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Sector Profile
November 2010
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Table of Contents
STRUCTURE .................................................................................................................................................... 12
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Table of Figures
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Sector Overview
The Russian telecom sector has a high level of subscriber penetration and is among the developed telecom
landscapes in Europe. At September 2010, the industry had 217 million mobile subscribers with a sim card
penetration of 149%, 33.8 million wireline subscribers (Dec 2009), and 13.27 million internet subscribers (June
2010)
The sector is valued at EUR 32.2 billion in 2008 (ICT Russia) with a year on year growth of 19.2%. The sector is
growing with a CAGR of approx. 22.3% over the last 5 years (2004-08). Investment in telecom segment has
increased over the year with operators deploying 3G network and technology up gradation.
Russian telecom market is fragmented with number of operators operating in all the three segments i.e.
wireline, wireless and broadband and stand alone services. The sector has approximately 10,000 internet
service providers and 9 Mobile virtual network operators. Mobile segment is primarily driven by 9 operators
and fixed line services by 3 operators. The industry also has three 3G mobile service operators. State owned
telecom service provider Svyazinvest was also granted 4G license in March 2010 to operate services in the
country.
Telecom sector in the last 2 year has witnessed a number of merger and acquisitions primarily aimed at
expanding telecom operator’s business portfolio and companies trying to benefit from operational synergies
by merging its subsidiaries like in 2010 fixed line telecom operator Comstar-UTS merged its 16 subsidiary to
control cost and gain operational synergies.
Mobile segment is one of the matured mobile markets with a sim card penetration of 149%; however the
segment is also one of the fastest growing telecom segments. During first 9 month 2010 the sector added 8.6
million mobile subscribers. The sector is marked by larges discrepancies between rural and urban penetration,
multiple SIM ownership, significant number of inactive SIMs and growing data usage.
Russian Mobile market is primarily led by MTS which has 69.3 million subscribers and holds respective market
share of 33.6%. Its is followed by Megafon with 26.1% market share and Vimpelcom with a market share of
24.1%, Tele 2 occupies 8.3% market share in the country. Average revenue per subscriber in Russia is one of
the most unstable components in Russian mobile telecom market. During 2008-09 the revenue declined due
to global economic crisis however by the last quarter of 2009 mobile ARPU grew. During the last 3 years MTS
has reported lowest ARPU. Revenue from the data services has increased in last few quarters primarily due to
the rising use of smart phones, including Apple iPhone, Android, and blackberry devices driving up data usage
Minute of usage in the country has grown during the last 2 quarters (2010) primarily due to reduction in call
tariffs.
Fixed line segment is one of the stable telecom service segments in Russia. During the last 5 year the industry
has largely remain stable with a very low churn rate. The sector is led by Svyazinvest (through its 7
subsidiaries), Comstar UTS (MGTS), and Vimpelcom. In the last 2 year the industry has witnessed, most of the
fixed line operators entering into triple play services which fixed line, broadband service and Pay TV services to
increase revenue.
Broadband in Russian telecom sector is one of the fastest growing sectors. The segment in the first 6 month
2010 added 1.75 million subscribers. Russian Internet segment is dominated by broadband, xDSL, cable and
FTTH/FTTB technologies; however Wimax use is also growing in the country. OAO Comstar-UTS is the largest
broadband operator in the country with 1.36 million broadband subscribers and respective markets share of
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14.4%, followed by Center Telecom with 1.33 million subscribers and 14.1% market share; Vimpelcom has
approximately 1.2 million broadband subscribers and has 12.6% market share.
The Russian telecom industry is led by mainly 5 players namely Svyazinvest, Mobile TeleSystem, Vimpelcom,
Megafon and Tele 2. Mobile TeleSystem is the largest mobile operator in the country with 32% market share
(Q3 2010). The company is also the leading fixedline and broadband operator through its subsidiary Comstar
UTS. State owned Svyazinvest is the largest fixed line service provider in the country together with its 7
subsidiaries. Comstar is the largest broadband operator in the country with 1.36 million subscribers (Q2 10);
North West is the largest broadband operator in St. Petersburg region.
