Analysis of the State and Development Prospects of Russian Telecommunication Services Market in B2C, B2B and B2G Segments
Analytical Report (full version)
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Analytical Report (full version)
Analysis of the State and Development Prospects of Russian Telecommunication Services Market in B2C, B2B and B2G Segments
Development of Infocommunication technologies (ICT) segment in Russia.
Telecommunications, information technologies, digital media concern the sphere which is liable to steady, impetuous and revolutionary changes in the whole world. Every second in all the countries, in the core of world technological innovations in Silicon Valley, California, in research centers, within the walls of world giant corporations there’s a war for original ideas, breakthrough solutions, new proposals, new customers. The segment of communications and new technologies, penetrating all the spheres of human daily activity, is the most significant according to the degree of influence on our private and work lives, social sphere, economy, image and status in the world society.
International researches show that there is a tight connection between Infocommunication technologies (ICT) development and economic welfare. Large scale expansion of high-speed communication and internet access technologies are a catalyst of ICT projects development, it creates a multiple effect on other segments of national economy, facilitates acceleration and raging of technological progress and ultimately ensures GDP growth both in separate regions and in the country in general. Besides, developing countries with more perfect infrastructure attract more outsourcing companies and foreign investments.
Infocommunication technologies (ICT) development is one of strategic directions in economy modernization, and investments in telecommunication infrastructure development facilitate strengthen of strategic position of any country in long-term outlook.
In the priorities list of government administration in Russia there is a strategic goal to enter the number of world leaders by the degree of ICT development. The government of the Russian Federation acknowledges telecommunication and connection segments development as one of priority directions and sets strategic goals of providing high-speed broadband internet access, mobile communication of the fourth generation (4G) and digital and electronic services introduction all over the country.
Effective use of opportunities provided by new communication technologies, reliable broadband networks and innovative users’ applications implementation pave the way for:
- improvement of country telecommunication infrastructure, creating the basis for providing new services for the population, local business activity and governmental institutions;
- connection to social and business activity of remote regions and regions with the small number of population,
- raise of government economy and social sphere administration effectiveness,
- acceleration of information exchange, electronic services distribution and appearance of new forms of communication between the population and enterprises, with foreign partners, government bodies, municipal services, medical and educational institutions (such segments like e-Business, e-Government, e-Education, e-Banking, e-Commerce, e-Health and e-Community are gaining popularity in the world).
New technologies and innovative services development, increase of informatization and technological awareness of the society, improvement of communication quality and convenience, appearance of social electronic portals, availability of different forms of multimedia content on the back of internet tariff and IT services prime cost decrease, on the level of regional and country economy in general facilitate labour productivity raise, stimulate creation of new businesses and workplaces and improve social sphere and life quality of the population.
On the governmental level due to new technologies development the country can upgrade its rating by the level of “informatization” (ICT) development. It is established that measurement of ICT development level (complex indicator calculated through index system) is used by governments to analyze problem fields in policy and to carry out monitoring in the field of new technologies introduction.
Multiplicative effect of ICT projects on economy, business-environment and social sphere.
Major factors influencing a general resultant Index of the country informatization (ICT Development / Networked Readiness), expressed through the following aggregated indicators besides technological parameters describing as well the state of regulatory environment in the country, competitive situation, size of R&D budgeting, quantity and level of innovative development, level of informational competence of the population, ICT education, quality and level of ICT trainings, courses and educational programs for the company employees and citizens, etc.:
Indexes of ICT services access (ICT access) are network infrastructure availability, technological coverage, governmental position towards information technology development, governmental costs on the sphere development, availability of information technologies for business, level of Internet and other technologies availability, cost of mobile communication, etc.
Indexes of ICT services use (ICT use) are citizens’, business communities and government bodies readiness to ICT use, level of ICT use in public, commercial and governmental segments, the number of PCs, internet users, subscribers, presence of active internet sources of governmental organizations as well as general production and information technologies consumption in the country.
Availability of conditions for ICT development (Environment) is a general situation of the business and regulatory environment in terms of ICT, presence of healthy competition, innovative potential, necessary infrastructure, opportunity of new projects budgeting, regulatory aspects, etc.
Human capital is a human development index (HDI), a complex comparative indicator of the expected life durance, literacy, education and life level in the world. It is used to reveal differences between developed, developing and less developed countries as well as to estimate the influence of economic policy on the quality of life.
Infocommunication competence (ICT Skills) is computer and technological awareness of the population.
