2013 Russia - Telecoms, IP Networks, Digital Media and Forecasts

Network deals help extend LTE services in Russia

BuddeComm’s annual publication, Russia - Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media sectors of one of Europe’s largest markets. The report includes the regulator’s market data to September 2012, telcos’ financial and operating data to Q1 2013 and market developments to June 2013.

Economic background

Until 2009 Russia experienced more than a decade of strong GDP growth, averaging about 7% per annum. The global financial crisis led to a fall in GDP for 2010 but the economy has since outshone most others in the region, partly due to the country’s reliance on commodity exports. Growth of 3-4% is anticipated for 2013 and 2014, so increasing consumers’ purchasing power.

Telecom market overview

Supported by the largest population in Europe, Russia’s telecom market has enormous potential, particularly in the broadband sector which remains relatively underdeveloped. The fixed-line sector has undergone substantial changes following the restructure and consolidation of Svyazinvest’s holdings and the merger of interregional incumbent operators into Rostelecom. The government’s plan to divest itself of its stake holding in Rostelecom by 2014 will spur new challenges and changes and encourage effective competition in the local fixed-line market.

Mobile market

The mobile market has one of the highest penetration rates in Europe. With few limited growth opportunities for voice services, operators have concentrated on mobile data and investments in LTE networks. Russia’s LTE market is partly operated through Yota managing a national network, with operators offering services as MNOs, though separate networks have also been built to service a growing number of cities. Like their Western European counterparts, the major players have also diversified through merger and acquisition activity. Number portability, expected to become available from the end of 2013, will further encourage competition and improve service offerings as operators struggle to reduce churn and retain customers.

Key telecom parameters – 2010; 2013

(Source: BuddeComm)

Market Highlights

• The number of mobile internet subscribers with access via smartphones grew 88% in 2012, while average monthly traffic using a smartphone reached broached 300MB. Higher data use is helping to stimulate the enormous investment in LTE networks across the country.
• The long-delayed MNP facility should be implemented by the end of 2013, costing about RUB100 to port a number. The service should encourage MNOs to improve offerings to customers, and so reduce churn.
• Government subsidies to provide affordable satellite internet to remote areas has been suspended after the state considered it unprofitable.
• WiFi services are becoming increasingly ubiquitous, with Aeroflot expected to provide WiFi on many aircraft by the end of 2013, and the Moscow Metro preparing for WiFi services across its network by late 2014. Russian Railways is also quadrupling the number of stations equipped with WiFi access.
• The number of Russians using the internet has climbed from about 20% in 2006 to 60%. Almost half of all citizens use the internet daily, compared to 5% in 2006.
• Russia’s broadband market has shown substantial growth in recent years as users benefit from rising PC penetration, more affordable offerings and a wider choice of services. The sector holds much potential given the size of the market, which is expected to be worth some €3.8 billion in 2013.

This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in Russia. It provides further information on:

• Market liberalisation and regulatory issues;
• The impact of the global economic crisis;
• Telecoms operators – privatisation, acquisitions, new licences;
• Mobile data market developments in coming years in light of spectrum auctions and new license awards;
• 3G developments, regulatory issues and technologies including HSPA and LTE;
• Broadband migration to an FttH architecture;
• Historical and current subscriber statistics and forecasts;
• ARPU statistics and forecasts.

Data in this report is the latest available at the time of preparation and may not be for the current year.