Three Russian companies lead second Belarussian GSM license tender

MINSK, Belarus—Russian carriers for the first time participated in a foreign wireless communications tender and three of them qualified for the final stage of the auction for the second GSM license in Belarus.
The Russian Mobile TeleSystems (MTS), North-Western GSM and Alfa-Eco Telecom investment company, which has a blocking stake in Vimpelcom (BeeLine), as well as the Austrian Dr. Karl J.Pisec Export-Import GMBH and the Saudi Odger Ltd. were named the winners of the tender’s first stage, in which 13 companies participated. Other competitors included Russian RECOM, NTU, Belarussian Belmetallenergo and Belcel NMT-450 carrier, South African MTN, Chinese ZTE, Lebanese Investcom and Telecommunication Consultings India Ltd.
The final winner of the tender is to be announced in early September and must start commercial operations in April 2002, when the exclusive GSM license with Mobile Cellular Communications (Velcom) carrier expires. The new carrier will have to cover a territory with 70 percent of the Belarussian population. The license will cost the winner US$5 million plus a US$2.5 million premium to the Belarussian budget. Contenders have already paid a bank’s backing of US$500,000, 10 percent of the license cost, plus US$5,000 as participation fee.
Belarussian Communications Minister Vladimir Goncharenko said that to win the tender contenders have to prove that they will create a network as soon as possible and have enough investments to build it.
Experts estimated the winner will have to invest US$10 million in 2001. The minister estimated the total cost of a second GSM network at close to US$100 million.
“The second carrier is to create competition. Tariffs will go down immediately when it comes,” the minister said, adding that the winner will get enough 900 MHz and 1800 MHz frequencies for successful operation.
The average revenue per user (ARPU) is US$50 to US$60 in Belarus compared with US$30 in Russia. The penetration level is low at 0.7 percent for 10 million of the population, compared with 3.3 percent in Russia.
Wireless market experts believe Russian carriers have an advantage thanks to the territorial closeness of neighboring Belarus, with which Russia is forming a Union State political and economic alliance. For Russian carriers “Belarus is a natural continuation of Russian regions. The economy of the country and the mentality of the clients are similar to Russia,” said Andrei Braginsky from Renaissance Capital telecom consultancy.
Belarus currently has two carriers—Belcel and Velcom with 18,000 and 60,000 subscribers respectively.