Attainment to the projects of high-tech telecommunication environment the status of governmental importance is expected to stimulate telecommunication infrastructure development at the level of world standards, to upgrade the status and competitiveness of the country in the world society and maximize a correspondent socioeconomic effect through introduction and popularization of ICT products and services, innovative and high-tech development in all the spheres of the society life: in private life, business and government segment.
The analysis of the state and development perspectives of Russian market of basic telecommunication services (in segments – society, business, government)
Nowadays Russia according to the technological development scenario repeats global international trends: high-speed communication and internet access technologies develop at high rates; modern information and digital services proposition and consumption increase; demand for qualitative diverse informational, educational and entertaining content increases.
The head of Mincomsvyaz Nikolay Nikiforov says that information technologies segment development will be one of the department priority. Also for the first time in the department a special IT direction appeared which is supervised by a minister deputy. At the time according to the minister’s words, ICT and GDP segment covers about 3,9%. In comparison with other countries this share isn’t very large. In this terms Russia has a serious potential of growth.
The company J’son & Partners Consulting made an analysis and presents the research results of Russian market of basic telecommunication services consumption in segments: B2C (Business-to-Consumer), B2B (Business to Business, including micro, small, medium and large enterprises) and B2G (business-to-government).
In Gartner analysts’ opinion, in 2012 world costs on telecommunication services will grow by 1% in comparison with the last year and will comprise 1,72 trillion dollars. J’son & Partners Consulting research results showed that Russian market of telecommunication services grows at higher rates than the world market. In 2012 the increase can comprise 5%. The same increase is expected in 2013.
Total market size of basic telecommunication services in B2C segment has reached 891 billion rubles in 2011. In B2B segment providers revenue is almost by 4,5 times smaller – 199,6 billion rubles. Governmental segment spends 45 billion. Private (consumer) segment share in the structure of operators’ revenue from basic services comprises 78%. B2B market takes 18% and governmental segment 4%.
Now mobile communication market size exceeded by many times such services volume as fixed Internet access and fixed telephony. By the end of 2011 mobile voice communication operators total revenue has reached 767 billion rubles, meanwhile Internet and telephony operators total revenue comprised 291,7 billion rubles.
Fixed Internet access
Now the level of broadband internet access penetration in Moscow and in cities with the population of millions of people can be compared with the level of major world capitals: for example, in 2010 among the capitals Moscow with the penetration level of 76% was behind Los Angeles by 11% and ahead of Berlin by 14%. By the end of 2011 80% of households used broadband access service in Moscow.
By the end of 2011 39% of Russian households (21,7mn) throughout the country used broadband Internet access service, about 38% of which (8,3 mn hh) were from the cities with the population of millions of people. About 18% of users are located in the cities with the population from 500 000 to 1 mn people. According to J’son & Partners Consulting forecasts, Russian providers’ revenue in private segment will grow by 12% a year on average. The penetration level will slow down gradually and each percent will be harder to get, and mainly due to connection of small towns and population centers. According to the words of Mincomsvyaz head Nikolay Nikiforov, there will be created a public register of population centers, people of which don’t have access to modern communication services. It is also planned to organize a feedback linkage from people of these territories.
Notwithstanding that as comScore researches showed, in 2011 our country was an absolute leader in the number of people using Internet access service in households (it is traditionally supposed that 2,7 people live in a household), by the level of broadband penetration (which is calculated through the number of connected households) Russia is still significantly behind the leading countries – in Europe the penetration comprises 70% on average and 77% in the USA. Among European countries Russia takes the third place in the number of connected households falling behind German and France by 5,5 and 0,9 mn connections correspondently.
In 2011 world leader in the broadband subscribers number is China where there are 153,5 mn of connected households. The last one of Top 10 is Italy which has about 16 mn connections. For the last year Russia rose from 7th to the 6th place, leaving England behind almost by a million subscribers.
According to the results of J’son & Partners Consulting research, market size of fixed broadband Internet access (by FTTx, ADSL and DOCSIS technologies) has reached 112,9 bn rubles in 2011. For the previous year this indicator was 100,9 mn rubles. Annual increase was 12%.
The biggest share of this volume (112,9 bn rubles) comprises B2C segment (64%). B2B segment takes 24% of the revenue which is twice more than governmental segment (12%).
About 70-80% companies of small-scale (including microenterprises), medium and large business in Russian major cities uses broadband Internet access. In the following 2-3 years the revenue of providers in B2B segment will increase by 4% a year on average.
