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Kartel (K-Mobile) GSM Network Expansion, Kazakhstan




Key Data


In May 2005 KaRTel (K-Mobile), one of the largest mobile communications providers in Kazakhstan, and a subsidiary of VimpelCom, awarded a $100m contract to Motorola for the expansion and improvement of its existing GSM Network over a five year period leading up to 2010. The deal includes the purchase of equipment and various services including installation and optimisation of the refurbished system.

Motorola will supply mobility products and solutions that will provide additional coverage on KaRTel’s 900MHz network across the country, to increase its geographical reach and will also upgrade the existing infrastructure with GPRS technology.

"KaRTel hopes the upgrade will enable it to increase subscriber capacity in the face of tough competition from its leading rival GSM Kazakhstan (K-Cell)."

KaRTel hopes this will enable it to increase subscriber capacity in the face of tough competition from its leading rival GSM Kazakhstan (K-Cell). The latter company invested $140m in its network in 2006 and has a subscriber base of 3.3 million.

Commercial deployment of the new network components began in June 2005. Kazakhstan’s current population is a little over 15 million people and network coverage before the KaRTel network expansion is 62%. KaRTel has a subscriber base of 1 million customers and a 31% market share.

The total investment into the KaRTel network over the next five years is likely to be over $230m, including refinancing of loans and infrastructure contracts that have not yet been awarded.

FINANCE FOR THE EXPANSION

Motorola UK is to provide the equipment for the network expansion from its Swindon-based facility. This part of the contract (GSM mobile phone infrastructure equipment and associated software), worth $30m, was underwritten by the Export Credits Guarantee Department (ECGD), the official Export Credit Agency in the UK. ECGD guaranteed a $28m finance facility, made available by Citigroup, to enable KaRTel to purchase equipment under this phase of the network expansion.

Additional security was provided by OJSC VimpelCom, KaRTel’s parent company. The ECGD guarantee enabled Citigroup to give the maximum loan period to KaRTel. KaRTel, which trades under the brand name K-Mobile, has also secured a US$100m loan from the European Bank for Reconstruction and Development (EBRD) to finance network expansion projects and refinance short-term debt.

The EBRD has supported the company’s upgrade plans following its 2005 acquisition by VimpelCom. KaRTel is owned by the Russian operator through Limnotex, a Cypriot company owned by VimpelCom Finance of the Netherlands. The loans will consist of:

  • EBRD US$100mA/B loan where the A-tranche, A-tranche of US$50m five-year senior loan and B-tranche of US$50m three-year loan
  • US$130m of ECA backed vendor provided or arranged financing and internally generated cash, which will finance further new capital investments

KARTEL OPERATION

KaRTel launched Kazakhstan’s second GSM-900 network in the city of Karaganda in 1999 and provides services under the brand names Beeline, K- Mobile and Excess. In April 2006, an agreement was struck allowing SMS exchange between the subscribers of K Cell/Activ and Beeline/K-Mobile.

"The total investment into the KaRTel network over the next five years is likely to be over $230m."

Dmitry Kromski, General Director of KarTel, said: "This event is a long-awaited one, both for our and GSM Kazakhstan subscribers. We are glad that our initiative has found understanding from partners and we have got such positive SMS-news.

"I hope the possibility of SMS exchange will find lots of excitement, convenience and comfort with subscribers of both networks."

There seems to be a good relationship between the two Kazakhstan mobile providers and they have said in a joint statement: "GSM Kazakhstan and KarTel will further put all efforts to provide best conditions and quality service to their subscribers."

MOBILE MULTIMEDIA SERVICE CENTER (MMSC)

EyeLine Communication’s subsidiary in Russia, Sibinco LLC, has deployed its Mobile Multimedia Service Center (MMSC) for KaRTel. MMC is connected to the network to provide subscribers with an opportunity to order images, ringtones, games, video and music for their mobile phones or to get text information on request.

The system is based on standard technologies such as SMPP, Java, and XML, and was deployed on an Intel platform with OS Linux/Solaris. Content provider X-Gate (Kazakhstan) uses MMC to deliver modern mobile services to KaRTel subscribers.