* MTS 3G coverage to double to 50 Russian cities by end-2009
* Web portal launched for music, video, games
* Aims to enter fixed-line broadband market this year
By Georgina Prodhan
LONDON, May 1 (Reuters) - Top Russian mobile operator Mobile TeleSystems is making an aggressive push into Web connections and services, hoping to capitalise on low Internet penetration and the weakness of big global brands in Russia.
Chief Commercial Officer Mikhail Gerchuk said the company would double the number of large Russian cities in which it has third-generation mobile networks to 50 by the end of the year, and was looking for chances to enter the fixed-line market.
MTS also sees a chance to dominate an emerging Russian market for mobile content such as music and video -- something that has eluded Western counterparts -- and launched a beta version of an entertainment Web portal, www.omlet.ru, last week.
"We want to become what iTunes is for America," Gerchuk told Reuters in an interview, referring to Apple's online music store, from which more than 6 billion songs have been bought and downloaded since it launched in 2001.
Gerchuk said the relatively low presence in Russia of global brands such as Apple, Google or Amazon would help MTS, which is 53 percent owned by services conglomerate Sistema, in its ambition.
These companies have leveraged their Internet strength to colonise mobile services markets in western Europe and the United States, snatching potential revenue from under the noses of telecoms operators.
Gerchuk said the need to have certain types of bank accounts or credit cards to purchase goods or services from the Internet giants meant they could not easily replicate that success in Russia.
MTS customers, on the other hand, can simply pay phone bills as normal or use prepaid cards to buy content from MTS.
More than 95 percent of Russian mobile phone users pay as they go, Gerchuk said. MTS, with under 90 percent pay-as-you-go, has a higher proportion of contract customers than the average.
WEB VIRGINS
As well as providing lucrative music, games or video, MTS sees huge opportunities in simply connecting people to the Web. Only about one in four Russians has Internet access, and most use dial-up, far slower than broadband.
"We have the opportunity to give many people the chance to access the Internet for the first time," Gerchuk said.
To that end, MTS is rapidly expanding its 3G network coverage and wants to enter the fixed-line market this year, either by buying companies or by building its own. It has already started some pilot projects.
"Acquisition is faster than building for fixed networks, but it has to be profitable," Gerchuk said. MTS plans to invest $1.5 billion in capital expenditures this year, including $450 million to develop infrastructure.
Outside Russia, by far its biggest market, MTS has 3G networks in Armenia and Uzbekistan. The company also has operations in Ukraine, Belarus and Turkmenistan, and has more than 95 million subscribers in total.
Gerchuk said MTS would be interested in any 3G licences that may come up in countries where it is active, as well as any other former-Soviet CIS countries.
MTS has also recently dipped a toe into the Indian market, franchising its brand to Sistema Shyam TeleServices there for a share of revenue, but providing no services itself.
MTS, whose annual sales are about $10 billion, was this week named the world's 71st most powerful brand and the top brand in Russian and eastern Europe in the BRANDZ ranking published by the Financial Times and market research firm Millward Brown.
Gerchuk said MTS would have to monitor the situation in India before deciding whether to enter the market in earnest, and would probably do through acquisition if at all.
"India is a very competitive market, with eight operators," he said. "There's also the possibility of entering the market by acquisition -- probably the better option in a crowded market." (Editing by Andrew Macdonald)