The service penetration in the governmental segment reached 94% in 2011. The market size in governmental segment will fall by 6-9% a year in the medium term, which is due to the cost reduction of the government contracts, cut of budget means as well as increase of requirements on projects cost economical validity.
The current situation on the fixed telephony market results in subscribers outflow to mobile communication operators offering more beneficial tariffs as well as increase of VoIP-telephone users’ number. In spite of this, fixed telephony remains highly demanded and is provided in full and with the proper quality.
By the end of 2011 fixed telephony market size according to J’son & Partners Consulting research results was about 178,8 bn rubles. Due to B2B and B2G segments costs reduction the market size decreased almost by 3% for a year. Operators revenue from private segment comprised 89,1 bn rubles (50% of the market). B2B segment makes up 37% of the market (67,1 bn rubles). Governmental segment makes up the rest 13% (22,6 bn rubles).
Telephone communication market in B2C segment shows a stable revenue growth which will continue in the future. According to J’son & Partners Consulting forecasts, average annual growth will be about 5%. Tariff increase by the Federal tariff agency will be the main driver. In B2B segment market size has negative dynamics. In the following several years the market size will decrease by 4-5% on average.
The market size in the governmental segment shows negative dynamics as well. J’son & Partners Consulting forecasts that revenue decrease will be about 10% a year.
Mobile voice communication
As for the end of 2011 total revenue of the operators from mobile voice communication reached 767,9 bn rubles. In comparison with 2010 this indicator grew by 7% (or 56,8 bn rubles).
Of this volume (767,9 bn rubles) B2C segment makes up 663,7 bn rubles, that is 86% of the total market. In B2B segment operators earned 97,5 bn rubles - 13% of the total market. The revenue of the operators in governmental segment made up about 1% (6,7 bn rubles in general revenue structure).
The biggest revenue growth in 2011 was in governmental segment, the share of which in the general structure doesn’t exceed 1%. In B2B segment the market size grew by 14%. In private segment this indicator grew by 7%.
Mobile Internet access and data transmission
For the recent years mobile Internet (data transmission services) was the fastest growing segment of additional services in Russian cellular communication networks. According to the results of J’son & Partners Consulting research, the half of Russian people use mobile internet, the total market size by the end of 2011 was 76 bn rubles, growing by 43% as compared with 2010).
In the basis of such a growth of mobile Internet segment there is active 3G networks development, users’ audience and consumed traffic increase. Revenue from mobile Internet access grows also due to a significant increase in mobile devices sales (tablets and smart phones).
At the moment mobile Internet access service is the most popular among all VAS services, offered to people. It is expected that by 2013 the market will increase up to 111 bn rubles, the growth in 2012 will be 24%, and in 2013 – 18%.
According to J’son & Partners Consulting, a significant revenue growth of cellular communication operators from data transmission is caused by the following factors:
- Smart phones and tablet PC sales growth;
- 3G-USB modems sales increase;
- Changes in the model of smart phones service consumption. Growth of popularity and the number of mobile applications requiring a “functional” phone and Internet access;
- Improvement of operators 3G/4G networks coverage, increase of the users number of conditionally unlimited tariffs for mobile internet;
- Mobile and Internet space convergence.
Projects in the sphere of ICT development are of a social and national significance for every country. Their realization besides a direct economical effect from new technologies penetration is able to influence a place which takes a country in the ratings of ICT development level. Active support from the government and the Ministry of Communications is called to create favourable conditions for collaboration of governmental bodies, operators-providers of new communication services and private investors and facilitates the telecommunication infrastructure development that finally can ensure the annual GDP growth in Russia and provide users with the services of world quality.
The period of 2012-2020 can turn out to be essential in forming a positive image of Russia as a potential leader in the sphere of ICT development in the world, due to:
- systematic large-scale launch of 4G communication technologies (LTE) and development of modern multimedia services on this basis,
- providing technical access to modern digital services and its facilitating for usage by the population, business and government officials,
- support from government and private investors of innovative unique and demanded projects for Russia in telecommunication and digital sphere,
- active partnership with Western leading players in introduction of successful business-models, marketing practices and ways of monetization of new kinds of services in digital sphere,
- formation and strengthen of modern technological and ICT education, improvement of technological awareness of the population.
In Russia on the governmental level main goals of ICT segment are as follows:
- improvement of coordination effectiveness of governmental expenses on informational technologies;
- renewal of legislative base and regulatory information in concordance with international standards;
- introduction of “e-Government”, electronic governmental and municipal services for the solution of inner problems, aimed at effectiveness increase of the work of government bodies and its usage convenience for the population and business at the world level;
- providing access to modern services of small and remote location centers and overcome of “digital inequity” problem.
