Investing in Russia: Mobile TeleSystems

Editor's note: This week, Thomson Financial reported that the CEO of Russia-based Gazprom (Over-the-Counter Ticker Symbol: OGZPY), said the gas utility company intends to become the biggest company in the world, with a market capitalization of $1 trillion within seven to ten years.

From natural gas to oil, when it comes to investing in Russia, the focus is often on energy companies. For example, the current top three stock holdings in the Market Vectors Russia ETF (RSX Quote - Cramer on RSX - Stock Picks) are energy-focused names (including Gazprom), which make up 27% of the exchange-traded fund's basket of stocks.

Energy aside, what is another sector in Russia that's worth researching? Here, RealMoney's John Hughes and Scott Maragioglio answer that question.

This was originally published on RealMoney. It is being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

As goes oil, so goes Russia, and with that, Russian stocks. It's no surprise that with oil prices reaching ever higher into record territory, countries rich in this natural resource are doing well economically. Each dollar move higher is another dollar earned. That newfound wealth usually finds its way into the pockets of consumers, which drives other business ventures.

With Russian businesses booming and consumer incomes growing fast, the oil-rich nation's citizens are spending much more on wireless services. This is big news for Mobile TeleSystems (MBT Quote - Cramer on MBT - Stock Picks), Russia's largest mobile-phone company. Add to that increased demand the introduction of upgraded technology, and we believe there is still further upside growth potential.

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As of March 31, MBT had 60 million wireless customers in Russia, 19.6 million in the Ukraine (the country's largest provider), and operations in Uzbekistan, Turkmenistan, Armenia and Belarus.

The company has sped up its push into third-generation networks that carry music, video, games, maps and other content to cell phones and laptop computers. Mobile TeleSystems has already launched a 3G network in St. Petersburg, and plans to invest a further $1.6 billion in 3G services throughout Russia, plus more in Uzbekistan and Armenia.

Because of spectrum shortages, 3G has been delayed in Moscow, even though it has the strongest demand for broadband. However, by early 2009, MBT hopes to launch 3G services in Moscow. These services are attractive to Russian customers mainly because most of them still lack broadband Internet access.