BELARUS NEWS AND ANALYSIS

DATE:

20/07/2007

Svyaznoy goes to Byelorussia for loses

Svyaznoy announced to enter the Belarusan market, having purchased the local participant Belaya Vezha controlling stake. Belaya Vezha possesses more than 100 retail outlets. However, specialists note, such a business in Byelorussia is unprofitable, the taxes having surged in May, 2007.

The Svyaznoy Group of Companies has joined its efforts with the Byelorussia Company Belaya Vezha, one of the leaders in the mobile retail and camera services market. According to Maxim Nogotkov, the Svyaznoy Group of Companies' President the question is about becoming one of the Belaya Vezha cofounders. The controlling stake value and the transaction charge are not reported.

Belaya Vezha is the owner of the MegaPlus retail chain on the GSM and DECT handsets and their accessory distribution. It also provides the service of connection to MTS. It is also the owner of the Focus retail chain on the cameras distribution, providing photo services and the possibility to connect to the cellular operators Velcom and BeST. At present both Megaplus and Focus have 102 retail outlets in 28 Byelorussia settlements.

The Focus and MegaPlus retail outlets reconstruction is planned to be finished up to the end of the year. It is also planned to open Svyaznoy and Svyaznoy 3 retail outlets on their territory, preserving the photographic printing dominant share. The first Svyaznoy 3 outlet is to be opened in Minsk in August. Elena Nogotkova, the Svyaznoy PR Department Director told CNews the investments into the rebranding and changing the Byelorussia network format are estimated at $ 2-3mln.

"We do not aim at competing with Euroset in Byelorussia", - Svyaznoy outlines. - We only wanted to enter the new market and did it". The Company did not say anything about entering the other CIS markets.

At the same time Euroset positively assesses its Russian competitor entering the Belarusan market. "We are satisfied with the appearance of a strong competitor in Byelorussia, - Ochir Mandjikov, the Company's Press Secretary outlines. - That is only for the consumers' benefit. Finally, everyone is to win from a healthy competition".

Analysts forecast the Svyaznoy Group of Companies might incur losses in Byelorussia. They note Euroset has already faced the profitability sweeping down. "The Government significantly upraised the taxes for the cellular retailers, - Eldar Murtazin, the Mobile Research Group Senior Analyst says. - The other negative factor is the high rate of illegal import, that is why the handsets sale is not profitable at present".

"The Belarusan market apparently is very simple, - Sergey Savin, the J'son & Partners Senior Analyst notes. - The illegal handset mainstream comes from the neighboring Poland. However, if the market is unprofitable now, it does not mean there is no sense in operating in the given market. Byelorussian possess satisfactory potential for the cellular retail business development on a worldwide scale, as the number of handset owners is significantly lower there than in Russia".

According to the Mobile Research Group estimates, about 60% of the Russian population has handsets at present, while in Byelorussia it is only 30%. "If the life in Byelorussia improves, the cellular retail might become more profitable there, - Mr. Murtazin says. - The cellular retail market is likely to occupy the third place according to the handsets sale in the CIS after Russia and Ukraine".

Svyaznoy is a federal cellular retailer, specializing in the sale of the cellular operators' services, personal communication device, accessories, portable digital audio and photo techniques. The company is the official distributor of the GSM and DECT handsets main producers. It is also the largest cellular operators' dealer. The number of Svyaznoy retail outlets is 1183, Svyaznoy 3 - 113, and Svyaznoy Discount - 45.

Euroset is the largest mobile handset retailer in Russia and one of the Russia's leading dealers for major mobile network operators. The main business activity of the Euroset Group is the retail sale of mobile handsets, digital cameras, CD, MP3 players and DECT-phones, mobile handset accessories and subscription to mobile network operators. In the first half of 2005, the Group estimated its share of the mobile handset retail market in Russia to be 23%. The Group already has an established presence n the Rouble-denominated bond-market, having issued RUB-denominated promissory notes in the amount of RUB 351mln. in 2003 and Rub-denominated bonds in the amount of RUB 1bln. in 2004.The Group intends to list its shares in on the domestic market and to obtain an international listing in the course of the next three years, depending on the prevailing market conditions. As 31 October 2005, there were 2,441 Euroset retail outlets, approximately 20.2% of which were located in Moscow and the Moscow region. As of 31 October 2005 Euroset has outlets in 626 Russian cities, as well as in 25 cities in Kazakhstan, 19 cities in Ukraine and one city in Belarus. Euroset's nest goal is to further develop its business in the Commonwealth of Independent States and the Baltic States.

Source:

http://eng.cnews.ru/news/top/indexEn.shtml?2007/07/19/259557

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