MegaFon Telecom eyes Azerbaijan for expansion

No. 2 mobile operator VimpelCom plans to cover the entire Commonwealth of Independent States within two years, while market leader MobileTeleSystems is considering a bid for Bosnia-Herzegovina's telecoms company, Telekom Srpske. MegaFon, the top-three firm with the smallest geographical reach, is also considering expansion.

The need to outbid foreign mobile giants is a big hurdle for acquisitions abroad, but the country's top mobile firms must find new markets to grow, analysts said.

"I think that within two years, all the CIS countries will be involved," VimpelCom CEO Alexander Izosimov said Friday at an investor conference organized by UBS.

VimpelCom and MTS have already expanded into less-developed mobile markets, as mobile-service penetration reached 100 percent in Russia last month, according to AC&M consultancy's latest estimates.

Through subsidiaries, VimpelCom is present in Kazakhstan, Tajikistan, Uzbekistan, Ukraine and Georgia, while MTS has is in Ukraine, Uzbekistan, Turkmenistan, Belarus and Kyrgyzstan.

"Future competition will require us to be bigger," MTS CEO Leonid Melamed told the conference.

The rate of profit growth in Russia is slowing for each of the three largest mobile operators, according to research firm J'Son and Partners.

MegaFon, which operates in Russia and Tajikistan, has "no set targets for acquisition," but is eyeing Armenia, Uzbekistan, Azerbaijan and other countries for expansion, the company's acting CFO, Raymond Ho, said on the sidelines of Friday's conference.

MTS, VimpelCom and MegaFon all have spare cash for acquisitions, but finding attractive CIS assets is increasingly difficult, said Yelena Bazhenova, telecoms analyst at MDM Bank.

/The St. Petersburg Times/