Interesting article on PLD Telekom [ROS references]
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Tstar of all the Russias
From humble beginnings, PLD Telekom has quickly grown to
become the major full-service telecomms provider in both
Russia and Kazakhstan. Gordon Feller and Vineeta Shetty track
the success of an important new player in the CIS
For a start-up company in the Russian city of
St Petersburg, PLD Telekom has come a long
way in a short time. From small beginnings just
four years ago, the company has grown
rapidly to become a full-service telecomms
operator with revenues in excess of US$100
million. Now, having formed a strategic
partnership with the worldwide
media/communications conglomerate, News
Corporation, PLD Telekom is poised for
further growth. News America, a
wholly-owned subsidiary of News Corporation, will acquire a 38% interest in
PLD Telekom, and is negotiating to sell half of this shareholding to a major
Russian industrial conglomerate, LogoVAZ. In company with News
Corporation, PLD will develop communications and media services across
Russia and the Confederation of Independent States (CIS). In comparison with
the incumbent telecomms operators in Russia, PLD is responsive, fast-moving
and customer-centric. Alexander Kazbegi, a London-based analyst with
Salomon Smith Barney, told CI that the company's revenues (which have
increased by more than 50% over the past three years) will continue to grow by
some 36% per year until 2000.
PLD owes its good results to the successful mix of companies that make
up the group. These are:
PeterStar, PLD Telekom's 71%-owned subsidiary, which operates a
fully digital 540km fibre optic network in St Petersburg and provides local
services to business and residential users.
Technocom, an 80%-owned holding company for PLD's ventures outside
St Petersburg. It has been rolling out a national satellite-based telecomms
network through a 49%-owned joint venture in Moscow, Teleport-TP.
BECET, PLD Telekom's venture in Kazakhstan, is the sole provider of
cellular services in that country.
Baltic Communications Limited, which PLD acquired in April 1996, is
a premium international operator offering a range of services from
international direct dial, through to payphones and private line telecomms
for businesses.
PLD will also become 50% owner of Belcel, which provides the only
national cellular service in the Republic of Belarus.
St Petersburg Yellow Pages, which is 100% owned by PLD, claims to
be the oldest (and only) directory in St. Petersburg to show year-on-year
increases in customers and revenues.
The jewel in PLD's crown is PeterStar, which made $54.5 million in 1997 while
still managing to provide free local calls to residential customers and reduce
long-distance and international tariffs. PLD pumped much of the $17 million
proceeds from the sell-off of SpMMT, an international and long-distance switch
operator, into PeterStar, giving the local operator an additional boost.
Primarily, PeterStar serves business customers, but all three cellular operators in
the city also rely on PeterStar to carry their traffic. By the end of last year, of the
114,774 lines commissioned by PeterStar on its 28 switches 85,948 were
provided to cellular operators. In fact, demand for PeterStar's services
necessitated an upgrade of the network's core network capacity from STM-4 to
STM-16. Some 14,000 new lines, eight new switches and 250km of fibre will
be added this year. PeterStar is particularly proud that a four-fold increase in
capacity was implemented with no service interruptions.
No man is an island
PeterStar is also upgrading about 30,000 business and residential lines on
Vassilyevski Island, in the heart of St Petersburg. The company is connecting
lines to its digital fibre optic network and replacing outdated switches and, by the
end of the year, it is expected that waiting lists, a persistent legacy of the old
Soviet system, will, at last, be a thing of the past.
One of the few hurdles to PeterStar's continued expansion -the ability to connect
customers in outlying areas -has been partly overcome thanks to the introduction
of wireless technology and some new 15,000 customers will have network
access by the end of the year. PeterStar has also introduced ISDN services
which permit the simultaneous transmission of voice, data, video and still images.
Such capability enhances the videoconferencing, Internet and computer network
facilities offered to PeterStar's largely business audience.
PeterStar also offers a level of customer service light -years ahead of what
prevailed in Communist times. More than 50% of the company's staff is
dedicated to customer service and enquiries and PeterStar maintains a
sophisticated 24-hours-a-day call centre which provides fast and accurate
responses to customer queries and requests for new lines and additional services.
This service is assisted and augmented by the latest in computer/telephone
integration whereby customers can instantly access their account histories.
PeterStar's products and services include customer billing reports, calling cards
and Internet access. It also supplies turnkey solutions based on fibre optic
connectivity, telephony equipment provision and managed data services, all
provided on an ad hoc basis.
PeterStar works closely with its sister company, Baltic Communications Ltd
(BCL), which is a dedicated international carrier with just 1,200 lines. Baltic
Communications too has recently completed a major project to expand its
capability for enhanced products and services, including the provision of national
and international ISDN services.
Last year, increased demand for BCL's services necessitated the establishment
of a new link to the UK, which was installed in partnership with Cable &
Wireless Communications (C&WC). New routes were also opened with
long-time partner Telia, of Sweden, and Lattelekom in Latvia, in addition to
BCL's existing operating agreements with Telecom Finland, Norway's Telenor
and TeleDenmark.
