Jo Lunder, a Norwegian national, was appointed president of VimpelCom – operator of the Bee Line brand – in September 2000. He is also the company's chief operating officer, a position he took up in September 1999.

Lunder had previously held leading positions with Norwegian telecom operator Telenor, one of VimpelCom's major investors. On his appointment at VimpelCom, Lunder introduced new strategies aimed at reaching profitability.

The Russia Journal: VimpelCom recently introduced new strategies. Does that mean there has been a shift in the company's focus?

Jo Lunder: I wouldn't put it like that. I don't think we have changed our strategy. What we're trying to do now is reposition VimpelCom to be seen as a GSM company.

VimpelCom built a very strong and profitable business between 1995 and 1997 using DAMPS standard. A lot of people remember VimpelCom for DAMPS. Over the last few years, there was a shift in technology that made GSM the leading technology, and more advanced services are coming along with GSM technology.

Now, it's extremely important to explain to Russians that we also have a GSM network that can compete with our main competitors. They used to have almost a monopoly on GSM for many years, and for that reason it was very easy for them to build an image of a GSM company.

But now, our network is more or less of the same quality and the same coverage, so the product we're offering to the market is more or less the same. On the growth side, we started to approach the mass market in the second half of 1999 and grew very strongly.

We still believe very much in the mass market. We see that a lot of the growth, a lot of the future revenue will come from the mass market. So we still want to be a major player in the mass market, as we were in 1999. But we see that because we now have a better GSM product, we're ready for the corporate segment, too.

We would like to approach the corporate segment, the heavy users, a bit more aggressively. In 1999, our GSM product was weaker in terms of quality, in terms of coverage, but now the timing is right to approach the corporate sector. We have a real ambition to become a national GSM company with a national GSM footprint, and we're working to find solutions for the regions.

RJ: Are you trying to compete with MTS in number of subscribers?

JL: It's more important for VimpelCom to return to profitability than to have the highest number of subscribers. But that doesn't mean that we're willing to let the mass market get away from us. So, we try to find a balance between returning to profitability and increasing our subscriber base. That's the way it works in business. You always have to choose, you can't have everything. So, right now we're focusing on profitability, but we also see a need to grow. Currently, our market share is about 40 percent, which is fine. If we can defend this position that means we're doing a good job.

RJ: You mentioned profitability as one of VimpelCom's most important goals. Do you have any set date for the company to reach profitability?

JL: No, we haven't set any specific date. A lot of things might happen. You may have a new price war, you may have a war on dealer commissions. A new GSM player is coming to the market next summer. It's probably not correct to give any specific date. What is important for VimpelCom is that we build a strong, healthy company with high quality services and loyal subscribers and customers.

RJ: VimpelCom has recently announced it will work more in Russia's regions. But some experts say that development of GSM networks in the regions is hampered by the low purchasing power of the population. How are you planning to tackle this problem?

JL: We see the situation a little differently. We see at least 40-50 oblasts where we have licenses with high potential. Of course, the purchasing power of the population is lower there than in Moscow or St. Petersburg. But we still believe in growth, and a lot of subscribers are coming to the networks. [Investment in GSM networks] is a long-term investment. You invest a lot of money in the networks and equipment with a payback time of 7-10 years, which is longer than in some other industries. You won't see the same penetration rate as in Moscow in the short term. But in the long term, you can have good penetration rates in the regions as well.

RJ: What, in your opinion, are the peculiarities of Russia's mobile communications market?

JL: In general, I don't think the market is that different from most markets. A lot of the challenges that the company is facing in Russia, and a lot of the opportunities we see, are exactly the same as GSM companies are coping with and looking at in Hungary, Poland, Germany and Italy. But, of course, all business is local and all markets have peculiarities.

The size of Russia is a challenge, not the size of the population but the size of its area. Therefore, you won't see a GSM network that covers all of Russia, like you would see it in the U.K. or in Germany. There will always be areas without GSM coverage because of the size of Russia.

It's also important for growth that the regulatory environment is stable, and foreign investors and shareholders have security and protection. How frequencies are allocated, how licenses are given away is also very important for the industry, and the government understands that.

We also have a situation in Russia when you have to pay to receive mobile phone calls, which is different from Europe, but, on the other hand, you have the same structure in the U.S. This is not a big issue, but it would be good for the industry if we changed it to the "calling-party-pays" model. I think that's probably one or two years into the future.

RJ: In what direction will the mobile communications market move in the future? What will it be like a year from now or two years from now?

JL: If the positive trends that we see in the Russian economy right now persist, I think the mobile market will be a key driver changing the quality of life, the way people work. I think you will see mobile phones as the preferred phones. You will see a tremendous growth in the number of mobile phones in this country. And when we launch higher speed services and add higher capacity to our networks, you will see a lot of people using their mobile phones for much more than just voice and short messages.

You will see people logging on to the Internet on their mobile phones. They will use their phones for payments. We will see the mobile phone turning into a small advanced personal computer. If the government manages to maintain economic growth, the industry will be able to provide people with a lot of useful services.

RJ: Will rates for mobile communication drop further?

JL: That's a kind of development you see in many other markets. When the number of subscribers is growing and more players are coming to the market, prices are also reduced. That will probably take place in this market, too. However, we've had a very strong price decrease in the Moscow market in recent years. Prices were too high, so now they are comparable to those in the rest of Europe. But I don't think we will see such a dramatic price decrease in the next year as we saw in the last year.

RJ: Is it possible that the mobile phone will replace landline services?

JL: No, I think, we will always see a combination of a mobile phone and a landline phone. First of all, landlines will always be ahead of mobiles in terms of speed and capacity. Also, it's a lot cheaper to use a landline phone compared to a mobile phone, which will keep landline services alive for many years.

VIMPELCOM

Business: Mobile telephone service under the Bee Line trademark.

SUBSCRIBERS: 739,000 (End of September).

INCOME: $900,000 operating loss in 3rd quarter vs. $ 1.5 mln in 2nd quarter. Nine-month loss: $5.2 mln (vs. $9.7 mln year ago).

STOCK HISTORY: VimpelCom became the first Russian company to trade on the NYSE in 1996.

STOCK PRICE 52-WK RANGE: $15.35-$53.19 (Current price $15.) NYSE SYMBOL: VIP.

Source: Company information