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iPhone Sales in Russia Seen at 3.5M in Two Years

iPhone 3G

Apple expects to sell 3.5 million iPhones in Russia in the next two years, according to market sources familiar with new deals being struck by Russian carriers.

Up to 600,000 iPhones have already flooded into Russia through unauthorized sales, but now at least two carriers have signed an official framework agreement with the manufacturer. One more deal is expected next week, according to analysts and market sources.

A market source told Reuters on Thursday that Mobile TeleSystems (MTS) (NYSE: MBT), Russia's largest carrier, had agreed with Apple to sell iPhones, probably starting in October.

Eldar Murtazin, an analyst with Moscow-based Mobile Research Group, said he had information that MTS was targeting sales of 1 million iPhones within the next two years.

"Total sales by the big three carriers will amount to 3.5 million iPhones within the next two years," Murtazin said, citing sources familiar with the negotiations.

MTS and its key rivals, Vimpelcom (NYSE: VIP) and MegaFon, which are also talking to Apple, declined to comment.

Apple said it aimed to sell 10 million iPhones worldwide this year, though analysts said it would beat its target after its new model, which supports third-generation (3G) high-speed data, sold at a rate of 1 million units in the first weekend.

iPhones have not been sold officially in Russia but have become a status symbol in the Russian capital with handsets brought into the country in suitcases or by courier.

Murtazin said the start of authorized sales is unlikely to trigger a big wave of consumer demand.


Risky for Carriers

Carriers are expected to buy the iPhone from Apple (NASDAQ: AAPL) for $399 and sell for $990, Murtazin said, well below the price at which the gadget is currently offered by unauthorized dealers but above a minimum price at which the iPhone can be bought abroad.

Murtazin said operators had been unable to obtain commitments on volume from the independent retailers who sell phones on their behalf.

[cob:Special_Report]"This number [3.5 million] could turn out to be inflated ... The operators could lose money because they took all risks upon themselves having failed to dictate terms to retail chains through which they will sell the iPhones," said Murtazin.

Ivan Shuvalov, analyst at Alfa Bank (NASDAQ: ALFA), said the Russian operators could fail to meet the sales target and lose money if the price proves to be too high.

But if Russian consumers are willing to buy at that price, operators will win because smartphones stimulate subscribers to use more value-added services such as mobile Internet and data transmission, Shuvalov said.

Russian operators get the bulk of their revenues from voice traffic, with a much smaller share of value-added data services than Western operators.