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Evaluation of the development potential of services in the corporate segment of the professional mobile radio networks

September 2015

Analytical Report (full version)

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Analytical Report (full version)

Evaluation of the development potential of services in the corporate segment of the professional mobile radio networks
Evaluation of the development potential of services in the corporate segment  of the professional mobile radio networks
September 2015

Evaluation of the development potential of services in the corporate segment of the professional mobile radio networks

September 2015

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J'son & Partners Consulting presents brief results of their research about the Russian market of services in the professional mobile radio (PMR) in the corporate segment

 

 

Key issues of the study

 

The study analyzes the main world and Russian technological trends in the field of PMR. It is focused on detailed analysis of the current market situation and prospects of development of PMR in a number of Federal and regional companies (electricity, oil and gas, transport companies, etc.), as well as in some small and medium enterprises.

 

 

Practical value of the research

 

According to the results of the market modeling, conducted by J'son & Partners Consulting and based on deep analysis of projects and trends in some foreign markets, the following estimates and predictions were obtained:

  • the Russian digital PMR market volume in 2014 and a forecast for its development in the segment of large enterprises (B2B) up to 2020 in terms of quantity (subscriber base) by main sectors, assessment of the small and medium business share;
  • the current (2014) and projected (2020) market structure of the PMR, broken down into B2B, B2G and small and medium-sized businesses;
  • the forecast of the dynamics of the replacement of analogue PMR systems with digital and professional solutions based on LTE 4G (LTE PMR) and the total subscriber base of PMR until 2025

 

 

Target audience

 

The study is intended for operators, professional radio, mobile and fixed network operators and PMR equipment manufacturers, system integrators, venture capital and investment funds, specialized start-ups and research agencies.

 


Summary of the study

 

World

 

One of the main trends of the world market of professional mobile radio systems is the gradual replacement of outdated analog equipment standards (MPT 1327, SmarTrunk II, etc.) with digital systems (TETRA, DMR, APCO P25, TETRAPOL, iDEN, EDACS, etc.). According to forecasts from IHS, 2015 could be a landmark for the world market PMR: at the end of this year, the global supply of terminals that support digital standards will for the first time exceed the supply of terminals operating in analog mode. In 2018 the share of the supply of digital terminals will have approximately 65% of the total supplies, and the subscriber base of digital PMR systems (available radio systems) will catch up with the stock of analog systems in 2017 (Fig. 1).

 

 

Digitalization of PMR networks which allows to increase their capacity and throughput is the first step towards active use of data services. According to forecasts from IHS, the shipments of PMR devices for data transmission will increase by 15% between 2015 to 2018 and will reach to the end of the forecast period about 3 million devices. According to the survey of end users, they want to use data transfer services in PMR networks, but many of them are unable to do it on the installed hardware due to insufficient network capacity or due to limitations in the frequency spectrum. The existing data networks in PMR including TETRA TEDS, P25 and DMR cannot provide the necessary data transmission speed for many users. It is therefore considered that the future of PMR networks is associated with LTE technology.


 

In Russia

 

As the analysis of projects in the field of trunking communication showed, the largest customers are the enterprises of large business:

  • the backbone of the mining companies of the oil and gas industry, including pipeline transport;
  • other companies in the mining industry (coal mines, quarries, deposits etc.);
  • the enterprises of the petrochemical industry;
  • metallurgical enterprises;
  • in the sphere of production and distribution of energy, gas and water main consumers are water companies, nuclear power stations, energy companies, heating networks, etc.;
  • transport enterprises, including

o     JSC "RZD" (“Russian Railways”), subways

o     airports;

o     sea and river ports;

o     major car carriers;

  • largest banks (Sberbank, VTB, etc.) and cash collection services are also active consumers of radio communication systems and collection service.

 

Other potential consumers of the services of trunking communication are small and medium businesses which are served by trunking communication commercial operators:

  • taxi services, forwarding and courier services;
  • private security companies;
  • construction companies;
  • other companies of SMB.

