In a landmark deal in the land of the tsars, U.S. search giant Google (Nasdaq: GOOG) has signed its first-ever collaboration with a Russian mobile phone company. As announced last week, Russia's VimpelCom (NYSE: VIP) will begin using Google's technology to permit VimpelCom customers to search the Internet on their mobile phones via Wireless Application Protocol.
Although Google has similar partnerships already established with mobile phone providers in Western Europe (for example, Deutsche Telekom's (NYSE: DT) T-Mobile, Vodafone (NYSE: VOD) in the U.K., and Telefonica (NYSE: TEF) in Spain), this will be Google's first partnership with a Russian phone provider. However, according to Google, the deal is not exclusive and Google may well partner with VimpelCom rivals such as Mobile Telesystems (NYSE: MBT) in the future.
This prospect doesn't upset VimpelCom, which claims its partnership with Google isn't aimed so much at stealing customers from its rivals as in convincing its own customers to use higher valued-added services. According to Bloomberg, the Russian market for mobile phone service is fast approaching the saturation point. And really, if you believe the customer acquisition rates being declared by VimpelCom and Mobile Telesystems, it's easy to see why Bloomberg would think this. No matter how large the country, subscriber counts can increase at more than 50% per annum for only so long before you start to run out of potential customers.
Meanwhile, according to VimpelCom, very few of these mobile phone users are using their phones to the fullest (from the company's profit-motive perspective.) In a story on the Google deal run by Marketwatch last week, VimpelCom chief marketing officer Kent McNeley was quoted as estimating phone-based Internet usage among VimpelCom customers at just 10%. VimpelCom's hope is that its Google partnership will help the company double that usage rate in a few years' time.
So it seems the Russian telecom game is set to change. No longer will it be a simple matter of signing up customers. In the future, the real winners in the Russian mobile phone race will be the companies that can milk their existing customers for the most rubles.
For more on Russia's mobile powerhouses and other global issues, read:
Vodafone is a Motley Fool Inside Value pick. Take the newsletter dedicated to top-shelf stocks at bargain-basement prices for a 30-day free spin.
Fool contributor Rich Smith does not own shares of any company named above.
Terms & Conditions
RSS Headlines
Fool UK