UMC To Adopt Parent Company Brand

KIEV, Ukraine -- Ukraine’s second largest provider of mobile phone services, Ukrainian Mobile Communications (UMC), is adopting the brand of its Russian parent company, Mobile Telesystems (MTS), rounding off a string of similar re-branding campaigns by MTS in other CIS countries where it has subsidiaries.

Mobile Telesystems (MTS) website

The re-branding plans are being unleashed amid growing competition and sharp growth in Ukraine’s mobile phone service business.

UMC, Ukraine’s first mobile services provider, which MTS took control of in 2002, will undergo re-branding in the second quarter of this year, according to Irina Osadchaya, head of media relations at MTS.

Osadchaya wouldn’t disclose whether the UMC logo would change or how much the company planned to spend on the re-branding.

The overall cost of MTS’s re-branding in Russia was about $4 million, she said.

“In Russia we went through the complete classical way of business re-branding, starting from a change of the logo and visual style to modifying our service channels (call centers and stores) and launching new attractive tariffs.”

MTS has re-branded its subsidiaries in Turkmenistan, Belarus and Uzbekistan, and now it is Ukraine’s turn.

“UMC has changed and we need to change not only the logotype, but the philosophy of the company.”

In addition to re-branding UMC, MTS will introduce new brands, such as ECOTEL for “value-conscious users.”

UMC, which currently offers UMC, UMC Business, Jeans and SIM-SIM, reported $125 million in profit for the third quarter of 2006.

MTS is the largest mobile operator in Eastern Europe, boasting a total of more than 72 million subscribers.

A Feb. 2 report by Bloomberg quoted MTS CEO Leonid Melamed as saying, “We have to take up the challenge of globalization of the telecommunications market and remain competitive. We are going to study the possibility of non-organic growth, primarily in the CIS.”

According to the agency, Melamed said MTS was actively looking to either buy assets or start new operations in all countries of the Commonwealth of Independent States.

Irina Astafeva, an analyst for Moscow-based telecommunications consultancy J’son & Partners, said there are several reasons why MTS would want to re-brand UMC.

First, “there is no sense in maintaining different brands in different countries that are so geographically and culturally close,” she said.

Second, “the UMC brand wasn’t very innovative in the first place. The market is growing and thus something new is required.”

And last, according to Astafeva, a new brand gives a company a chance to reposition itself and thus expand its subscriber base in services such as roaming.

Astafeva said that compared with Russia, MTS’s re-branding in Ukraine “would definitely be cheaper: you don’t have to re-invent the wheel.”

UMC’s main competitor in Ukraine, market leader Kyivstar, with more than 22 million subscribers, underwent similar changes last spring, including a new logotype, a revamped company philosophy and repositioning, according to Kyivstar spokesperson Zhanna Revnova.

“The market has matured. It has changed over the last several years, and we needed to change as well,” she said.

Revnova said Kyivstar had been planning its “restyling” long in advance and that the process is continuing.

Sharp growth

The re-branding plans of Kyivstar and UMC follow the sharp advance of smaller competitors with flashy new brands onto Ukraine’s fast-growing mobile telephony business.

Russia’s Vimpelcom last year launched its Beeline brand in Ukraine; Astelit, co-owned by Turkey’s Turkcell and Ukrainian tycoon Rinat Akhmetov, has for several years pushed its Life:) brand.

While relatively small, the subscriber bases of both companies have risen sharply as of late, posing a challenge to market leaders UMC and Kyivstar.

Kyivstar is 43.5 percent owned by Russia’s Alfa Group and 56.6 percent owned by Norway’s Telenor. Both are the principle shareholders in Vimpelcom, MTS’s main rival in Russia.

According to Kyiv-based investment bank Dragon Capital, telecom revenues in Ukraine grew 23 percent year-on-year in 2006. Traditionally, the fastest growing segment is mobile communications.

However, the 2006 growth rate in this sector was 38 percent in 2006, down from 53 percent year-on-year in 2005 and 147 percent in 2004.

Source: Kyiv Post