Russian mobile telecom market is fragmented with number of operators and penetration of more than 100%.
The phenomenon has resulted market consolidation in last few years aimed at acquiring market share & gains
on operational efficiencies and an intense price based competition in the sector. The industry is slowly
transforming into data centric model as growth in voice based revenue is declining.
Telecommunication in Russia is regulated by Ministry for Communications and Information of the Russian
Federation. The law Communications Law, which came into effect on January 1, 2004 and is the principal legal
act regulating the Russian telecommunications industry. The Communications Law sets forth general principles
for the regulation of the telecommunications industry, including a description of the institutional framework
for the federal government’s involvement in the regulation, administration, and operation of the
telecommunications industry.
Source: ictrussia.com
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2010
Comstar-United Telesystems JSC reorganized its subsidiary CJSC Comstar – Region. It integrated company’s
October
regional subsidiaries offering telecom services under Comstar-Region.
Megafon acquires 100% stake in St Petersburg based fixed line operator MetroKom from St Petersburg city
October authorityies and MST (45%)
October MTS, Vimpelcom and Megafon reduced mobile roaming tariff in Russia
October Sibirtelecom launched internet services in Chita, ZabaiKalsky Krai.
Russian telecom operator Altaisvyas OJCS and STEK GSM merged into Yenisseytelecom OJSC, a subsidiary
October
of Sibirtelecom OJSC.
Vimpelcom Ltd agreed to acquire Italian telecoms operator, Wind Telecomunicazioni and 51.7% stake of
October
Orascom Telecom which is owned by Egyptian Tycoon Naguib Sawiris for USD 6.6 billion
Skartel was granted license and permission to launch 4G in Russia
August
July Vimpelcom acquired 100% stake in Foratek for RUB 1.4 billion (USD 46.43 million).
June Russian court cancels Megafon and Turkcell joint venture erfax
June Comstar UTS acquired Penza region based telecom operator Penza Telecom for RUB 630 million.
June Jasper wireless and Vimpelcom entered into agreement to offer first Machine to machine service in Russia.
June Megafon entered into interconnection agreement with iBasis for high quality international voice services.
June
May MTS OJSC entered into agreement to sell 25% +1 share in Svyazivest to OAO Rostel for RUB 26 billion.
Ukraine anti monopoly committee suspended decision to approve merger of Vimpelcom with Ukrainian telecom
April
operator Kyivstar.
Russian state owned telecom company Svyazinvest announced to deploy LTE technology for its 4G mobile
March
network.
March Russian state owned telecom operator Svyazinvest gets 4G licences.
February Megafon acquired fixedline operator Synterra for USD 745 million.
February OAO Comstar UTS acquired internet service provider Tenzor Telecom LLC for RUB 32.7 million.
January Comstar UTS increased its fixedline tariff by 10%
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Russian Telecom sector has witnessed a number of acquisition and mergers in the last 2 year. The high number
of transaction in telecom sector is primarily due to growing penetration which has resulted in intense
competition and thus lesser profit margins.
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Sector Size
Russian telecom sector is one of the most matured telecom markets in Europe. The sector is valued at Eur 32.2
billion in 2008 (ICT Russia) with a year on year growth of 19.2%. The sector is growing with a CAGR of
approximately 22.3% over the last 5 years (2004-08). Investment in telecom segment has increased primarily
due to deployment of 3G network and technology up gradation in the last 2 years.
At the end of September 2010 the industry had 217 million mobile subscribers with a penetration of 149%,
33.8 million wireline subscribers (Dec 2009), and 13.27 million internet subscribers (June 2010)
Source: ictrussia.com
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Structure
Russian telecom market is fragmented with number of operators operating in all the three segments i.e.
wireline, wireless and broadband and stand alone services. The sector has approximately 10,000 internet
service provider and 11 Mobile virtual network operator. Mobile segment is primarily driven by 9 operators
and fixed line services by 3 operators. The industry also has 3 3G mobile service operators. In March 2010,
State owned telecom service provider Svyazinvest got license to operate 4G services in the country.
