Igor Timofeyev is marketing director of MobileTeleSystems (MTS), which is Russia's leading mobile-telecom provider. Timofeyev spoke to Telecoms Russia about his company's plans to make cellular services available to a wider portion of the population.

Telecoms Russia: The acquisition of Telecom-900 has strengthened the position of MTS in the regions and indicates intentions to conquer the country's eastern areas. How would you appraise your positions in regional markets? What else is MTS planning to consolidate expansion?

Igor Timofeyev: MobileTeleSystems occupies very firm positions in the regions. MTS is Russia's sole telecom provider to have made full use of the opportunities provided by its license. Others can boast mainly of their development potential. Of course, some have started building up regional networks, but it will take them years to catch up. Nobody has as broad a coverage as MTS, and, I think, nobody will in the next year or two. Without a doubt, the acquisition of Telecom-900 will strengthen our position. Before, we focused mainly on Central Russia. Now our ambitions extend to the Urals, Siberia and the Far East. In regards to our efforts to consolidate expansion into the regions, in addition to building more networks and acquiring those of other providers, we plan to attract more clients in those regions where we already operate.

We are not holding back. Just recall how we conquered Nizhny Novgorod. No provider who operated there could compete with our prices, and the tempo of our growth exceeded our best expectations. We got a thousand clients connected to MTS during the first 2 1/2 days. The expansion into the regions is a multi-faceted issue. There is a huge difference between a uniform network and a patchwork network. A universal tariff policy is of great importance because it allows our clients in any region to enjoy the benefits of the federal network. Also, we offer discounts on intra-net roaming on calls between MTS users of different regions and other benefits. We employ all these methods to strengthen our positions as a federal provider.

TR: With the introduction of its new "active" tariffs, MTS has once again brought prices down. Do see further price reductions?

IT: We have said more than once that the more customers we have, the lower our per-unit costs are. Naturally, as costs go down, we will reduce prices, offer increasingly favorable schemes of service and make cellular communications accessible to more segments of the population.

TR: MTS launched its Unified Client Paying System. How does it work? What else is planned for the creation of a countrywide network?

IT: The new system's main advantage is that wherever one might be within our area of service, he or she can buy an express pay card and replenish the balance. For clients in Moscow, this will mean the opportunity to use "express pay cards" in any region serviced by MTS. For clients elsewhere, it be a fundamental innovation because these cards have not been available there before.

In the future, we will expand our area of service and will introduce more discounts and other benefits for our clients.

We are seeking to make our long-distance rates cheaper than those offered by ordinary telephone providers. We have already achieved that in a number of regions. I think that after we build trunk-relay lines connecting the regions from east to west and from north to south, we will be able to provide all the connection at discounted rates.

TR: What are the main trends in the Russian telecoms market?

IT: The market is experiencing very rapid growth. This is especially true for the market's Moscow segment, where the client base tempo of growth has exceeded the best expectations of market analysts. Simultaneously, regional markets have seen a considerable activation of demand for cell-phone services, and a number of solid providers have appeared, including North-West GSM in St. Petersburg, Kuban GSM in southern Russia, Smarts in the Volga area and others. But I think it is only now that real growth has begun to gain momentum and the main events are still ahead. Even the St. Petersburg market is far from being saturated.

Competition will play a crucial role in development of cellular communications in the provinces. In Moscow, the market has developed primarily thanks to intense competition between the two major providers (MTS and VimpelCom). As a result, today we have rates that are affordable for millions of Muscovites. Besides, Russia has entered a period of stable economic growth which translates into a growth of people's incomes and their consumption.

TR: Which factors, political or other, hamper development of the telecom market in Russia? Do you think current Russian legislation needs some changes to improve conditions for the market's development?

IT: If you compare Russia with Western Europe, then, of course, Russia's average level of wealth and hence consumption is much lower. In Moscow, it is more-or-less high and comparable to the level of Eastern Europe, but in the rest of the country it is far behind. Of course, this negatively affects market capacity. But I want to repeat that we are witnessing real economic growth in the country and, therefore, capacity of the telecoms market is also growing.

Like other industries, telecoms have been affected by the political risk factor over a long period of time. Of course, all telecom providers without exception need a more clear-cut legal framework for our business. We see some progress in this direction, but we think this progress could be faster. Every business needs clear rules of the game. Another concern is the banks. Unfortunately, the banking system we have today cannot cope with financing such a capital-intensive industry as telecoms in the full measure. Turnover taxes are still too high, which is particularly bad for telecoms and all those specializing in services. At the same time, the government's policy in the field of taxation is becoming clearer.