Daily analyst comments

Interfax reported on June 18 that according to Telecom Minister Leonid Reiman, "Svyazinvest's mobile assets have nearly reached their target price and their market caps will not likely rise much higher".

We have repeatedly noted in our overviews that independent wireless operators (both RTO subsidiaries and other companies) can expect to see their market shares eroded in favor of Big3 companies. The reason for this is no secret. Previously, mobile communications were a technological service which largely depended on the operator's equipment quality and coverage zone. At present, the wireless communication and services offered by all operators are nearly the same. Needless to say, there are difficulties but they are not serious enough to produce any tangible impact on user choice. In the current situation, the most important factor is customer service level, VAS and "brand power" and the Big 3 operators have developed the last two factors on a very high level. They are the only companies which can offer profitable national roaming terms and allocate huge amounts to advertising campaigns.

Although Leonid Reiman is Svyazinvest's chairman of the board of directors, we are not inclined to view his words as a direct order for RTOs. Neither can we disregard his opinion, either. In addition, we are inclined to believe that both Svyazinvest and buyers of RTO cellular businesses stand to gain a lot, since the former will receive financial resources to develop more promising segments and the latter – profitable assets, stronger subscriber bases and higher market caps due to the synergetic effect.