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Home RUSSIA PARTNESHIPS

Russian Telecom Sector – Dynamic Growth in 2006

by 198 Russia News
January 2, 2022
in RUSSIA PARTNESHIPS
Reading Time: 5 mins read
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Russian Telecom Sector – Dynamic Growth in 2006

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Three main traits fueled Russian telecom growth in 2006: (a) liberalization of the long-distance telecom market and introduction of latest operator interconnection laws, (b) broadband Web entry as the brand new main market section, and (c) the upcoming issuance of third-generation (3G) licenses amid one hundred pc mobile-sector penetration and value-added companies (VAS)-sector progress.

In 2007, there might be rising competitors within the long-distance market section. Mounted-line operators will additional diversify their companies, significantly amongst broadband and convergent companies. Different main market sectors are digital subscriber line expertise, Web protocol tv (IPTV) options, next-generation community gear, and passive optical community expertise. The cell sector will function rising competitors for subscriber loyalty, providing heavy VAS content material (cell tv and interactive video games) as operators deploy 3G networks. Cable tv, broadcasting, and satellite tv for pc operators will enrich content material and develop their choices to subscribers.

Market Overview

Russia’s regular macroeconomic efficiency (6.8 p.c gross home product progress in 2006) elevated authorities and company spending on info and communication expertise (ICT) infrastructure and companies, and rising regional client spending elevated telecom-sector progress. In 2006, the Russian telecom-sector revenues reached $29.6 billion, a 26 p.c progress over 2005, as reported by iKS-Consulting. The cell communications sector grew 34 p.c and exceeded $10.5 billion. Nevertheless, broadband entry confirmed the biggest progress of greater than 42 p.c.

In 2006, in accordance with the Russian Ministry of Info Applied sciences and Communications (MITC), the whole ICT market exceeded $40 billion. Native capital investments totaled $5.6 billion, a 7.1 p.c progress over 2005, whereas international investments totaled $4.1 billion, a 19.5 p.c annual progress. The Russian Internet consumer base reached 25 million, and revenues from Web entry and information transmission companies reached $2.1 billion, or 24 p.c progress, in contrast with $1.7 billion in 2005.

Liberalization of the Lengthy-Distance Market

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January 2006 started with a historic occasion. Rostelecom, the nationwide provider and dominant participant on the long-distance telecom market, awoke to a brand new aggressive reality–the market was liberalized. Truly, greater than 20 new operators acquired licenses to offer long-distance and worldwide communication companies. Analysts estimated the Russian long-distance telephony market dimension at $1.9 billion to $2.1 billion in 2006.

The challenges for brand new gamers stay excessive. Proudly owning a license for long-distance companies shouldn’t be a panacea. A brand new operator will need to have a nationwide community and an settlement with regional operators for the final mile connection. Furthermore, new interconnection laws divided operators into three main ranges: native, zonal, and long-distance. Lengthy-distance operators now should hook up with end-users solely by regional operators (native stage) and pay interconnection charges for each name.

The primary contender, Multiregional TransitTelecom (MTT), started offering companies in 2006 and was anticipated to problem Rostelecom’s place. Nevertheless, with its modernized community, good pricing, and enhancing customer support, Rostelecom didn’t yield a lot floor to MTT in 2006, and the MTT subscriber base reached solely 2 million (4 p.c). However, MTT expects to seize 15 p.c of the market share by 2008. With greater than 40 million subscribers, Rostelecom gained 60 p.c of the market, whereas the smaller operators, together with Web protocol suppliers and grey-market operators, fought for the remainder.

In January 2007, Golden Telecom (GT), one of many largest different telecom operators, launched companies. With a powerful regional community, developed company market section, and important distribution community of 30,000 factors, GT plans worth companies at 10 p.c lower than Rostelecom. GT stays upbeat, anticipating to seize some 20 p.c of the market share by 2008 and estimating that the market will exceed $4 billion.

Mounted-Telephony Sector: Broadband Entry Growth

The increase of the Russian fixed-telecom market was quite predictable. Russian areas outdoors the extra mature St. Petersburg and Moscow markets demonstrated rising client and company spending confidence as broadband Web utilization skyrocketed. No marvel the broadband entry market has grow to be the chief of the knowledge expertise sector. MITC believes that the information transmission market will develop from $1.18 billion in 2005 to $2.8 billion in 2008.

Furthermore, the rising IPTV market can also be flexing its muscle tissues. Greater than 20 Russian operators joined MTU-Intel and different market leaders in offering video companies. In line with iKS-Consulting, there have been about 150,000 IPTV subscribers in Russia in 2006, and by 2010, that quantity could attain 1.4 million.