One of the factors negatively influencing on the distribution level of informational technologies and informational society in Russia is that some territories of the Russian Federation are not developed enough in this sense. Thus, a high level of discrepancy in information technologies usage by the population in different regions is preserved. For example, according to the rating estimations of Russian regions by its readiness for the informational society the leader index is 20 times higher than the index of the outsider region. There are still problems of broadband internet access implementation for final users. As a rule, speed of access in regions is lower and tariffs, in contrary, are higher than in major cities – Moscow and St. Petersburg. Share of enterprises using broadband in regions is lower as well. For faster development of the informative society in Russia it is necessary to reduce prices of services on the basis of informational technologies for the population with the simultaneous improvement of their quality and availability level on the basis of competitive development between communication operators and equipment providers.
According to the Russian Federation government program “Informational Society (2011-2020)”, the number of households having broadband Internet access, calculating for 10 households, by 2015 the number is expected to reach 55, and by 2020 – 80. The growth will be secured due to active development of high-speed mobile 3G and 4G networks. Due to increase of broadband connections and improvement of other mentioned complex indicators, solving of “digital inequity” problem, by 2015 Russia will be one of the Top-20 countries by the index of readiness for the informational society and will strengthen this position at least up to 2020.
Main results of the research of private, business and governmental segment expenses on basic telecommunication services are given below:
Fixed Internet access
• Total market size in 2011 reached 112,9 bn rubles, out of which:
- B2C segment - 71,8 bn rubles (+ 19%)
- B2B segment - 27 bn rubles (+ 3%)
- B2G segment – 14,1 bn rubles (- 4%)
• Total market size in 2011 reached 178,8 bn rubles, out of which:
- B2C segment - 89,1 bn rubles (+ 4%)
- B2B segment – 67,1 bn rubles (- 8%)
- B2G segment – 22,6 bn rubles (- 11%)
Mobile voice communication
• Total market size in 2011 reached 767,9 bn rubles, out of which:
- B2C segment – 663,7 bn rubles (+7 %)
- B2B segment – 97,5 bn rubles (+ 14%)
- B2G segment – 6,7 bn rubles (+ 60%)
Mobile internet access and data transmission
• Total market size in 2011 reached 76 bn rubles, out of which:
- B2C segment – 66,4 bn rubles (+ 42%)
- B2B segment – 8 bn rubles (+ 39%)
- B2G segment – 1,6 bn rubles (+ 335%)
Contents of the full version of the report containing results of the research “Analysis of the state and development prospects of Russian market of telecommunication services in B2C, B2B and B2G segments”
