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1 Oct, 2008 09:59

Big Che’s empire to collapse?

Big Che’s empire to collapse?

Evroset, the leader of the Russian mobile phone retail market, is not seeing the best of its days. Three of its high-ranking economic safety managers have been arrested in the last week and its debts – according to uncon

Some now draw parallels between the current situation in Evroset and Yukos.

In an interview with the Russian newspaper Komsomolskaya Pravda (KP), Big Che (as Chichvarkin is sometimes referred to by Evroset staff) stated that he will keep his current position of CEO in the company. At least, for as long as the new leadership allows it.

Chichvarkin is acknowledged to have been the brainpower behind Evroset's dominance of the market. He is the author of many successful marketing campaigns and innovative business concepts. For example, he was the first to propose the idea of selling mobile phones on credit. According to his interview in KP, Chichvarkin's business model is very simple – he always places the customers’ needs first.

His eccentric personality has been on the forefront of the Russian media for many years. According to his interview with KP, his personnel-training strategies ensure that his staff is taught to be “People, with a capital P”. Some of his corporate letters were even popularised on the Internet and used by many corporate heads all over Russia as a means of communicating with their staff.

The sell-off

On the September 19, Chichvarkin made an unusual appearance at the economic forum in Sochi. He was wearing a well-tailored business suit, a white shirt and even a tie. This was such a dramatic change from his usual multi-coloured t-shirts, nonsensical accessories and designer jeans that some of the forum's participants failed to recognise him at first. Afterwards, they quickly concluded that something was wrong with the then co-owner of Evroset.

Indeed, these suspicions were not wrong. During the forum Chichvarkin reiterated that he and his business partner had no intention of selling their multi-million dollar company. Yet, within 28 hours the situation had changed dramatically with 100 per cent of Evroset's shares being sold to Aleksandr Mamut, a prominent Russian businessman, whose name is firmly associated with the blogging portal LiveJournal and the exiled tycoon Boris Berezovsky.

Unconfirmed reports point to a sum of $US 400 million that Mamut paid shareholders. But other sources point out that Evroset is also over $US 900 million in debt, which was part of the reason for the swift sell-off.

The deal came as a surprise for many. Yet according to the analysis of the business journal “Expert”, Chichvarkin had been planning to sell Evroset for the last three years.

Witch hunt?

Evroset was not only affected by the developing economic crisis that has resulted in its heavy debts. It has also been troubled by problems with the government. As Chichvarkin pointed out in his interview with KP, government officials issue complaints to the company every day.

On September 30 the head of the company's economic security team, Sergey Katorgin, was arrested at Domodedovo airport in Moscow as he was attempting to leave the country. He is now in custody, under suspicion of kidnapping and blackmail.

Over the course of the last month, two similar arrests have taken place. The company's vice-president and the deputy head of economic security are currently in custody facing similar charges.

Furthermore, the company is also accused of illegally importing mobile phones as of 2005.

However, some unconfirmed rumours suggest that the allegations are in fact a false attempt to fragment the company's dominance of the market.

As solely a mobile phone retailer, Evroset differs significantly from most of its European and American counterparts. Unlike most of them, it is not owned by any network provider.

When the sell-off deal was merely a rumour, many suspected that MTS – the leader of the Russian mobile network providing market – would opt to buy Evroset. This would have firmly secured their dominance of the market. Yet Russian law currently doesn't allow companies to sell an operator's contract in a bundle with a mobile phone device.