At the end of September 2010 the industry had 217 million mobile subscribers with a penetration of 149%,
33.8 million wireline subscribers (Dec 2009), and 13.27 million internet subscribers (June 2010)
The industry is witnessing a rise in number of 3G subscribers since operators started to launch services in 2008.
There are three operators offering 3G services in Russia (MTS, Vimpelcom, and Megafon).
Mobile segment in Russia is one of the most matured markets with a penetration of 149%. During the first 9
month 2010 the sector added 8.6 million mobile subscribers.
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Figure 10. Russia, Quarterly growth in mobile subscribers by region (Q1 09-Q3 10)
Particulars Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10
Mobile subs in Moscow 32.1 33.2 32.5 32.4 32.4 33.4 33.7
Penetration (%) 188.9% 195.6% 191.2% 190.7% 191.0% 196.8% 198.7%
Mobile subs in St.Petersburg 10.7 11.2 11.7 11.8 11.9 12.2 12.6
Penetration (%) 169.1% 176.1% 185.2% 186.8% 187.6% 192.7% 198.0%
Mobile subs in other regions 148.0 152.2 159.5 163.7 166.3 167.7 170.2
Penetration (%) 121.5% 124.9% 130.9% 134.3% 136.5% 137.7% 139.7%
Total number of mobile subs in Russia 190.8 196.6 203.7 207.9 210.6 213.4 216.5
Penetration (%) 131.4% 135.4% 140.3% 143.2% 145.1% 147.0% 149.1%
Russian Mobile market is primarily led by MTS which has 69.3 million subscribers and holds respective market
share of 33.6%. Its is followed by Megafon with 26.1% market share and Vimpelcom with a market share of
24.1%, Netherlands based Tele 2 occupies 8.3% market share in the country.
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Company (Subscribers by %
operator) Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Share
Average revenue per subscriber in Russia is one of the most unstable components in Russian mobile telecom
market. Minute of usage in the country has grown during the last 2 quarters (2010) primarily due to reduction
in call tariffs.
Figure 14. Russia, Quarterly growth in ARPU by operator (Q1 09-Q2 10)
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Figure 16. Russia, Quarterly growth in Minute of usage by operator (Q1 09-Q2 10)
Fixed line segment is one of the stable telecom service segments in Russia. During the last 5 year the industry
has largely remain stable with a very low churn rate. The sector is led by Svyazinvest (through its 7
subsidiaries), Comstar UTS (MGTS), and Vimpelcom. In the last 2 year the industry has witnessed most of the
fixed line operators has started entering into triple play services which fixed line, broadband service and Pay
TV services to increase revenue.
Source:mforum.ru
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Broadband in Russian telecom sector is one of the fastest growing sectors. The segment in the first 6 month
2010 added 1.75 million subscribers. The most prominent broadband technology in Russia is ADSL; however
Wimax use is also growing in the country. OAO Comstar-UTS is the largest broadband operator in the country
with 1.36 million broadband subscribers and respective markets share of 14.4%, followed by Center Telecom
with 1.33 million subscribers and 14.1% market share; Vimpelcom has approximately 1.2 million broadband
subscribers and has 12.6% market share.
Major urban cities such as Moscow and St Petersburg have the highest broadband subscribers. The sector
presents huge growth opportunities, both from expanding into urban and rural regions and the development
of additional services such as super high-speed broadband and IPTV.
