MOSCOW-Three nationwide Russian wireless carriers, which control close to 75 percent of the market, have launched a fierce battle for new clients as mobile phones become more common communications tools in Russia.
Cellular phones are now ringing in buses, trolley buses and even subways. The Russian Communications Ministry estimated that the number of wireless clients reached 1.35 million nationwide at the end of 1999, but most were in Moscow (800,000).
The tariff war turned a cellular phone from a fashionable toy of the so-called “new Russian rich” businessmen into an everyday facility of students, housewives and the elderly. Carrier Mobile Telecommunications Systems (MTS) Marketing Director Igor Timofeyev said the new tariffs are aimed at those who “really need to talk, but not use the phone as an expensive toy.”
Coverage is also expanding, drawing in even more subscribers. MTS was the first carrier to offer coverage in Moscow subways, with service in only one station so far. In several months, cellular phones will be operating on 10 to 25 stations, the carrier said. In the second-biggest Russian city of St. Petersburg, cellular phones are operating on six subway stations thanks to the local carrier North-Western GSM.
Pricing strategies
Earlier this year, wireless advertising billboards outnumbered even those of presidential candidates across the country. “Vote for our contract,” and “There is only one leader,” the competing billboards in city streets said.
Television and radio commercials were more concrete. They said prices were as low as US$49 per contract with a phone included. In reality, most new clients were enticed to sign higher-cost contracts, averaging about US$150 per contract, but the marketing was a good bait to catch new customers.
The “tariff war” was initiated by BeeLine (Vimpelcom), which introduced its GSM Silver tariff for a monthly fee of only US$12 and 25 minutes of talking free. The Bee Plus tariff targeted at students followed.
MTS accepted the challenge by halving the fee to turn on service and decreasing the cost for most cellular phones. In February, MTS, a GSM carrier, offered the Beloved and Youth tariffs. The former offers two cellular phones, one free for the subscriber’s beloved, while the monthly fee for the Youth plan is only US$4.80.
BeeLine fired back in March with four new tariffs. One of them offered up to 60 minutes of free talking and a monthly fee of only US$10. In April, BeeLine further decreased prices, with charges on Saturday and Sunday falling from US$0.23 to US$0.18 per minute for some tariffs.
“Everyone can be a lucky owner of a mobile phone,” BeeLine advertised.
The third major carrier, Moscow Cellular Communications (MCC), was slow to offer similar pricing schemes, and its billboards first said only that the company had been operating for eight years. However, in April, MCC decreased the monthly fee on its Family tariff by more than half, from US$30 to US$14.40. In addition, MCC was the first carrier to introduce free outgoing calls from its phones to those of its competitors BeeLine and MTS. The carrier also offered up to 80 percent off traditionally expensive NMT 450i standard phones.
A Nokia 640i with the US$50 Personal (one phone and 100 minutes) and Entrepreneur+ (four phones and US$0.25 per minute) tariffs was only US$25, value-added tax (VAT) included. The minimum MCC contract cost with advanced payments and taxes was only US$75.
However, experts predict that the tariff war is coming to an end as prices are close to the minimum level. Since January, BeeLine prices have fallen by 33 percent on average, while MTS prices have fallen 20 percent. However, Communications Minister Leonid Raiman said currently there is no legislation that bans dropping prices in Russia, and only a drastic fall in profits can legally stop the tariff war.
New opportunities
Meanwhile, carriers are eying new market segments.
Because not all carriers operate in all regions, Russian users often have to determine which carrier is operating in the area to which a trip is planned before going. In fact, most staffers of Russia’s Gazprom natural gas monopoly have two mobile phones-one for home and one for foreign travel.
MCC boasts a large coverage area, while MTS and BeeLine have better foreign roaming capacities.
MTS is now also active in the country and offers cheaper tariffs in a dozen regions. BeeLine national roaming is also expanding. Because not all carriers operate in all regions, Russian users often have to determine which carrier is operating in the area to which a trip is planned before going.
The new services of the national carriers will be connected with the Web. MCC was the first to act as an Internet provider. The company said that Internet and wireless clients have much in common-age, wages and social status. MCC Deputy Director General Alexander Yesikov said in two years the Internet and wireless clients would be “a single audience.”
In April, MTS introduced prepaid services using prepaid cards purchased from the carrier. The company was the last among Moscow carriers to introduce the service, however it charges less than any other per minute-US$0.44 during the day compared with BeeLine at US$0.46 and MCC at US$0.47.
