Year 2007 was the year of the telecom industry consolidation. By far the single largest merger shook the Tmnetmy operators' status quo. Mikhail Fridman, Alfa Group's owner, which holds a large stake in VimpelCom, blessed a deal to buy Golden Telecom, one of the largest Russian alternative fixed line providers. The deal, which is worth USD 4.3 billion, created the first Russian mega mobile-fixed player. VimpelCom, the number two Russian mobile operator, which provides mobile services to over 65 million subscribers in Russia, Armenia, Kazakhstan, Ukraine, Georgia, Tajikistan, and Uzbekistan, decided to diversify its services into providing mobile broadband. Golden Telecom, which is traded on the NASDAQ and holds a large chunk of the Russian Internet, voice and data market, seems to be satisfied. In the meantime, Golden Telecom has announced that it plans to invest over USD 1 billion to expand its fiber-optic network to cover the territory with population of 65 million.
Broadband Internet continued to be the key driver of the telecom market. Nation-wide ADSL has remained one of the fastest growing segments of the broadband market. However, despite the dominance of DSL, wireless services over Wi-Fi or WiMAX connections are rapidly emerging as a cost-effective alternative to DSL. By the end of 2007, broadband penetration in Russia was estimated at 3.2%.
Broadband technologies also boosted IPTV and HDTV exposure. Naturally Moscow and St. Petersburg lead in this market segment. Outlying regions have only 17% PC penetration, while Moscow is well over 70%. At the same time 50% of Moscow has BWA connection. Technology-wise great prospects have technologies supporting broadband, such as VDSL, HDSL, ADSL2+ and FTTx. For example, in Moscow where the most of last mile lies in copper, FTTC technology is widely used. The reason is that Moscow began launching BWA networks much later than Europe and was fortunate enough to choose more modern technology. As a result, the FTTx share in Moscow is over 50%, according to MForum. Similarly, in outlying regions other technology combinations are being used for BWA, including FTTB, FTTC and FTTH.
Triple Play market demonstrated healthy growth of about 25% to 30% in 2007. According to the National Cable Networks, total investments in the BWA and TriplePlay markets may reach $4 billion in 2008. As of April 2007, there were over 1 million Russian cable TV subscribers, and 7.4% of all cable TV subscribers used digital TV. Today Russian subscribers have at least 50 channels to choose from. Almost 10% (4.7 million households) of Russian households watched digital TV.
Various sources estimate the Russian long distance communication market size at about $3-3.5 billion in 2007. CNews Analytics believes that the volume of the Russian international and inter-city communication in 2007 reached about $2.2 Streamyx Malaysia Inter-zonal communication alone brought $1.3 billion. The inter-city communication market segment holds 43.3% of the long distance market, while inter-zonal has 36.4% and international accounts for 20.3%, according to CNews Analytics.
After Rostelecom lost its monopoly on long distance communication, other operators jumped on the bandwagon. Today MTT, Golden Telecom, TransTeleCom, Orange Business Services, Arctel and Synterra also provide long distance communication services nation-wide. ComStar also is planning to capitalize on its dividends. Overall, according CNews Analytics, about 30 companies have licenses for long distance communication in Russia.
Rostelecom remains a major power on the long distance market, and according to its own research holds 57% of the market. Most of its revenues, about 80%, come from long distance. Nevertheless, by the end of 2007 the inter-city communication market had grown only 0.7%, while its share of the international market segment fell 6.8%.
Golden Telecom produced good results, stating that over 1 million clients used its long distance communication services in 2007. MTT doubled its revenues from $92 million to $208 million in 2007, and according to the company's sources its share of the long distance communication market reached 6.8%.
The biggest news is that Russian mobile operators are keen on advancing this market. MTS planned to launch 6,000 km of network in 2008 and by 2011 is set to build another 12,000 to 15,000 km of network. VimpelCom built a network of over 7,000 in 2007. Naturally, newly acquired Golden Telecom adds a significant capacity to this market. On top of that VimpelCom is building more than 1,000 km. MegaFon's backbone network has about 10,000 km.
Communication Ministry announced that during the first nine months of 2007 over 6,000 km of international communication cables were built, which is a 48.5% year-on-year growth. Led by liberalized long distance market and explosive growth of Broadband Speed Test transit market as well as new regulations requiring new operators to build their own networks nation-wide, operators invested heavily into the infrastructure upgrades.
One of the year's major highlights in the carrier market segment was the launch of the new undersea fiber optical cable system between Russia and Japan by TransTeleCom and NTT Communications (NTT Com). This new 570 km DWDM network has a capacity of 640 Gbit/s and has great potential for expansion of Eurasian traffic. According to CNews, the NGN market in Russia will be about $1.5 billion in 2009.
Mobile operators surprised analysts with peaking ARPU numbers. In fact, the ARPU of VimpleCom and MTS showed very high growth compared to that of Western operators. The whole market surpassed USD 22 billion in 2007, while operators continue to invest into the network expansion. In 2012 mobile Internet services are predicted to bring some 10% of all revenues of mobile operators of the mobile service segment, or about $3.4 billion, according to MTS CEO Leonid Melamed.
Dr. Andrey Gidaspov has over 12 years of experience in business consulting in the IT and telecom (ICT) fields in Russia, CIS and Asia. Andrey has sealed deals for hundreds of American companies with Russian and CIS partners, ranging from start-up businesses to large multi-national corporations throughout Eurasia. His past clients include well-known technology leaders such as Motorola, Harris, Tekelec, Oracle, Corning, Tellabs, Qualcomm, Net2Phone, Nortel, Andrew and many others.
In September 2004 Andrey opened his own consulting business, Gidabyte http://www.gidabyte.com based in Hong Kong, China. The company provides a wide range of business consulting in the ICT sector for international companies in Eurasia and Asia Pacific. GidaByte's bi-monthly newsletter "GidaScope" has become an instant success http://www.gidabyte.com/newsletters among various businesses interested in doing business in Russia. In 2007 Andrey authored his first book - "Riding the Russian Technology Boom" - which is available on Amazon.
