2008-09-13 03:29:02 -
Russia Telecommunications Report Q3 2008 - a new market research report on www.companiesandmarkets.com
www.companiesandmarkets.com/Summary-Market-Report/Russia-Telecom ..
The first six months of 2008 have been characterised by some significant developments in the Russian mobile communications market. Firstly, the launch of 3G services has begun in earnest, following on from number three player MegaFons launch of services in St Petersburg in October 2007; the company has awarded infrastructure supply contracts to Nokia Siemens Networks and announced the availability of 3G services throughout north western Russia in June 2008. MegaFons foray into 3G has been accompanied by the launch of services by its principal rival, number one-ranked Mobile TeleSystems (MTS), which initiated 3G coverage of St Petersburg in May 2008.
MTS plans to cover more than 10 cities by the end of this year, and will be serving 40
cities by the end of 2009. Second-ranked VimpelCom has yet to say exactly when it will launch its 3G offering, but it seems most likely that services will be initiated in Q308. VimpelCom has had an interesting six months. Firstly, the company completed the acquisition of Golden Telecom, a Russia and Ukraine-centric broadband operator with a growing presence in other CIS states. In June, it directed Golden Telecom to acquire the outstanding shares of its affiliate, Corbina Telecom, an independent fixed-line operator with a growing presence in Russias broadband market. VimpelCom may be seeking to establish itself as a quadruple-play service provider, leveraging Golden Telecoms extensive broadband backbone to offer voice telephony, data/internet access and from this summer video services via an IPTV offering, alongside its main mobile telephony service.
The Golden Telecom purchase has also given VimpelCom access to valuable fixed-line, wireless broadband and mobile telephony assets and licences in Ukraine. In Russia, however, the company decided to stop basing its financial and operational reports on its total reported subscriber base by excluding inactive mobile subscribers. In Q108 alone, the company lost 9.5mn mobile subscribers, reducing its market share to 25%. Consequently, this has impacted on our forecasts for the mobile market, and we now expect there to be 182mn subscribers by the end of 2008, representing a y-o-y increase of 5.3%. By 2012, we now believe there will be 209.75mn subscribers. MegaFon saw its market share rise to 21.9% and now has an opportunity to draw level with or even overtake its rival if it can acquire seventh-ranked Middle Volga Inter-regional Association of Radio/Telecommunications Systems (trading under the name of SMARTS), a Volga-based operator with more than 4mn customers. Reportedly, MegaFon is also considering buying ninth-ranked Motiv (1mn customers) as well as potential targets in the fixed-line and broadband sectors. Clearly, MegaFon, with its first-mover advantage in 3G, believes the time is right to challenge VimpelCom in its core market. MegaFon does have an ulterior motive for launching a fresh assault on the market as the company could pursue a listing of its shares, a move that has long been anticipated but frequently stymied by a complex shareholder structure.
This obstacle seems to have been removed in May 2008 when Communications Minister Leonid Reiman left office amidst a government reshuffling and the shares he was alleged to have held indirectly in MegaFon were sold. Whether remaining shareholders TeliaSonera and Alfa Group are in favour of listing MegaFon remains to be seen, but the company is certainly making the most of the opportunities that are coming its way in order to make itself more attractive to potential investors. It is also said to be considering placing a bid for Irans third national cellular licence, due later this year. Meanwhile, Russias broadband sector continues to become increasingly competitive with a number of WiMAX operators including Enforta and Synterra announcing plans to enhance or extend their geographic coverage and ADSL operators such as ComStar UTS, Moscow City Telephone Networks, Corbina Telecom and the Svyazinvest local telephone companies accelerating their deployment of ADSL-capable switches. Comstar continues to be one of the most aggressive players in the broadband sector, having announced the acquisition of several fixed-line and broadband operators during the first six months of 2008 as well as partnerships with WiFi and WiMAX companies, such as FON Wireless and Intel.
The company plans to launch a mobile WiMAX service later in 2008; targeted at Moscow and leveraging ComStars existing broadband platforms in the Russian capital, the service should quickly find its audience. The Russian government has announced tentative plans to make the 2.5GHz spectrum available to wireless broadband operators and several key players have already said they would be interested in acquiring this spectrum to enhance and augment their existing offerings. However, it is no longer certain that this will happen, following the political changes of May 2008 that saw Vladimir Putin hand over the Presidency to his successor, Dmitry Medvedev. One of the most significant changes imposed by the new regime was the replacement of the former Ministry for Information Technologies and Communications with the Ministry of Communications and Mass Media as the principal federal executive body charged with overseeing the Russian telecoms sector. It is still too early to tell whether the new entity will have the same goals and strategies as its predecessor, including the long-awaited privatisation of Svyazinvest. For this reason, we believe there is a new air of uncertainty pervading the Russian telecoms market.
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