Comstar buys Penza, plans for convergence

Russian service provider Comstar UTS has completed a deal for its regional service provider Penza Telecom for RUB630m (€16.3m). Russia’s anti-monopoly authority has cleared the deal, under the terms of which Comstar assumes RUB48m of Penza debt. At the end of the first quarter of this year Penza had 42,000 pay-TV customers across the Russian cities of Penza and Zarechny in the Volga region.

Comstar said it will update the network and launch new TV and triple play packages. “As in the other cities where we operate, we will modernise the fixed line networks in both Penza and Zarechny, launch convergent service offerings and introduce new tariff plans,” said Viktor Koresh, vice-president for regional development at Comstar. “We believe there will be a high level of demand for our new services in this region.”

The move is the latest in a series of acquisitions for Comstar, in line with its overall strategy for the Russian regions. At a recent analyst conference call on the company’s first-quarter results, Sergey Pridantsev, Comstar’s CEO, highlighted a three-pronged strategy. The company plans, in the first instance, to develop a converged offer for its Moscow networks with mobile operator and sister company MTS, and to phase out its existing Comstar and Stream-TV brands in favour of a ‘converged’ MTS brand. Comstar and MTS have already developed bundled product offerings, with discounts on single product offers.

The second prong for Comstar is to modernise its existing fixed-line networks and to enter new markets in the Russian regions by acquisition, with the aim of covering 200 Russian cities with populations over 100,000 over the next two years. At the end of April, the company completed the acquisition of 16 regional operators in a number of major cities across Russia, which in turn followed the February acquisition of Yaroslavl operator Tenzor Telecom. (The third pillar of Comstar’s strategy is the consolidation of ownership with Moscow city network provider MGTS.) Comstar is currently the leading pay-TV provider in the Russian regions, with a 21% market share, with a somewhat smaller share of the broadband pie.

While Comstar has seen a decline recently in premium broadband subscribers in Moscow, some of whom have traded downwards to a more basic broadband service, Pridantsev said he believed that the path to growth in the face of a maturing and competitive broadband market is to offer bundled services and to consolidate these around a single brand.