Due to the interconnection and the “Calling Social gathering Pays” (CPP) laws ratified in 2006, Russian fastened operators acquired a big monetary increase. Lengthy-distance and cell operators reported that simply within the third quarter of 2006 fastened operators earned some $14 million. Lastly, fastened operators shouldered different operators of their conventional spheres of affect, Web entry, and cable tv market sectors, providing a complete vary of latest aggressive companies.

Russia’s incumbent telecom operator, SvyazInvest Holding, will in all probability not be privatized till 2009. Safety and army companies blocked this transfer in 2006, citing nationwide safety causes. Analysts imagine that due to the upcoming presidential election, the choice on privatization might be postponed additional. Nevertheless, SvyazInvest’s interregional firms confirmed some good outcomes, appeasing traders in 2006. The outcomes have been reached by an efficient reduce in operational prices and personnel, in addition to by the set up of latest enterprise resource-planning options to enhance enterprise administration. On the finish of 2006, Comstar UTS, Sistema Telecom’s main fastened telecom asset, bought 25 p.c of SvyazInvest shares from its house owners, Leonard Blavatnik and Viktor Vekselberg, for $1.3 billion.

In 2006, some 7,000 WiFi hotspots operated in Russia. J’son & Companions predicts that the quantity will exceed 9,400 in 2007, rising exponentially within the subsequent 5 years. Most outstanding, nevertheless, is the GoldenWiFi community launched by Golden Telecom that added 6,700 hotspots, making it the biggest WiFi community in Europe.

Cellular Sector Saturates

In 2006, the Russian cell market turned the third largest on the earth by variety of subscribers and income, after China and the US. Cellular penetration exceeded one hundred pc as a result of some 152 million subscribers (Russia’s inhabitants is 145 million) used cell companies in 2006. Main cell operators confronted saturation and elevated spending on advertising and growth of VAS companies.

The introduction of the CPP laws helped Russia’s main cell operators to melt the gradual fall in common income per consumer. Anticipating a drop in cell calls, operators rapidly moved to ruble-based tariffs, elevating common tariffs by 5 to 10 p.c. Operators additionally secured reimbursements of $0.03 per minute by fastened operators, which resulted in a 5 to 10 p.c web revenue to main operators.

Main cell operators, MTS, Vimpelcom, and MegaFon held 85 p.c of the Russian cell market, whereas the share of regional operators reached 15 p.c (22 million subscribers, 3 p.c progress). Tele2, SMARTS, SibirTelecom, and UralSvyazInform demonstrated essentially the most dynamic outcomes.

3G Involves Russia

3G cell telephony expertise lastly arrived in Russia. On the finish of 2006, the Russian State Committee on Radio Frequencies accredited the allocation of three &occasions; 15 MHz in 1935-1980 MHz and 2125-2170 MHz frequencies, and three &occasions; 5 MHz in 2010-2025 MHz frequencies for 3G growth. This frequency capability is adequate to concern three nationwide licenses. The licenses will price round $100,000 and might be issued for a interval of 25 years. Operators are anticipated to “clear” the frequency and to speculate thousands and thousands of {dollars} into gear and community building.

In April 2007, the tender fee will announce winners in accordance with a scoring system for every operator. The scoring system will use main standards, resembling community presence in every Russian area and the quantity of potential funding in new networks. In line with analysts, Russian cell operators will first launch 3G zones in about 20 Russian areas. Though the cell content material market has resurged from its sudden droop in 2005, the “heavy” content material companies haven’t but emerged as mainstream. In rising markets resembling Russia, the place cell penetration is uneven and buyer preferences are primarily based on buying energy, it’s onerous to foretell the precise begin of 3G.

The Russian telecom market is carefully following world leaders in ITC growth and expects continued progress. Additional info on this dynamic trade, together with doing enterprise within the Russian ICT sector, could be present in Andrey Gidaspov’s first e-book, Driving the Russian Expertise Growth, which might be printed by Futuretext in April 2007 (www.russiantechboom.com).

Andrey N. Gidaspov is a former BISNIS Moscow consultant. He at present heads GidaByte (www.gidabyte.com), a telecom business-consulting agency in Hong Kong.

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Source by Andrey Gidaspov

Tags: china russia partnershipcivil partnership in russiaDynamicGrowthjoint ventures in russiarussia eastern partnershiprussia marketrussia marketplacerussia strategic partnershipsRussianSectorTelecom
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