2. General characteristic features of telecommunication services in Russia
3. B2C segment
3.1. Fixed Internet access
3.1.1 Number of connected households and level of penetration
3.1.2 ARPU and market size in monetary terms
3.1.3 The portrait of an average broadband user
3.1.4 Market structure by access technologies
3.1.5 Leading providers
3.1.6 Regional broadband markets in Russia
184.108.40.206 Leading regions
220.127.116.11 Comparison of Federal Districts
3.1.7 Market analysis by the number of Russian cities (the list of cities is in Appendix)
18.104.22.168 Cities with the population of millions of people
22.214.171.124.1 The number of connected households and level of penetration
126.96.36.199.2 Leading providers (the number of users, ARPU, revenue)
188.8.131.52.3 ARPU and market size in monetary terms
184.108.40.206.4 Set network throghput
220.127.116.11 Towns with the population from 500 thous. to 1 mn people
18.104.22.168.1 The number of connected households and level of penetration
22.214.171.124.2 Leading providers (the number of users, ARPU, revenue)
126.96.36.199.3 ARPU and market size in monetary terms
188.8.131.52.4 Set network throughput
184.108.40.206 Towns with the population from 100 to 500 thous.
220.127.116.11.1 The number of connected households and level of penetration
18.104.22.168.2 Leading providers (the number of users, ARPU, revenue)
22.214.171.124.3 ARPU and market size in monetary terms
126.96.36.199.4 Set network throughput
3.2. Fixed telephone communication
3.2.1 The number of fixed communication lines disaggregated according to Federal Districts, 2010 – 2015
3.2.2 Market size and dynamics in monetary terms disaggregated according to Federal Districts, 2010 – 2015
3.2.3 Market analysis by the number of Russian cities (the list of cities is in Appendix)
3.2.4 Competitive situation disaggregated according to Federal Districts, 2011
188.8.131.52 Market shares of traditional and alternative operators by the revenue
184.108.40.206 Market shares of traditional and alternative operators by the number of clients
220.127.116.11 Cities with the population of millions of people
18.104.22.168.1 The number of fixed communication lines and penetration
22.214.171.124.2 Leading operators (the number of lines, revenue)
126.96.36.199 Towns with the population from 500 thous. to 1 mn
188.8.131.52.1 The number of fixed communication lines and penetration
184.108.40.206.2 Leading operators (the number of lines, revenue)
3.3. Mobile voice communication
3.3.1 The number of active subscribers and penetration level
3.3.2 ARPU and market size in monetary terms
3.3.3 MOU, voice traffic
3.3.4 Leading operators
3.3.5 Regional markets
220.127.116.11 Leading regions
18.104.22.168 Comparison of Federal Districts
3.4. Mobile Internet and data transmission
3.4.1 The number of active subscribers and level of penetration
3.4.2 ARPU and market size in monetary terms
3.4.3 MBOU, traffic
3.4.4 Leading operators
3.4.5 Regional markets
22.214.171.124 Leading regions
126.96.36.199 Comparison of Federal Districts
4. B2B segment
4.1. Fixed Internet access
4.1.1 SME macroeconomic indicators in Federal Districts
4.1.2 The number of companies in Russia
188.8.131.52 Small-scale business
184.108.40.206 Medium business
4.1.3 The number of broadband companies
220.127.116.11 Small-scale business
18.104.22.168 Medium business
4.1.4 Corporate broadband business
4.1.5 Operators revenue from Internet access services
22.214.171.124 Small-scale business
126.96.36.199 Medium business
4.1.6 ARPU on corporate broadband market
4.2. Fixed telephone communication
4.2.1 The number of fixed communication lines disaggregated according to Federal Districs, 2010 – 2015
4.2.2 Market size and dynamics in monetary terms disaggregated according to Federal Districts, 2010 – 2015
4.2.3 Competitive situation disaggregated according to Federal Districts, 2011
188.8.131.52 Market shares of traditional and alternative operators by revenue
184.108.40.206 Market shares of traditional and alternative operators by the number of clients
4.3. Mobile voice communication
4.3.1 The number of active subscribers and penetration level
4.3.2 ARPU and market size in monetary terms
4.3.3 MOU, voice traffic
4.3.4 Leading operators
4.3.5 Regional markets
220.127.116.11 Leading regions
18.104.22.168 Comparison of Federal Districts
4.4. Mobile Internet and data transmission
4.4.1 The number of active subscribers and level of penetration
4.4.2 ARPU and market size in monetary terms
4.4.3 MBOU, traffic
4.4.4 Leading operators
4.4.5 Regional markets
22.214.171.124 Leading regions
126.96.36.199 Comparison of Federal Districts
5. B2G segment
5.1. Market size and dynamics in monetary terms disaggregated according to Federal Districts, 2010-2015
5.1.1 Fixed telephony
5.1.2 Fixed internet access
5.1.3 Mobile voice communication
5.1.4 Mobile Internet and data transmission
5.2. Fixed communication services
5.2.1 Order structure by type of a service, 2011
5.2.2 Order structure by state customers profiles, 2011
5.2.3 Government orders growth dynamics disaggregated according to state customers profiles, 2010-2015
5.3. Mobile communication services
5.3.1 Order structure by type of a service, 2011
5.3.2 Order structure by state customers profiles, 2011
5.3.3 Government orders growth dynamics disaggregated according to state customers profiles, 2010-2015
5.4. Competitive situation disaggregated according to Federal Districts, 2011
5.4.1 Market shares of key players by revenue from provided services
5.4.2 Market shares of key players by the number of state customers
5.4.3 Market shares of key players by revenue according to the type of service
188.8.131.52 Fixed Telephony
184.108.40.206 Fixed Internet access
220.127.116.11 Mobile voice communication
18.104.22.168 Mobile Internet and data transmission (in Russia in general)
5.5. Share of government orders of telecom and IT services in gevernment budget
Information ballot is prepared by the company J'son & Partners Consulting. We do our best to provide you with factual and prognostic data reflecting the whole situation and being at our disposal at the moment of the material publication. J'son & Partners Consulting reserves the right to revise the data about subscribers base after publication by distinct operators.
Development of Infocommunication technologies (ICT) segment in Russia.
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