RUSSIAN-GERMAN VENTURE TO CONTROL SMART-CARD MARKET

MOSCOW, May 19 (RIA Novosti) - The Nauchny Center concern and Germany's Giesecke & Devrient GMBH have set up a joint venture that may change the face of the Russian smart card market, Business and Vedomosti, daily business newspapers, reported. This joint venture plans to issue 10 million SIM cards in 2006 and to control one-third of the smart card market in two years. SIM cards account for 90 percent of this market.

The joint venture's production facilities will be in Zelenograd, on the outskirts of Moscow. The Nauchny Center, a subsidiary of the Sistema financial corporation, owns 65% of the venture's shares.

"Neither partner can make any important decision concerning joint-venture operations," Nauchny Center (KNTS) General Director Alexander Goncharuk said. Both partners want to channel �20 million into this venture by next summer.

The joint venture will turn out all types of smart cards, prioritizing SIM cards during the first year. This market has an annual volume of 80-100 million SIM cards.

The first SIM cards will be produced this November. The joint venture plans to make 10 million SIM cards for the Russian market in 2006.

Giesecke & Devrient sold just five million SIM cards last year. Alexander Goncharuk and Franz Haniel, member of the Giesecke & Devrient board, think that annual sales could reach �100 million within the next two years. The venture will control about 30 percent of the Russian smart card market.

Market players agree that MTS, a major Russian cell-phone operator, could become one of the new joint venture's main clients. Just like KNTS, MTS is affiliated with Sistema. However, the Russian-German joint venture will face numerous problems.

"The smart-card market is filled to capacity. Its segments have already been divided," a smart-card factory official said.

Yelena Sayapina, an analyst with ACM-Consulting, believes that SIM cards will soon become less popular because of the saturated cell-phone market.

The Sistema financial company is the largest private service-sector entity in Russia and the CIS. It manages leading companies inside rapidly growing service-sector segments.

Giesecke & Devrient develops and produces smart cards, as well as smart card system options and solutions.