http://www.themoscowtimes.com/stories/2006/06/30/014.htmlAll incoming calls to cell phones will be free starting this weekend, but cell phone users will have little to celebrate because their monthly bills are expected to stay about the same.
In addition, people calling cell phone numbers from home or the office will be charged 1.50 rubles (5 cents) per minute. The calls were previously free.
While 5 cents per minute is a significant discount from the 10 to 20 cents currently paid by cell phone users for incoming calls, cellular providers are expected to start adding hidden charges that will gradually cancel out these savings in the coming months.
The changes begin Saturday as legislation known as the Calling Party Pays protocol comes into force. The reform will bring Russia in line with many European countries.
All three main cellular providers -- MTS, VimpelCom's Beeline and MegaFon -- are stressing that their fees will not shoot up from Saturday. VimpelCom, for one, intends to spend July studying the effect of the change and reviewing possible ways to boost income, a company spokeswoman said.
She said VimpelCom and other providers might raise monthly charges and introduce connection fees to recoup lost revenue.
Reimbursement from fixed-line operators, such as MGTS, will cover about two-thirds of the costs of carrying a call, and the three providers are expected to lose a combined $84 million in July alone.
Cell phone users will probably see the cost of their outgoing calls jump by at least 15 percent, said Yelena Bazhenova, an analyst with Aton.
"It is impossible for prices not to grow. These companies cannot allow themselves to simply lose money," she said.
Raising prices, however, comes with the risk of angering customers.
"Mobile operators will have to increase prices, but they can't do this openly or their customers will be very upset," said Yevgeny Golosnoi, an analyst with Troika Dialog. "People are used to prices going down, not up."
Instead, operators will quietly pad prices in ways that they hope will fall below users' radars, he said.
One way of doing this is by introducing the connection charge mentioned by VimpelCom. Such a charge was introduced in Ukraine when it switched to free incoming calls three years ago.
Another strategy would be to move from per-second pricing to rounding charges up to the nearest minute to get a few extra rubles from customers.
A third way to increase revenues without upsetting customers would be to gradually introduce new calling packages, where increased costs are played down, and discontinue existing ones.
"When they say there will be no hike in charges, they mean there will be no growth in the costs of current plans," Bazhenova said.
In an apparently pre-emptive move, cellular providers recently changed their billing fees from dollars to rubles at a rate about 8 percent above the Central Bank's official exchange rate.
While providers have been telling customers that they can only gain from Saturday's change, they have been warning investors of falling incomes and lower profit margins due mainly to over-regulation.
"The less meddling from the regulators, the better. This is a particularly good example that badly affects the economics of the industry as it works in its current form," VimpelCom general director Alexander Isosimov told an investment forum earlier this month.
Many on the market see the move as aimed at helping out fixed-line operators at the expense of their mobile rivals. Fixed-line operators' profit margins float near 30 percent, while mobile operators' margins can reach 50 percent.
