Daily analyst comments

The media reported January 10 that the Moscow Arbitration Court invalidated the FAS's decision on the auction criteria to assign GSM wireless licenses and their revocation and repeated auctions on new terms after FAS classified the terms of the initial auctions as discriminatory.

In spring 2007 Rossvyazokhrankultura announced auctions to assign GSM 900/1800 licenses in 60 Russian regions. The reason behind this large-scale allocation of frequencies was the release of the spectrum by military agencies. As a result of the auctions, Summa Telecom won 11 licenses in 13 Far East regions. Vimpelcom placed two bids to get licenses in the region which is complicated for the company (see our daily dated June 13, 2007). The results of the auctions were cancelled further down the road by the Federal Antimonopoly Service based on Vimpelcom's petition. New auctions were held at a later time, and then Sky Link won 42 licenses and Tele2 14 licenses. Summa Telecom appealed to the arbitration court to invalidate Rossvyazokhrankultura's decision to cancel the results of new auctions. The court banned the agency from issuing licenses to winners of the second auction as a security. Now it became clear that Rossvyaz's chances became stronger.

We view this development as neutral for Big3 operators. This ruling hardly impacts their operations. This judgment could also be challenged and we do not rule out that FAS will use this option.