 

According to J'son & Partners Consulting, the number of subscribers of digital PMR in the segment of large enterprises in the corporate sector will increase from 0.49 million in 2014 to 1.15 million in 2020 in the conservative forecast and from 0.66 million in 2014 to 1.8 million in 2020 in the optimistic forecast  (Fig. 2).

 

 

The average annual growth rate of the subscriber base of digital PMR (CAGR index) will be between 15% (conservative forecast) to 18% (optimistic forecast), which in whole coincides with the growth of the global market. The methodology for estimating the number of users took into account different penetration rates of digital PMR technology in the conservative and optimistic forecasts. In the conservative forecast for 2020 the market potential of small and medium-sized businesses is estimated at 100 thousand subscribers, in the optimistic – 240 thousand.

 

Detailed specification of the predictions of the subscriber base of digital PMR in the B2B segment for 2014-2020 are presented in the full version of the report.

 

 

Comments from the market participants

 

1. How do you assess the degree of penetration of digital PMR networks/devices in Russia in the segment of corporate customers? What are the key drivers and barriers in this segment of the market?

 

The degree of penetration can be assessed as high, as almost all new purchases in the last two years are conducted only for digital equipment. The total volume of the market of analog PMR equipment that requires upgrading, can be estimated as 80-90% of the total number of radioelectronic facilities that are in operation.

 

The first wave of active implementation of digital PMR networks were seen around 2006 and has been associated with TETRA technology: large-scale TETRA networks were built for large consumers such as Rosneft, Gazprom, Surgutneftegaz, Transneft, Russian Railways and not only. De facto, TETRA has become the industry standard for the most demanding and leading enterprises of the oil and gas sector. Then, around 2011, we saw active new digita DMRl technologies introduction, which allows (efficiently in economic and technical terms) to solve problems for consumers who have low customer density in large regions of operating activities (e.g., electric companies). Also, not all consumers can receive frequencies in the range which can operate TETRA equipment. Another very important advantage of the DMR digital equipment is its ability to work in both digital and analog networks (including trunking networks of standard МРТ1327), which allows to provide a smooth migration from analog to digital networks.

 

Key drivers and barriers in this segment of the market are:

  • the awareness of key customers that the service of cellular operators can not replace the professional radio communication, especially in critical situations: we can see return of entire segments of consumers to use their own technology PMR networks;
  • the emergence over the past two years from leading manufacturers a complete line of DMR equipment and solutions, including the low and middle price segments, which will fully replace analog equipment by digital;
  • the presence of localized applications from domestic producers (primarily for DMR) significantly increases the attractiveness and usefulness of solutions for consumers;
  • the main barrier is the lack of understanding by a number of consumers of the purpose of the PMR as a tool for loss prevention and operational management not only in normal mode but in emergency mode when a public network connection may be down, overloaded or out of order; unfortunately, in some cases, the awareness comes after the disaster has occurred and the organization can not manage their staff which is distributed over a large territory, which in some cases leads not only to significant material losses, but also to human victims.

 

2. How much is the increase of the demand for PMR services and devices among corporate customers over the past year? Which sectors have shown the most growth?

 

Last year was very difficult for obvious reasons, so any growth is hardly possible. In the course of this year there was a significant slowdown, associated inter alia with a postponement of the implementation of several major projects, some parts of which are also mobile radio systems. Smaller consumers (such as construction companies, security companies) reacted to the depreciation of the national currency and a slowing economy more sharply. But usually these segments are also first to recover.

