Can you briefly outline
the key points of Centre Telecom?
Centre Telecom is one of the seven selected Russian
telecommunications companies, which emerged from
the restructuring of a large telecommunications
holding Svyazinvest The super-regional company CenterTelecom
united 17 telecommunications companies of Russia's
central part. Legally the consolidation is completed
on December 1, 2002, and the first meeting of the
consolidated company's shareholders will be held
in the first quarter of next year. The company MGTS
servicing Moscow did not join the consolidated company.
Why? This topic brings up many questions from potential
investors. This was the case at the road show we
organised in London and New York with JP Morgan
earlier this year. The decision on this issue was
taken by owners of the companies involved. In our
opinion there is a positive point in the fact that
MGTS did not join CenterTelecom. Should MGTS join
the holding, all the income earned by it would be
spent to reconstruct our network. I believe that
this could bring changes in the telecommunication
development in the regions, which joined the holding.
Today, the new holding is relatively balanced with
our company from the Moscow region being the largest
one.
We plan to work with corporate clients in Moscow
without the participation of MGTS. I see no problems
in working with Moscow clients and we have certain
agreements in this respect. I have worked for 20
years in MGTS until being the general director for
three years and have kept good relations with them.
The Ministry of Telecommunications estimates
that about 30 billion dollars are needed during
the next ten years to develop telecommunications
in Russia. What are you investing in your seventeen
regions?
We have development plans until 2010 and the figures
are impressive. Our company is the major telecom
company in Russia and one of the largest ones in
Eastern Europe: the annual revenues of our company
are 500 million US dollars and the number of employees
is about 75 000. On the other hand, the territory
of the Central federal district where our company
operates is rather small as compared with the vast
expanses of Siberia where SibirTelecom operates;
with the maximum distance of about 750 Km from one
side of our region to the other. Furthermore our
climate is more moderate, working conditions (meaning
construction of new networks) are more comfortable,
which facilitates efficient work. Lasts but not
least, business is concentrated in the central region
of Russia.
We are often told that we have a long waiting list
for a simple service such as an ordinary telephone
line, but we are working on improving this, as it
is not acceptable that in the 21st century Russian
people do not have a telephone line. On the other
hand, this market is not saturated. It should be
noted, that Russia underwent major political and
economic reforms. Revolutions in any country of
the world, be it the USA, Europe or Russia, bring
a temporary worsening of the population's living
standards. Russia is among the countries that have
suffered most. This is why when presidents of large
investment companies question me about when Russian
tariffs will be brought in line with at least East
European tariffs, I always answer that when the
living standards will correspond, the tariffs will
also. This question is crucial for investors as
they are looking at return on investment.
One of the main goals of telecommunications companies'
consolidation is exactly to improve investor attractiveness
through dramatic improvement of the business efficiency.
We need large investments to build out a modern
infrastructure and to meet the public demand for
traditional and advanced telecommunications services.
Last year, CenterTelecom entered international stock
markets with Level 1 ADRs. We are also tapping domestic
investment resources: we had two bond issues completed
to the total value of over 1,100 million roubles.
It should be stressed that both bond issues were
hugely oversubscribed: the demand was three times
higher than supply.
In 2002 Russian saving bank Sberbank invested over
4 billion roubles in the development of the 7 super-regional
telecommunications companies, including CenterTelecom
on very beneficial terms for the holding.
On the other hand, there is more business to
service in Central Russia. How are you using new
technologies to offer more services and become more
attractive for businesses?
Just now we commissioned for operation a multi-service
network based on the state-of-art technological
solutions- ATM and IP. The equipment was supplied
by Lucent Technologies. The network enables provisioning
of most advanced services to the residential and
business sectors, large enterprises. This should
give momentum to further development of telecommunications
in both the Moscow and the whole Central region.
The company enters the market as a carriers' carrier,
selling its network resources, and will be able
to develop advanced value-aided services, the tariffs
for which will be set by the company itself based
on the market situation and economic viability.
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This is closely linked
with the tariff policy, as virtually all our traditional
telephony tariffs are regulated by the state, since
by the definition of the Ministry of Antimonopoly
Policy we are monopolists.
Concerning mobile business, we are almost out of
it, though we do have some mobile business in some
regions, because today there are three or four players
on this market with whom we can't compete.
In addition to this, we have to work in some rural
areas where we have no competition because rural
communication is not profitable in normal conditions.
However, for us, countryside communication is very
prospective because we do not have any competition
there and the market is very large. We cooperate
with the other six super-regional companies of the
holding Svyazinvest, and with Rostelecom under rules
established by the Law of Telecommunications. We
know our competitors, who are the alternative operators.
Today is a consolidation phase and in a year or
two things will have settled down: there will be
eight major companies on the nationwide scale and
four to five rather large players in each region.
What are you doing to maintain your position
now that competition is entering the market?
First of all, we develop our business - build a
modern infrastructure. We are also streamlining
our marketing policy, using our competitive advantages.
We work seriously with securities to raise money
for our investments. We plan to go out to the NYSE
again with depositary receipts of the second level.
It is also easier for us to compete as we take joint
decisions within Svyazinvest for important technical
or financial issues.
You are looking at attracting international investors.
Are you also looking at developing more partnerships
with foreign companies?
Since I joined this company two years ago, we have
pursued a policy of absolute information openness
and business transparency - this is in effect a
mandatory prerequisite of our activities. By quality
of information disclosure S&P's included CenterTelecom
in the list of Russia's most transparent companies.
I believe this a very important point for international
investors.
We now meet on a regular basis with domestic and
foreign journalists and analysts, publish annual
reports. We participate in international ratings.
For the first time S&P's assigned an international
credit rating to CenterTelecom. We also plan to
take part in corporate governance rating.
Our company's management has also changed: when
I came here the top managers were mostly technical
experts, but today there are appeared many highly
qualified financial specialists, economists, professional
managers and sales experts. Furthermore, the average
age of our employees does not exceed 40 years.
We are still very much concerned with our technical
base and have managed to improve considerably our
network in the Central Region and 40% of it is digital
and corresponds to Western standards versus an average
of 29 to 32 % in other regions.
Moreover our collaboration with international equipment
suppliers as Lucent Technologies, Siemens and Alcatel
is the best promotion we can have.
For us it is now easier to work as we already have
experience of digital networks and can base our
work on these experiences rather than on intuition,
as MGTS has to do. We can pick up the best and most
advanced technologies and move forward. Considering
all this, we offer new services in the Central Region:
Internet access, video conferencing, broadband access,
microwave television, call centres and network management
centres. We now offer the whole scope of existing
services.
Looking ahead, where will you bring Centre Telecom
in ten years from now?
In ten years, I will already have retired, as I
will be 63 years old. In ten years, Centre Telecom
will be the leading player in the fixed communications
market and the company will be absolutely transparent
and attractive for domestic and foreign investors
and the fact that you are interviewing me today
is a step in the right direction.
Our financial indices prove this as well as the
capitalisation of the company increased by 100%.
The attitude of Western investors and our suppliers
is also positive. Our last bond issue is the brightest
example of this. If you visit us next year, you
will see that things will have changed dramatically
as our growth rate is very strong. We have sustained
a growth rate of 30% during the last two years under
my management. This is very interesting and attractive
for investors because in the West the communication
market is if not in a crisis then at least near
to it, but in Russia this market is booming.
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