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Russia Telecommunications Report Q3 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: July 2009 Product Code: R302-7385 Description In our latest quarterly report on the Russian telecommunications sector we have focused on the country’s fixed-line and broadband market data analysis sections while leaving the mobile market data analysis section unchanged, to be updated in full in the subsequent quarter.Russia’s fixed-line segment is dominated by the seven Svyaz invest regional telecoms operators which combined account for more than 25mn fixed lines, over 55% of the market. The incumbent’s main competition is from Comstar-UTS, which owns Moscow incumbent MGTS, and from VimpelCom, the mobile operator which acquired fixed-line and broadband operator Golden Telecom in Q108. All of the operators are looking to protect their revenue streams by developing their broadband business and launching new products such as IPTV. The triple-play market is expected to play an increasingly important role in Russia’s fixed-line segment. The fixed-line sector is estimated to have grown by 1.1% during 2008 as services were expanded, but growth is being tempered by fixed-to-mobile substitution and the popularity of VoIP services. As mobile networks are expanded into more of Russia’s regions and broadband access availability is extended, both mobile and VoIP will offer stiffer competition for the country’s fixed-line sector. The development of the fixed-line sector also faces headwinds from the financial crisis, which is slowing consumer spending and limiting operators’ network expansions. The most prominent broadband technology in Russia is ADSL, although there is growing interest in WiMAX, a sector where competition is really heating up and one that is expected to play a key role in the sector’s progression. Comstar-UTS is the largest single broadband operator in the country, followed by VimpelCom, although Svyazinvest’s regional telecoms operators’ combined broadband subscriber base trumps both. Broadband penetration was just 6.4% at the end of 2008, representing 9.1mn broadband subscriptions. Penetration in major urban centres such as Moscow and St Petersburg is approaching saturation, but broadband availability is low or non-existent in other regions. Russia’s broadband sectorpresents huge growth opportunities, both from expanding into underserved regions and the developmentof higher-value services such as super high-speed broadband and IPTV. In June 2009 the Russian government approved a plan to restructure Svyazinvest by merging its regional telecoms subsidiaries into one operator, centred on long-distance and broadband operator Rostelecom. At the time of writing, full details of the plan had not been released, but the restructuring process is expected to take between one and a half and three years to complete. The government also revealed plans to offer an IPO of Svyazinvest shares on a Western stock exchange after the restructuring is complete. Russia’s mobile sector is characterised by large discrepancies between rural and urban penetration rates, which, combined with a significant number of inactive SIMs and the prevalence of multiple SIMownership, results in sustained subscriber growth opportunities. Tele2 Russia is aiming to exploit some of this growth potential by expanding into new regions in the country. That said, the market is approaching saturation, and with the financial crisis restricting operators’ access to investment capital,growth is forecast to slow. Although full 3G services are still to be launched in the capital Moscow, MTS, the country’s largest operator, was given permission to launch indoor 3G services in the city. Moscow is not only Russia’s largest city, with over 31mn mobile subscribers, but also the country’s most affluent, and will be thejewel in the crown of any 3G operations. Nevertheless, although this is a step in the right direction, the Russian military has still not vacated the necessary spectrum in Moscow to allow operators to make a fullcommercial launch. The longer full commercial launch is delayed, the greater foothold alternative mobile broadband technologies such as WiMAX will be able to gain on the Moscow market. An additional factorthat will limit the success of 3G in the near term is the country’s deteriorating economy, which will hit consumer spending on advanced mobile services. Table of Contents
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