 

 

 

Detailed results of the research are presented in the full version of the report:

 

«Evaluation of the development potential of services in the corporate segment of the professional mobile radio (PMR) in the regions of the Russian Federation»

 

 

 

Glossary (terms and abbreviations)

 

 

1. Brief analysis of the major PMR technologies and their market potential

 

1.1. Advantages and disadvantages of narrowband systems and prospects of their development

 

1.1.1. TETRA

 

1.1.1.1. In the world

 

1.1.1.2. In Russia

 

1.1.2. APCO P25

 

1.1.3. DMR

 

1.1.4. GSM-R

 

1.2. Prospects of broadband services in PMR networks based on LTE in Russia and in the world

 

1.2.1. Drivers and limiting factors

 

1.2.2. Forecasts

 

1.3. Analysis of the main possible trends of the PMR networks development in Russia and in the world

 

1.3.1. The introduction of data services in conventional narrowband PMR networks within existing frequency bands

 

1.3.2. The construction of new broadband networks based on LTE

 

1.3.3. Organization of virtual private networks (VPN) within the existing and future commercial LTE networks

 

1.3.4. Use of public commercial LTE networks in ad-hoc (on-demand)

 

1.3.5. The creation of a MVNO to access the commercial 3G/LTE networks

 

1.3.6. Other possible trends

 

 

 

2. Analysis of the current situation and assessment of the potential of PMR in the major Federal and regional companies (electricity, oil and gas, transport companies, etc.)

 

2.1.Analysis of public PMR projects in various industries

 

2.1.1. Local projects

 

2.1.2. Distributed projects

 

2.2. Identification of key enterprises – consumers of special radio communication services in the main branches and their strategy for the PMR development

 

2.3. Profiling companies from key sectors of the economy

 

2.3.1. Оil and gas industry (on the example of JSC "Svyaztransneft")

 

2.3.1.1. Analysis of the existing systems of special radio communication used in the enterprise, by technologies

 

2.3.1.2. Identification of the current and potential number of users of special radio communication

 

2.3.1.3. Identification of the structural units responsible for providing businesses with telecommunication, including special radio communication

 

2.3.1.4. Assessment of the costs for special radio communication in 2012-2014 and forecast for 2015-2017

 

2.3.1.5. Analysis of the technological development plans for use of PMR

 

2.3.2. Other large oil and gas companies

 

2.3.3. Energy companies (on the example of “Southern electric networks”, a branch of the “Moscow electric networks”)

 

2.3.3.2. Identification of the current and potential number of users of special radio communication

 

2.3.3.3. Identification of the structural units responsible for providing businesses with telecommunication, including special radio communication

 

2.3.3.4. Assessment of the costs for special radio communication in 2012-2014 and forecast for 2015-2017

 

2.3.3.5. Analysis of the technological development plans for use of PMR

 

2.3.4. Railways (on the example of JSC «Russian Railways»)

 

2.3.4.1. Analysis of the existing systems of special radio communication used in the enterprise, by technologies

 

2.3.4.2. Identification of the current and potential number of users of special radio communication

 

2.3.4.3. Identification of the structural units responsible for providing businesses with telecommunication, including special radio communication

 

2.3.4.4. Assessment of the costs for special radio communication in 2012-2014 and forecast for 2015-2017

 

2.3.4.5. Analysis of the technological development plans

 

2.3.5. SMBs

 

2.3.5.1. Taxi services

 

2.3.5.2. Private security companies

 

2.3.5.3. Construction companies

 

2.3.5.4. Other SMBs

 

2.4. Prospects of implementation of PMR services based on broadband LTE networks in the commercial sector (B2B)

 

 

 

3. Analysis of PMR event projects

 

3.1. The APEC Summit-2012

 

3.2. The Universiade 2013

 

3.3. The Olympic Games in Sochi

 

3.4. The BRICS and the Shanghai cooperation organization

 

3.5. Upcoming projects

 

 

 

4. The PMR market in Russia in 2014 and forecast till 2020-25 in quantitative (subscribers) terms

 

 

 

Conclusions and recommendations

 

 

 

5. APPENDIX

 

5.1. The number of installed base trunking communication stations with a breakdown by subjects of the Russian Federation, 3Q2013 and 2Q2015

 

 

 

This Information Note is Prepared by Json & Partners Consulting. We strive to provide factual and prognostic data that fully reflect the situation and are available to us before issuing the material.

 

 

J'son & Partners Consulting presents brief results of their research about the Russian market of services in the professional mobile radio (PMR) in the corporate segment