BCL has also extended its coverage, establishing a new dedicated international
network in Vyborg, an historic city on the Finnish border 120km north-west of
St Petersburg.
Elsewhere, BECET International, PLD's monopoly cellular company in
Kazakhstan, has increased its subscribers by 60% (subscriber numbers now
stand at 11,120) and revenues have grown to more than $30 million as the
company has expanded coverage to take in a total of 12 cities.
BECET is also about to launch a "pre-paid" service which will allow a much
wider cross-section of the population to have access to mobile telephony through
reduction of the high set-up costs generally associated with cellular.
Meanwhile, Moscow-based Teleport-TP is central to PLD's pan-Russian
ambitions. A fully-meshed satellite-based network, using DAMA stations from
Scientific Atlanta, is planned. However, Teleport's strategy is to complement
rather than directly to compete with long-distance operator Rostelecom. The
company will connect areas where economic growth has created new demand
and where Rostelecom has only an installed base of old-fashioned analogue lines
or perhaps no market presence at all. Up to 45 new sites will be made
operational this year, although Alexander Kazbegi admits there have been
problems both with the delivery of new equipment and the signing of contracts
with new customers.
Regional operations
To further differentiate itself from Rostelecom, PLD is directing efforts at
intra-regional communications. One of the first to benefit is the Republic of
Sakha (Yakutia). Here, Teleport-TP is installing a regional network connecting
the cities of Mirniy, Neryungri and Yakutsk. Teleport-TP's acquisition last year
of a 25% stake in the local GSM cellular operator, Gorizont-RT, has
strengthened its presence in the region. By the end of last year, 1,000 customers
had been signed up, generating $180,000 in revenues per month. Long-distance
traffic from mobile callers is also being carried on the Teleport-TP satellite-based
network, and roaming agreements are being established with other GSM
operators across Russia.
Other intra-regional networks are centred on Sverdlosk in the Ekaterinburg
region, (where traffic is carried between 13 cities), in Chita in eastern Siberia and
in Kuznetski.
Teleport-TP is also one of the largest international carriers in Russia, with 1,200
international circuits to 27 operators in 24 countries. It has a contract this year to
upgrade (with Ericsson switches) the national and international switching facilities
at Teleport-TP's Moscow hub.
Much of PLD Telekom's success is down to the strength and experience of the
company's management team and personnel. An understanding of existing
networks and systems and familiarity with the unique local business environment
are also key. The executive and financial management of the company is now
based in New York City in the US, which is where the company's advisers and
investors are based. International operations are run from London and local
management is sited in Russia and Kazakhstan.
PLD Telekom also draws strengths from its relationships with local, regional and
national business partners in Russia. In St Petersburg, PeterStar's network is fully
interconnected to the local analogue network of Petersburg Telephone Network
(PTN), which is also a 29% shareholder in PeterStar via a joint venture.
Meanwhile, Rostelecom, the main long-distance and international carrier in
Russia, is a 44% shareholder in Teleport-TP, and its general director Oleg Belov
is on the Teleport-TP board of directors. Rostelecom is Teleport-TP's largest
customer for international services. Meanwhile, in Kazakhstan, the state-owned
national operator, Kazakhtelecom, holds a 50% stake in BECET International.
PLD's chairman and chief executive James Hatt told CI that the addition of
News Corporation as an active shareholder in PLD was extremely welcome at
such a critical stage in the convergence of the Russian market. With its
world-class fibre optic and satellite systems already in place, "PLD presents
News Corporation with a perfect base from which to build its media strategy in
this key growth market," said Hatt. More announcements are expected as the
new partnerships develop.
PLD Telekom also aims to maintain a close working relationship with its former
major shareholder, C&W in the UK, which still holds a 31% stake. However,
industry observers expressed surprise when C&W opted to provide its global
multinational customers with a frame relay service in Moscow through PLD's
rivals, Sovintel and Sovam Teleport.
A merger in Leningrad Oblast's telecomms industry?
Svyazinvest has requested regional telecomms managers to study the
possibilities of a merger of St Petersburg Telephone, St Petersburg LDI,
Lensvyaz, and St Petersburg Telegraph. Inevitably the news gave rise to
rumours of an imminent merger, and Svyazinvest, which has much improved its
public relations apparatus as of late, was quick to respond that the holding has
issued no such directive. However, deputy director Sergei Chizhov admitted
to CI that the idea of such a merger existed. Presumably the creation of a
mega-provider in Russia's second most populous region would be
cost-effective and makes common sense from a financial standpoint.
The idea of merging regional telecomms providers has been mooted for some
time. As big as Russia is, many argue that it does not need 90 different
providers, and could use some economies of scale. Svyazinvest officials have
openly discussed such mergers, although given the providers' regional
affiliation, it will be extremely difficult to carry out a merger in practice. The
political fallout could be quite dramatic in some regions.
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