Belarus Telecommunications Report 2013

BMI View: The Belarusian telecoms sector remains underdeveloped compared to the majority of marketsin Central and Eastern Europe. Furthermore, development remains hamstrung by the extent of stateownership of key players in the market, including wireline incumbent Beltelecom and mobile marketleader MTS Belarus. The state's control of backbone infrastructure has also stymied development of thevalue added services sector. However, there are signs of liberalisation, such as the ongoing effort todivest the government stake in MTS, as well as infrastructure investment by the incumbent - including theexpansion of international gateways and the roll-out of FTTH networks. If momentum towardsliberalisation accelerates, the Belarusian market holds among the greatest potential in the regionconsidering the strong consumer outlook over the medium term.

Key data

Mobile subscriptions contracted y-o-y to Q312, with a net loss of 420,000 subscriptions, as thepenetration rate declined to 114.3%. This was the result of extensive subscription discounting byTurkcell owned BeST and was the first y-o-y decline to have occurred in the mobile market.

Fixed-line subscriptions declined for the first time in 2011, after a decade of growth asBeltelecom expanded its network. Subscriptions declined by 1% in 2011 as a consequence ofmarket saturation, but also the economic crisis.

Key Trends And Developments

As already noted above, ownership issues remain central in Belarus. The government has persisted withattempts to sell its 51% stake in MTS Belarus. However it is unwilling to compromise on the US$1bnasking price - a fact that has deterred investors since 2011. However, in October 2012 it was announcedthe government would make another presentation to potential buyers in early November 2012. In lateNovember 2012 it was reported that the majority of investors had baulked at the US$1bn asking price,including MTS (which did not attend the presentation). However, local Kazakh investors retained interest.

Meanwhile, in June 2012 Yota Bel closed its LTE-based mobile broadband network in Belarus after justsix months of operations, with its parent company Scartel citing a need to focus its energies on its coreRussian market. Yota Bel launched limited LTE services in Minsk and Grodno in December 2011 andbegan commercial operations in May 2012. A brief statement on Scartel's Russian website in early June2012 informed its subscribers that the network would be switched off on June 11 and refunds would beissued.