Figure 18. Russia, Broadband subscriber growth by region (Jan 10-Jun 10)
Figure 19. Russia, quarterly growth in broadband subscribers (Q1 09-Q2 10)
Region Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10
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Figure 20. Russia, quarterly growth in subscriber by operator and market share (Q1 09-Q2 10)
Figure 21. Russia, broadband subscriber market share in Moscow (Q1 09-Q2 10)
Figure 22. Russia, broadband subscriber market share in St Petersburg (Q1 09-Q2 10)
%
Operator Q 109 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Share
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Russian telecom market is a fragmented with number of operators operating in all the three segments i.e.
wireline, wireless and broadband. The industry is primarily led by 5 players namely Svyazinvest, Mobile
TeleSystem, Vimpelcom, Megafon and Tele 2. Mobile TeleSystem is the largest mobile operator in the country
with 32% market share (Q3 2010). The company is also the leading fixedline and broadband operator through
its subsidiary Comstar UTS. State owned Svyazinvest is the largest fixed line service provider in the country
together with its 7 subsidiaries. Comstar is the largest broadband operator in the country with 1.36 million
subscribers (Q2 10); North West is the largest broadband operator in St. Petersburg region.
Akado Group
Akado Group (Comcor), founded in 1992 is an integrated telecom operator in Russia. The company is primarily
engaged in offering package TV, high-speed Internet and telephony (triple play) services for corporate
subscribers and homes using advanced fibre optic technology. The company offers its internet and Pay TV
services through AKADO-Stolitsa ZAO (previously COMCOR-TV). The company offers telecommunications
services in Moscow. Akado provides unlimited high-speed Internet access and over 100 digital TV channels
(including NTV Plus, Russian terrestrial channels and AKADO LIVE) as well as digital telephony and radio
services. Akado is Moscow’s leader in double play package telecommunications services (Internet + TV) and
serves more than 800,000 homes in Moscow, Zelenograd and Lubertsy.
The company offers its telecom services through COMCOR OAO in the Moscow region and joined Renova
Media telecommunications group (now Akado Group) in June 2006. Akado Telecom provides data transfer,
Internet access, digital telephony, corporate network architecture, data security, data centre services, digital
transmission lines, TV rebroadcasting and digital audiovisual content transfer.
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Comstar - UTS
Comstar is the leading integrated telecom operator in Russia. The company is primarily engaged in offering
fixedline, broadband and Pay TV services other value-added services to residential and corporate subscribers
and operators in 84 Russian cities. As of Q 2 2010, the company service approximately 1 million fixedline
subscribers, 1.4 million residential broadband subscribers and 2.2 million residential Pay TV subscribers. The
Company also offers communications services in 82 cities in the Russian regions, Armenia and Ukraine.
Recently the company integrates its regional business (16 companies) in its one subsidiary Comstar Region.
The company merged includes CJSC Astro-Tel and CJSC IMA Trunk Media in Astrakhan; CJSC Comtel-Kemerovo
in Kemerovo; CJSC RusLan-TV in Moscow; CJSC Simbirsk CTV in Ulyanovsk; CJSC SALLAK Group of Companies in
Krasnodar; CJSC Comtel-Vologda in Vologda; CJSC Comtel-Taganrog in Taganrog; CJSC Network TV and Telesat
in Nizhny Tagil; CJSC Elecom-Service in Voronezh; CJSC Electronica in Balakovo; CJSC Inter-TV Cable Systems
and Ivanovo Cable Systems in Ivanovo; CJSC TVK-Kursk in Kursk; and CJSC Penza Telecommunications in Penza.
For the year ended December 2009, the company generated USD 1.484 billion in revenue. At the end of June
2010 the company generated USD 818.1 million in revenue. The company owns approximately 25% stake in
state owned fixed line incumbent Svyazinvest.
The company also operates in Uzbekistan, Turkmenistan and Armenia and the second largest in the Ukraine, in
terms of number of subscribers. The company has license to operate 2G and 3G services in Russia. As of
September 2010, the company has 69.7 million mobile subscribers with a relative market share of 32.6%
In the year to end-December 2009, MTS achieved revenues of USD 9.8 billion (annual decline of 3.9%) and net
profit of USD 1.0 billion (annual decline of 47.4%).
In the year to end-December 2009, North-West Telecom generated revenues of RUB 27.1 billion (annual
growth of 5.1%) and net profit of RUB 3.2 billion (annual decline of 12.5%).
