Russian Telecom Sector - Dynamic Development in 2006

Three important developments fueled the event of telecommunications in Russia in 2006: (a) the liberalization of the long-distance telecommunications market and the introduction of latest laws for the interconnection of operators, (b) Web entry broadband as the brand new important market phase and (c) the rising problem of third-generation licenses (3G) between 100% penetration within the cellular sector and development within the value-added providers (VAS) sector.

In 2007, competitors within the lengthy distance market phase will enhance. The mounted phone operators will additional diversify their providers, specifically between broadband and converged providers. Different important sectors of the market are digital subscriber line expertise, IPTV (Web Protocol Tv) options, next-generation community gear and passive optical community expertise. The cellular telephony sector can be characterised by growing competitors for subscriber loyalty, providing heavy VAS content material (cellular tv and interactive video games) whereas operators use 3G networks. Cable TV, tv broadcasters and satellite tv for pc operators will enrich the contents and increase their gives to subscribers.

Market overview

Russia's regular macroeconomic efficiency (6.8% development in gross home product in 2006) elevated governmental and company spending on data and communication infrastructures and providers (ICT) and the expansion in client spending on the regional degree has elevated development within the telecommunications sector. In 2006, revenues from the telecommunications sector in Russia reached $ 29.6 billion, up 26% in comparison with 2005, as reported by iKS-Consulting. The cellular communications sector reached 34 % and exceeded $ 10.5 billion. Nevertheless, entry to broadband has proven development of greater than 42%.

In 2006, in response to the Russian Ministry of Data and Communications Applied sciences (MITC), the whole ICT market exceeded 40 billion {dollars}. Native capital investments totaled $ 5.6 billion, a rise of seven.1% in comparison with 2005, whereas overseas investments totaled $ 4.1 billion, an annual development of 19.5%. The Russian Net person base has reached 25 million and the revenues from Web entry and information transmission providers have reached $ 2.1 billion, or 24% development, in comparison with $ 1.7 billion in 2005.

Lengthy distance market liberalization

January 2006 started with a historic occasion. Rostelecom, nationwide provider and dominant participant within the lengthy distance telecommunications market, has woke up to a brand new aggressive actuality: the market has been liberalized. In reality, greater than 20 new operators have obtained licenses to offer long-distance and worldwide communication providers. The analyzes estimated the scale of the lengthy distance telephony market in Russia at $ 1.9 billion at $ 2.1 billion in 2006.

The challenges for brand spanking new gamers stay excessive. Proudly owning a license for lengthy distance providers will not be a panacea. A brand new operator will need to have a nationwide community and an settlement with regional operators to attach the final mile. Moreover, the brand new interconnection laws have divided the operators into three important ranges: native, zonal and lengthy distance. Lengthy distance operators should now join to finish customers solely via regional operators (native degree) and pay interconnection expenses for every name.

The primary contender, Multiregional TransitTelecom (MTT), began offering providers in 2006 and must problem Rostelecom's place. Nevertheless, with its modernized community, good costs and improved customer support, in 2006 Rostelecom didn't give a lot floor to MTT and the MTT subscriber base reached solely 2 million (4%). Nonetheless, MTT expects to realize 15% market share by 2008. With over 40 million subscribers, Rostelecom has gained 60% of the market, whereas smaller operators, together with Web protocol suppliers and market operators grey for the remainder.

In January 2007, Golden Telecom (GT), one of many main different telecommunications operators, launched providers. With a robust regional community, a developed enterprise market phase and a big 30,000 level distribution community, GT plans 10 % lower cost providers than Rostelecom. GT stays optimistic, anticipating to succeed in 20% of the market share by 2008 and estimating that the market will exceed Four billion {dollars}.

Mounted telephony sector: Broadband Entry Increase

The growth within the Russian mounted telecommunications market was fairly predictable. The Russian areas exterior the extra mature markets of St. Petersburg in Petersburg and Moscow display a rising confidence in client and enterprise spending, provided that using broadband Web has skyrocketed. It's no marvel that the broadband entry market has turn out to be the chief within the data expertise sector. The MITC believes that the info transmission market will develop from $ 1.18 billion in 2005 to $ 2.Eight billion in 2008.

