The Russia Journal

Vimpelcom, a major Russian mobile telephone company, is not paying too dear a price for acquiring new subscribers in its new marketing campaign, analysts said.

In October, Vimpelcom launched an ambitious promotion program, subsidizing sales of mobile phones to customers. The company has already added 100,000 subscribers since the end of September, expanding its customer base by 50 percent.

"Vimpelcom is obviously acquiring new customers inexpensively," United Financial Group said in a research note. UFG telecommunications analyst Ari Krel said in the note that Vimpelcom is effectively paying $47 for each new buyer of its subsidized phones. "Deutsche Telecom's purchase of stakes in Hungarian operators valued each subscriber at around $2,000."

"The critical issue is what sort of revenue these customers will generate," UFG said, adding that many new customers might have bought the handset out of a sense of "novelty."

The major indication of profitability of each customer - "average revenue per unit" was down more than 20 percent in the third quarter to $96. It's hard to imagine that it could be much over $75 in the fourth quarter, when the impact of the growth in lower-income subscribers will start to appear, Andrei Braginsky, a telecommunications analyst with Renaissance capital suggested.

Vimpelcom announced last week that the company had $2.6 million losses on revenues of $56.9 million for the third quarter of 1999. The losses could continue through at least the first quarter of 2000, some analysts suggested.

The company announced that the number of subscribers by mid-December was about 300,000, and Andrei Braginsky from Renaissance Capital estimates that the company could add 60,000 more subscribers on the back of the traditional holiday shopping spree.