There may well be a vast geographic and cultural divide between Russia and the United States, but Mikhail Bogdanov, owner of Moscow-based EcoSoft GTCO, said he is impressed by the fact participants in the C-block auction for personal communications services face many of the same problems and opportunities as his paging firm.
With the goal of “blanketing the entire country,” EcoSoft obtained its first license-for four frequencies serving Moscow proper and its greater metropolitan area-in March 1994 from the Russian Ministry of Communication. Spectrum of any kind has become so scarce in this area that even the federal agency in charge of disaster preparedness and response recently was denied its application for additional frequencies, Bogdanov said. EcoSoft hopes to begin service in Moscow this spring.
Within the city of Moscow, which has 10 million people, EcoSoft has 14 competitors. Bogdanov estimates that the competitors account for 4 percent penetration of the marketplace, which he thinks only scratches the surface of people who would buy paging service.
“Phone systems are antiquated; there aren’t enough numbers, not enough public telephones. Pagers help keep tabs on people who move around a lot because of the nature of Russian business,” Bogdanov said. “About 20 percent of all newspaper ads seem to be for cellular and paging services.”
But cellular phones cost about $3,000 to $5,000 each, whereas paging units are substantially cheaper. “I can sell pagers for $740 each, including a one-year subscription, or $345 down and $45 a month,” he said.
Last year, EcoSoft obtained a second license for 13 other regions of the country, including Perm, an industrial region near the Ural Mountains, where EcoSoft is involved in discussions of a joint venture with another paging company on the same frequency. Last month, Ecosoft turned on its transmitter in Ryazan, a region with about one million people approximately 100 miles east of Moscow. Bogdanov said he owns 50 percent of the other paging company there that uses the same frequency.
Ryazan, a defense installation community that specialized in missile guidance systems, is a brain trust of satellite communications specialists, according to Bogdanov. EcoSoft’s Rusant Division there is developing “flat plate DBS antennas the size of MacDonald’s food trays,” he said, adding, “we haven’t used these yet for paging.”
Later this winter, EcoSoft plans to go on the air in the Lipetsk region, bordering Ryazan, that was built around a metal foundry. Its 800,000 residents have the option of two cellular carriers, but no paging companies.
EcoSoft started out as an environmental software company with 120 employees and a large customer base in Taiwan. But lack of capital for expansion forced the company to close because “my two partners could not feed their families,” Bogdanov said.
EcoSoft GTCO, the paging company, could face the same fate if it cannot finance the pre- and post-construction phases of development. “With proper financing, I could cover all of central Russia in four months,” said Bogdanov, who estimates he needs $125,000 per paging system for each of the 15 Russian regions in which EcoSoft owns licenses. “But I can’t finance this anymore myself. The Russian stock market is only for Fortune 500-size companies, not for start-up companies that are rich with licenses. There are no usury laws in Russia, so I had to refinance a bank loan last summer that carried a 100 percent interest rate.”
The EcoSoft owner, who received his doctorate in geology in Russia and a master’s degree in business administration from Oklahoma State University, said he used personal capital to finance the start-up of the paging company a few years ago.
“The U.S. dropped its export restrictions to Russia about three years ago, and overnight the market exploded,” Bogdanov said.