Research: Internationalization of Russian Telecommunication Companies Vimpelcom and Rostelecom

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Elisa Tilley
International Business Strategy
March 14, 2013
VIMPELCOM
VimpelCom provides voice and data services through a range of wireless, fixed, and broadband technologies under the "Beeline", "Kyivstar", "djuice", “Wind”, "Infostrada" “Mobilink”, “Leo”, “banglalink”, “Telecel”, and “Djezzy” brands. The company is listed as an ADS on the New York Stock Exchange under the symbol "VIP". The company operates in Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, Kyrgyzstan, Cambodia, Laos, Algeria, Bangladesh, Pakistan, Burundi, Zimbabwe, Central African Republic, Italy and Canada, with 214 million mobile subscribers worldwide.

HISTORY
VimpelCom was founded by the Russian scientist Dr. Dmitri B. Zimin and the American entreprenuer Augie K. Fabela II in 1992 in Moscow. Mr. Fabela first visited Russia in 1991 where he saw the significant opportunity for wireless. Inspired to do what everyone said couldn't be done, Mr. Fabela and Dr. Zimin set out to accomplish their vision of bringing basic wireless communications to Russia. In 1993, VimpelCom launched its first commercial network, a five base station system in Moscow, limiting sales to only 1,000 mobile phones in order to ensure quality of service. In the mobile communications industry, VimpelCom thus operated as a first mover in Russia. The brand “Beeline”, which was intended to differentiate the company as a youthful and fun company, rather than a technical company, was introduced in late 1993. VimpelCom was the first Russian company to list its shared on the New York Stock Exchange in 1996, which helped to attract foreign investment. In 1998, the Norwegian communication company Telenor purchased 25 percent + 1 voting shares of VimpelCom for US$162 million.

INTERNATIONALIZATION
|Country |Kazahstan | |Year of entry |2004, 2008 | |Industry/ business area |telecommunication | |Entry mode |Acquisition of the control shareholding of KaR-Tel, a wireless operator in Kazahstan. The | | |price for this acquisition was US$350 million and the company also took over KaR-Tel’s debt | | |of US$75 million. In 2008, VimpelCom acquired a 24.9% share of the Cyprian offshore company | | |Limnotex Developments Limited, which owned 100% of KaR-Tel. Thus, VimpelCom has increased its| | |share in the Kazakh subsidiary to 74.9%. The rest 25.1% belongs to the Kazakh ATFBank. | |Motives |Just like VimpelComs competitors, the company saw chances in expanding to the CIS countries. | | |Market penetration of mobile communication services was very low in those areas. They chose | | |growth by acquisition, because it is an easy way to enter new markets without having troubles| | |with licenses. | |Firm specific advantages used on the foreign |Beeline was one of the main mobile operators in Russia and therefore had a good reputation. | |market |It worked with modern technologies in providing people with mobile telecommunication and | | |other services. VimpelCom was able to raise foreign funds via stocks traded on the New York | |...
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