This report covers trends and developments in telecommunications, mobile, Internet, broadband, digital TV and converging media including VoIP and IPTV developments. Subjects include:
The recent global financial crisis has dented Russia’s strong economic recovery from the 1998 financial crisis, particularly due to the crash in commodity prices and associated customs duties and taxes which account for nearly half of the federal budget revenue. Exacerbating the situation was the highly leveraged Russian corporations, exposure to US mortgage-backed securities and capital outflows due to concerns over state interference in the economy and increasing tensions between Russia and the West over the conflict in Georgia; these concerns triggered rating agencies to downgrade Russia’s credit rating.
Government assistance in response to the latest economic crisis has included refinancing banks and corporations, as well as a reduction in the corporate profit tax rate. The cost of government intervention and falling tax receipts from energy production have pushed the federal budget into a deficit of at least 7% of GDP in 2009, expected to ease to 5% for 2010. The impact to the real economy is only now becoming evident with the World Bank publishing revised projections in March 2009 of an economic contraction of 4.5% for 2009 with unemployment to rise to 12% by 2010.
Despite the economic slowdown the telecoms market will fare relatively well given the essential nature of most telecom services although market segments will be affected differently; voice is expected to remain stable while the annual growth rate of the pay TV market in 2009 is expected to be half that of the previous year. The other impact is in capital expenditure, with the cost of financing pushing back projects as operators seek to preserve liquidity.
As in other industries within Russia, government participation in the telecoms market is increasing following its deal in July 2009 to acquire the only private ownership stake in telecoms incumbent holding company Svyazinvest, possibly increasing uncertainty over the state of effective competition in the telecoms market. Incumbent and alternative operators alike have spent much effort modernising existing networks or deploying new ones altogether, in hopes of selling broadband and convergence services such as broadband TV (IPTV).
Wireless access platforms such as WiMAX have garnered much interest and publicity, particularly in the regions, as alternative operators aim to capitalise on underserved markets by rapidly launching broadband services and build subscriber numbers while incumbents struggle to modernise existing PSTNs.
Russia posses a vast broadcasting market undergoing rapid change. Both freely accessible and paid content is widely available from cable TV, terrestrial, IPTV and satellite platforms. Competition is driving new network deployments and network modernisation, as incumbent broadcasting network operators face challenges associated with digitising analogue networks and increased competition from new market entrants, particularly from the telecom sector.
The desire to maximise APRU levels has led to the introduction of triple play services, bundling voice, video and broadband to consumers at a cheaper price. Digital terrestrial TV developments are progressing, with the government recently deciding to progress analogue switch off on a region by region basis.
Russia has the largest mobile market in Europe. The rapidly growing sector is dominated by three major service providers (MTS, VimpelCom and MegaFon), and SIM card penetration has surpassed 100%. Perceiving the growth opportunities in the fixed-line market, the two largest mobile operators have acquired major fixed line operators to become integrated service operators. Future growth in the mobile market will hinge upon mobile broadband and applications, with the major three operators deploying WCMDA networks in 2009 and offering mobile broadband services.