Outlook

AFK Systema is the largest private sector consumer services company in the CIS. It had a successful $1.6 billion IPO on the London Stock Exchange in February 2006. AFK Systema enjoys a strong market position with strengths ranging from close government connections and broad diversification, to being one of the three major players in the Russian mobile phone market. Russia’s mobile market itself is the largest in Europe and is rapidly growing. The growth before the crisis was in excess of 80%/year in 2006. One of the three major mobile market operators, MTS, is owned at 52.8% by AFK Systema.

Our opinion of AFK Systema is that it is an aggressive company with a well diversified and complex structure with excellent government connections. This company offers good value and growth opportunities as it will most likely enjoy government support in acquiring domestic and foreign competitors in the current crisis. Also, service-oriented industries in general are growing in Russia, still a largely undeveloped market.