(ProQuest: ... denotes non-US-ASCII text omitted.)(ProQuest: ... denotes formulae omitted.)IntroductionMobile telecommunications bears the immense importance in the economy, as it can enhance development and functioning of other sectors. The introduction of telecommunication systems can dramatically improve productivity on mobile objects, save material and human resources, to provide automated control of technological processes, create a reliable vehicle control systems or mobile robots, distributed over a large area and are part of the flexible automated control systems.It is not surprising, that mobile telecommunication market was one of the most profitable and fastest growing segments of the telecommunications market in Russia. Revenues of mobile operators were increasing, even in times of economic crisis.Given the growing influence of the telecommunications industry in the economic development of Russia and the increasing complexity of the global external environment, we consider important to study the factors that influence efficiency of main Russian telecommunications companies.The factors that influence productivity in telecommunication industry described in the literature most often concern the effects of capital investments in physical capital (towers, routers, computers, and fixed lines), investment in innovative technologies (software logic) and management practices (Hammond and Michaels, 2009; Sabat, 2002, 2005). These capital investments among other may influence productivity (Gruber, 2001), profitability (Futia, 1980; Zahra and Covin, 1993), and price recovery in the case of high competition (Laursen and Meliciani, 2002).The results on the impact of capital investment on productivity and profitability are mixed. On one hand, in competitive environment investments in technology of one firm are subject to imitation and innovations by other players, which creates so called Red Queen effect and reduces the effect of investments on profitability and competitive advantage of the first investing firm (Barnett and McKendrick, 2004; Walker et al., 2002). On the other hand, Banker (2013) found out, that the association of investment and profitability is positive in the future (after six quarters).The purpose of this paper is to identify the factors that determine the effectiveness of the telecommunications companies, and to determine the extent of their influence. We employ the data from State Statistics Committee database, open source (analytical sites and portals), reports and websites of telecommunication companies, surveys of market participants to investigate the factors influencing effectiveness of three leaders of the mobile telecommunication market - MTS, MegaFon and VimpelCom holding in aggregate more than 80% of the market share. We concentrate on the time span from 2005 through 2013.The paper is structured as follows. First section provides short literature review on the effects of capital investments on productivity, profitability, and price recovery. Then we describe telecommunication market in Russia and characteristics of major competitors. We continue with describing our data and model. The next section states our results and interpretation. The last section closes the paper and presents the overall conclusions and policy implications.1. Literature reviewThe factors that influence productivity in telecommunication industry described in the literature most often concern the effects of capital investments in physical capital (towers, routers, computers, and fixed lines), investment in innovative technologies (software logic) and management practices (Hammond and Michaels, 2009; Sabat, 2002, 2005; or Krejci et al., 2015). These capital investments among other may influence productivity (Gruber, 2001), profitability (Futia, 1980; Zahra and Covin, 1993; or Ehrenberger et al., 2015), and price recovery in the case of high competition (Laursen and Meliciani, 2002). …