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Yota Devices in MegaFon Talks on Dual-Screen Phone Debut

Feb. 21 (Bloomberg) -- Yota Devices, a Russian smartphone startup, is in talks to sign up the country’s second-biggest wireless operator as its first customer for a dual-screen handset the manufacturer plans to introduce in the second half.

The phonemaker is negotiating with OAO MegaFon and “large operators” developing so-called fourth-generation networks in Europe, South Africa and Asia to offer the YotaPhone, Chief Executive Officer Vlad Martynov said. He declined to elaborate. The manufacturer plans to start selling the device for about $650 by year-end, he said.

The company, a maker of modems and routers, was part of mobile-phone operator Yota Holdings until billionaire Alisher Usmanov bought the network last year and a group of Russian investors took over the manufacturing business. The YotaPhone, equipped with an electronic-paper screen on the back in addition to a standard touch screen on the front, is aimed at changing the market in the way that Research In Motion Ltd.’s BlackBerry and Apple Inc.’s iPhone did earlier, Martynov said.

“Phonemakers are obsessed with better resolution in cameras or experimenting with gadgets’ size,” Martynov said in an interview in his Moscow office. “In terms of user experience, there have been no revolutions since the first iPhone came to the market six years ago.”

Petr Lidov, a spokesman for Moscow-based MegaFon, confirmed the mobile operator’s potential interest in the YotaPhone, declining to comment further because of the “early stage” of the project.

MegaFon, with 63 million subscribers, ranks second in Russia to OAO Mobile TeleSystems, which serves 71 million customers.

2010 Brainstorming

Martynov, an engineer who worked for Microsoft Corp. in the U.S. and ran the Russian business of German software maker SAP AG for two years, said the device is the result of a brainstorming session by Yota managers in 2010 focused on “a simple idea: what we don’t like in smartphones.”

One of the main annoyances was that screens of phones that aren’t in use stay black, lighting up only a short time if a call or text arrives, posing a risk of delay in spotting a message, Martynov said. Also, reading on a standard smartphone is limited to about four hours before the power dies, he said.

“We came up with the idea of a second, electronic-paper screen, which saves batteries,” Martynov said. “Then we created scenarios enabling user to send to the back screen whatever he wants -- an electronic book, a notification, a map he needs, an electronic airline ticket.”

Finnish Engineers

Yota Devices employs 50 people, including former Nokia engineers in Oulu, Finland, and former executives of RIM and Microsoft. The YotaPhone uses Google Inc.’s Android operating system and chipsets from Qualcomm Inc. and will be assembled by Singapore-based Hi-P International Ltd., which produces BlackBerry smartphones.

Development costs will probably total $25 million by the end of 2013, and the company needs to sell at least 500,000 YotaPhones to remain in the market long-term, offering new models every 10 months, Martynov said.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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