MTS hacks into cybercrime for app skills

Russia’s MTS mobile phone company is seeking to create the country’s first market for mobile phone applications with a little help from an unorthodox supplier: Russia’s considerable community of computer hackers.

Inspired by the success of Apple iTunes’ lively app market, aimed at users of the iPhone and iPad, MTS, the largest Russian mobile phone provider, has joined forces with Vodafone and other global telecoms groups to create a common app standard, offering would be designers access to their customer bases.

MTS will also host town-hall style meetings across Russia and internationally, hoping to interest Russian language programmers from London to Novosibirsk in writing for the Vodafone 360 app store. Russia produces 70,000 computer programming graduates a year but a notorious minority join the shadowy ranks of the hacker community.

Josh Tulgan, head of investor relations with MTS said: “Russia has about 3 per cent of the world’s internet users, but seemingly a much larger share of the world’s hackers, spammers and cybercrime. One benefit [of our efforts] may be the creation of more legitimate opportunities for this abundance of talent.”

The company is hoping that 360 will compete with iTunes and Android for the attention of Russian app designers. Pay-outs are not going to be large yet, but by 2013, MTS projects the Russian market for mobile applications and games will be worth $246m.

The new interest in apps is driven by the economics of the mobile phone industry. For much of the past decade, Russia’s mobile phone market has grown at an astounding rate from 2.5m subscribers in 2000 to 216m in 2010, according to AC&M Consulting, a market research firm.


But now that there are about 1.5 mobile subscriptions for every Russian, the growth curve has levelled off. As a result, Russia’s big three networks – MTS, Beeline and Megafon – are scrambling to find ways to keep the existing customers talking, texting and tapping on their phones for longer.

Alexei Reznikovich, chief executive of Altimo, which owns Beeline brand, says the industry is rapidly bumping up against the limits to growth “once everyone has a phone, and everyone talks for 400 minutes a month, then that’s it”, he says. The new frontier is data, which he says in five years will have reversed places with voice services, currently 90 per cent of phone use. “In five years it will be 90 per cent data, 10 per cent voice,” he says.

The hope for many lies in the humble app, which has revolutionised the phone industry since Apple iPhone created a thriving market for developers.

“We’re not so much interested in the money from apps,” said Marc Sommer, products director for MTS. “The idea is to make your phone an even more central part of your life. This will result in higher usage and increased loyalty to the operator,” he said.

For now, the offerings are limited to Russified versions of successful foreign apps. But Mr Sommer said creating a Russian app market is a key thrust of the company’s strategy.

Over the long term, experts predict Russia’s app market is likely to be as unique as its internet is. Russia is one of just a few countries where local internet brands dominate – is the predominant search engine, and Vkontakte and Odnoklassniki are still bigger than Facebook. Russia’s internet users, according to polls, are the biggest users of social networking sites in the world.

The most successful phone app so far is designed is Yandex’s Yandex maps, which shows, and even predicts, traffic jams using feedback from mobile phone users.

Other quirks make Russia a highly unpredictable market. Russians love to install ringback tones on their phones, which is what a caller hears when he calls a mobile number While they are marginal in European and US market, they have a penetration in Russian of about 17 per cent of mobile phone users.

Mr Sommer said the company aims to engage with the Russian programming community over the next year in an effort to get them thinking about designing more Russian applications.

“Whether you’re a professional developer or a high school kid, the aim is to treat everyone equally,” he said. As for hackers, he smiled.

“If you can programme in HTML5 you can design apps. We don’t discriminate.”




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