scenario, when poor indicators result in the market decline, MTS saw no slump yesterday, and its ADRs were even up 1.32 percent on NYSE as of 10:20 p.m. MSK. The investors are inspired by new president of MTS, Leonid Melamed, the analysts speculate. Melamed, who officially took over the company only yesterday promised to maintain business efficiency at 50 percent.
www.kommersant.com
All the Article in Russian as of June 16, 2006
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