Moreover, the rising marketplace for IPTV can also be flexing its muscular tissues. Greater than 20 Russian operators joined MTU-Intel and different market leaders in offering video providers. In line with IKS-Consulting, in 2006 there have been about 150,000 IPTV subscribers in Russia, and in 2010 this quantity might attain 1.Four million.

Due to the interconnection and the "Calling Celebration Pays" (CPP) laws evaluated in 2006, Russian mounted operators have obtained a substantial monetary enhance. Cellular and lengthy distance operators have reported that within the third quarter of 2006, mounted operators earned round $ 14 million. Lastly, mounted operators have employed different operators of their conventional sectors of affect, Web entry and cable tv, providing a full vary of latest aggressive providers.

Russia's incumbent telecommunications operator, SvyazInvest Holding, will most likely not be privatized till 2009. Safety and army businesses blocked this transfer in 2006, citing nationwide safety causes. Analysts consider that as a result of upcoming presidential elections, the choice on privatization can be additional postponed. Nevertheless, the interregional firms of SvyazInvest confirmed some good outcomes, engaging traders in 2006. The outcomes have been achieved via an efficient lower in working and personnel prices, in addition to via the set up of latest company useful resource planning options for enhance enterprise administration. On the finish of 2006, Comstar UTS, the primary mounted telecommunications enterprise of Sistema Telecom, bought 25% of SvyazInvest shares from its house owners, Leonard Blavatnik and Viktor Vekselberg, for $ 1.Three billion.

In 2006, round 7000 WiFi hotspots labored in Russia. J & # 39; son & Companions anticipates that the quantity will exceed 9,400 in 2007, rising exponentially over the subsequent 5 years. A very powerful, nonetheless, is the GoldenWiFi community launched by Golden Telecom which added 6,700 activation factors, making it the most important WiFi community in Europe.

Saturati cellular sector

In 2006, the Russian cellular market turned the third largest on the planet when it comes to variety of subscribers and revenues, after China and america. The penetration of cellular telephony has exceeded 100 % as a result of about 152 million subscribers (the inhabitants of Russia is 145 million) used cellular providers in 2006. The primary cellular operators have saturated the side and elevated spending on advertising and the event of VAS providers.

The introduction of CPP laws has helped Russia's main cellular operators to mitigate the progressive decline in common income per person. Anticipating a decline in cellular calls, operators rapidly moved to ruble-based charges, growing common fares by 5-10%. The operators additionally obtained repayments of $ 0.03 per minute from mounted operators, which required a web revenue of 5-10% from the primary operators.

The primary cellular operators, MTS, Vimpelcom and MegaFon held 85% of the Russian cellular market, whereas the share of regional operators reached 15% (22 million subscribers, 3% development). Tele2, SMARTS, SibirTelecom and UralSvyazInform have proven probably the most dynamic outcomes.

3G arrives in Russia

3G cell phone expertise has lastly arrived in Russia. On the finish of 2006, the Russian state committee for radio frequencies accepted the task of three × 15 MHz within the frequencies 1935-1980 MHz and 2125-2170 MHz and three × 5 MHz within the 2010-2025 MHz frequencies for improvement 3G. This frequency capability is ample to problem three licenses on a nationwide scale. The licenses will price round $ 100,000 and can be issued for a interval of 25 years. Operators are anticipated to "cancel" attendance and make investments hundreds of thousands of {dollars} in gear and community development.

In April 2007, the tender fee will announce the winners in response to a scoring system for every operator. The scoring system will use essential standards, such because the presence of the community in every Russian area and the quantity of potential funding in new networks. In line with analysts, Russian cellular operators will open 3G zones in about 20 Russian areas. Though the cellular content material market has risen since its sudden collapse in 2005, "heavy" content material providers haven't but emerged as mainstream. In rising markets like Russia, the place cell phone penetration is erratic and buyer preferences are based mostly on shopping for energy, it's tough to foretell the precise begin of 3G.

The Russian telecommunications market intently follows world leaders in ITC improvement and expects continued development. Extra data on this dynamic sector, together with doing enterprise within the Russian ICT sector, may be present in Andrey Gidaspov's first e book, Driving the Russian Know-how Increase, which can be printed by Futuretext in April 2007 (www.russiantechboom.com ). ).

Andrey N. Gidaspov is a former BISNIS consultant in Moscow. He's at present head of GidaByte (www.gidabyte.com), a telecommunications consulting agency in Hong Kong.