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Russian telecommunications market – moderate forecasts for 2011
|26 ноября 2010|
The value of the Russian telecommunications services market will increase 5% this year. Forecasts for 2011 are only slightly better and rather cautious. The overall performance of the Russian economy will continue to play an important role for the country’s telecoms industry.
In recent years, the Russian telecommunications market has demonstrated strong growth, driven by the country’s continuing strong economic performance. Until 2009, Russia experienced more than ten years of GDP growth, which equalled 7% per annum on average. In 2009 with the changing environment on the external markets, Russian GDP dropped by 7.9%.
The slowdown in the purchasing power growth of the Russian population was evident even in 2008. While in 2007 real disposable incomes of households increased by 12.1%, in 2008 the growth amounted to only 4% and in 2009 this indicator remained almost at the level of the previous year. What is more, income levels vary considerably depending on the region.
In 2010 the Russian economy has started to recover after the crisis period, however, current year-end forecasts for the GDP growth have been revised down and they now stands at around 3%. Forecasts for the telecommunications market are also cautious.
The value of the telecommunications services market in Russia amounted to €22.7bn in 2009, declining by more than 11% year-on-year. As measured in local currency the market was even able to report an increase of 4.2%, however, the growth rate was the lowest since 2000. Despite still growing (in terms of RUB), last year the worst-affected sector was the fixed-telephony market, which declined by 1.9% after 6.4% growth in 2008. By far better result was reported on the ISP market which went up by a third over the same period.
Currently PMR expects that the Russian telecommunications market will grow by 5.7% this year. In the next years the market will continue to be triggered by the growing demand for internet and data transmission services. PMR also predicts that the fixed-line telephony market will stagnate or decrease in the medium term and mobile telephony will grow at a rate of 2-4% per year.
The mobile telephony market in Russia, which currently represents more than a half of the market value, in the coming years will not be driven by adding millions of SIM cards (often distributed for free and active for a very short period), but rather by attracting customers to actively use the services. Non-voice and value-added services will continue to gain in significance and an increasing proportion of mobile carrier revenues will come from this source. In our opinion, the development of 3G networks will bring new growth opportunities for the market and their significant impact on mobile operators’ revenues will become visible in 2011-2012.
The fastest growth in the coming three years is expected on the ISP market. The sector will benefit strongly from a further expansion of broadband in the residential sector as well as a growing demand for data transmission services from the corporate sector. Factors behind broadband’s rapid growth will be the relatively low broadband penetration in Russia, decreasing tariffs and the development of new technologies in the market.
Conversely PMR assumes that the number of new installations of fixed-lines in the coming few years will not be significant. Despite the latest actions of the regulator aimed at improving fixed voice revenues by the increase of rates of local calls, PMR does not expect the fixed-voice market to return to growth. In our opinion, the market will stagnate over the short term and will decrease due to the strengthening effects of fixed-to-mobile substitution and a further erosion of DLD/ILD revenues (liberalisation and VoIP providers).
It is also worth noting that in line with the overall macroeconomic climate, investments in the development of telecommunication networks in Russia declined by more than a third last year. Most of the fixed-line ISPs halted regional expansion plans and even 3G networks were developing at a much slower pace than expected. In H1 2010, major providers of telecommunication services in Russia declared the recovery of the investment programmes, what will also make a positive impact on the industry in 2011. PMR expects the investments to grow by at least 30% in 2010, however, they will still remain lower than in 2008. “Investment budgets of the companies will depend not only on their current financial resources but also on available investment opportunities. One of those might be a tender for LTE network development” – concludes Pawel Olszynka, PMR analyst and one of the report authors.