Vodafone is understood to have clinched a strategic partnership with Mobile TeleSystems, the largest mobile phone operator in Russia, as it searches for growth in emerging markets.
The deal, which Moscow-based MTS is expected to announce this morning, will see Vodafone sign up MTS as a "partner network" to bring a range of Vodafone services into Russia and other countries including Ukraine and Belarus.
MTS and its subsidiaries have more than 87 million customers in Russia, Armenia, Belarus, Turkmenistan, Ukraine and Uzbekistan, out of a total population of more than 230 million.
MTS has been listed in New York for the past eight years and is majority-owned by billionaire Vladimir Yevtushenkov's Sistema conglomerate. Vodafone is not expected to take an equity stake in the firm. Neither Vodafone nor MTS would comment on the move.
The deal will provide reassurance for western companies who have become concerned about doing business in Russia after the political interference that forced BP into a major restructuring of its BP-TNK joint venture and the Kremlin's incursion into Georgia.
In July, Vodafone admitted that some of its core markets such as Spain and the UK were becoming challenging because of the worsening economic climate. The company will announce its half-year results on November 11 and the management is expected to deliver a gloomy prognosis for Vodafone's core European businesses and to announce another round of cost cuts.
To try to make up the slack, the company recently restructured its management to focus on emerging markets. It has already made acquisitions in India, Turkey and Ghana and recently strengthened its position in South Africa by acquiring control of the country's largest cellular phone operator, Vodacom.
Yesterday, Vodafone announced plans to increase its stake in Poland's telecoms operator Polkomtel by 4.8% to 24.4%, for €176m (£140m).
It has also made extensive use of partnerships. It has more than 40 network partners across the world and has used them to expand eastwards in Europe. It has partner networks in Slovenia, Croatia, Macedonia, Serbia, Lithuania, Latvia and Estonia. Under the terms of these agreements, Vodafone and its partners cooperate in the development of global services under dual brand logos. Services in Russia are expected to be marketed under the MTS-Vodafone logo.