Rostelecom Corporation
Rostelecom Corporation is a Russian telecommunications operator offering fixed line, broadband services, and
domestic and international long-distance communication services. Rostelecom owns and operates a large
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telecommunications network (approximately 150,000 km) and carries most of Russia's long-distance and
international traffic. It has a 30% market share in the Internet segment. The company is also engaged in
related telecommunication services such as Internet access, data-based services for voice transmission,
videoconferencing, virtual private network services, and data centre services. In March 2010, Russian govt.
allotted license to operate 4G services in Russia
In the year to end-December 2009, Rostelecom achieved revenues of RUB 65.5 billion (annual decline of 1.7%)
and net profit of RUB 3.5 billion (annual decline of 71.1%).
Sibirtelecom OJSC
Sibirtelecom OJSC, established in 1919, is a telecommunication services provider in Russia. The company is
primarily engaged in offering fixed line telephone and mobile communications, local, long-distance, and
international telephony and VoIP services. The company offers a range of telecommunication services in the
Siberia region of Russia, including cellular and mobile communications, VoIP, and local and international
services. It provides GSM and CDMA mobile services with its associated mobile operators (Bailkalwestcom,
Eniseytelecom and STEK GSM). The company also offers mobile radio communication services. As of
September 2010 the company has 4.6 million mobile subscribers and 630,000 broadband subscribers.
In the year to end-December 2009, Sibirtelecom achieved revenues of RUB 38.0 billion (annual growth of 0.8%)
and net profit of RUB 1.9 billion (annual growth of 26.7%).
Tele 2
Tele 2 Russia is one of the leading mobile operators in Russia. The company has license to operate mobile
services in 37 Russian Regions. As of September 2010 the company has 17.7 million mobile subscribers in
Russia with a relative market share of 8.3%.
As of December 2009, the company generated SEK 7.54 billion in revenue from Russian operation with a year
on year growth of 11%.
Uralsvyazinform
Uralsvyazinform is a leading Russian telecom service operator. The company is primarily engaged in offering
fixed line, mobile telephone and Internet access services in the Urals region. The company was established as a
result of the merger of 6 regional operators in the Urals region and Uralsvyazinform, an operator in the Perm
region. Under telecom services the company offers including local and intra-zone telephone communications,
international and domestic long distance services, mobile communications (GSM, NMT and CDMA), data
transmission and Internet services. It also provides cable television and wired radio broadcasting services,
telegraphy and channel lease services. As of September 2010 the company has 4.9 million mobile subscribers,
750,000 broadband subscribers and approximately 3.7 million fixed-line subscribers (2008).
In the year to end-December 2009, Uralsvyazinform achieved revenues of RUB 40.4 billion (annual decline of
0.7%) and net profit of RUB 3.7 billion (annual growth of 44.1%). The mobile segment accounts for around 30%
of the company's total revenue.
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Vimpelcom
Vimpelcom is one of the 3 largest telecom operators in Russia. The company is primarily engaged in offering
mobile services both 2G (through out Russia) and 3G in certain part of Russian Federation. Recently Norwegian
telecom operator Telenor acquired 31.7% stake in the company. As of September 2010, the company has 51.6
million mobile subscribers in Russia and 1.2 million broadband subscribers.
For the year ended December 2009, the company generated USD 10.078 billion in revenue. In Q2 2010 the
company generated USD 2.14 billion in revenue with a Q-o-Q growth of 23.1%.
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Regulatory Environment
Telecommunication in Russia is regulated by Ministry for Communications and Information of the Russian
Federation. The law Communications Law, which came into effect on January 1, 2004 and is the principal legal
act regulating the Russian telecommunications industry. The Communications Law sets forth general principles
for the regulation of the telecommunications industry, including a description of the institutional framework
for the federal government’s involvement in the regulation, administration, and operation of the
telecommunications industry. Ministry for communication and Information is authorized to grant license to
communications service providers, allocate radio frequencies, certify telecommunications equipment, allocate
numbering capacity, ensure fair competition and freedom of pricing and conduct oversight of operators’
compliance with the terms of their licenses and Russian law.
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