MegaFon Campaign Falls Foul of Anti-Monopoly Service

The Federal Anti-Monopoly Service is looking into the mass distribution of SIM cards after taking issue with MegaFon for connecting anonymous users to its Skazka service plan.

The service's Arkhangelsk branch found MegaFon in violation of anti-monopoly law, according to a statement on the Federal Anti-Monopoly Service's web site. The case was investigated following a complaint from rival Mobile TeleSystems, which said MegaFon was selling pre-activated SIM cards for 99 rubles ($3.2) without signing service agreements with customers.

According to the complaint, buyers were initially only required to make their payment and were given a full 10 days to visit a MegaFon office with their passport and SIM card to sign the service contract.

The service ruled that MegaFon was using a simplified sales procedure for the SIM cards, which gave it an advantage over competitors. Additionally, the company violated the law on communications, which requires that a service contract be signed before a customer can be connected.

MegaFon, however, made it possible for anonymous users to access mobile networks, the service said. Its Arkhangelsk branch warned MegaFon not to let it happen again and is now deciding whether to open a case into administrative violations.

A spokesman for the service would not say whether it was planning similar checks in other regions.

MegaFon spokeswoman Lyudmila Ignatyeva said the company disagreed with the anti-monopoly service and that it would contest any fines.

Selling SIM cards without a contract also violates the rules on mobile communications and the terms of operators' licenses, said Mikhail Vorobyov, an adviser to the director of the Federal Communications and Mass Media Inspection Service.

The watchdog typically uncovers such violations during checks after complaints from individuals, Vorobyov said. The offender is ordered to correct the violations and fined 15 to 20 times the minimum monthly wage, currently 4,330 rubles ($143), or 300 to 400 times for companies.

Vorobyov declined to comment on which regions had the highest number of free SIM cards distributed.

But a Vedomosti reporter found that all three of the largest mobile operators — MTS, VimpelCom and MegaFon — are openly selling pre-activated cards on Moscow streets without any documentation required.

Spokespeople for the three companies said it appeared that the SIM cards were being offered by subdealers, and that the companies themselves were not breaking the law.

Operators frequently hand over activated contracts to dealers, who are required to conclude the agreements for them and then hand over information about the subscriber, said VimpelCom spokeswoman Ksenia Korneyeva. If it turns out that the information is inaccurate, the dealers are sanctioned, she said.

According to data from AC&M-Consulting, the penetration level for cell phones is 143 percent in Russia, although operators continue to build up their client bases. In Ukraine, the companies have for three years been reducing their client count on paper, said Anton Pogrebinsky, a partner at AC&M-Consulting. He said the process should begin in Russia, where the real penetration level is about 80 percent to 85 percent.