In terms of crisis, ruble’s depreciation, lack of access to foreign capital and decrease of population incomes force Russian telecom operators and IT companies to identify potential growth points and to optimize their activities.
Goal of the Research
To estimate the level of crisis influence and rate risks on Russian telecommunication and IT industries.
The methodology of the research is based on industry estimation of export potential, level of dependence on import and debt burden. The forecast of prices on the main export items, estimation of necessity to make capital investments for short-term period and measure of governmental support are included in the research. External sanctions by industry and companies are being reviewed separately.
During analysis, J’son & Partners Consulting’s consultants estimated the following indicators:
- Export potential of the industry in 2015;
- Share of import in the primary costs;
- Announced measures of governmental support for the industry in 2015;
- Level of competition;
- Industry’s share in Russian GDP;
- Influence of sectoral sanctions.
Nowadays market of telecom services is one the most important sectors, crucially important for many industries of Russian economy and government operation. According to J’son & Partners Consulting, the volume of Russian telecommunication industry was 1.28 trillion RUB. in 2014.
The volume of exported telecom services was 49.3 bln RUB or 3.9 % of the market in general in 2013. The level of export-focus in the industry can be estimated as “low”. In general cost structure, costs on hard and software usually specified in telecom industry. Share of solutions, based on imported equipment and software is over 80% of the total consumed volume. Due to ruble’s depreciation, capital costs in rubles are increasing, which negatively influence the financial stability of telecom market participants.
The most important industry’s specialty is its service model with low elastic demand from the point of consumers. In these terms companies, which can effort operate without capital investments in short-term perspective, obviously will win.
J’son & Partners Consulting’s consultant identified the following positive and negative factors, which will mainly impact the telecommunication industries in a short-term perspective.
According to J’son & Partners Consulting, in Russia main telecom market players will not experience any major financial difficulties for a short-term perspective.
At the same time, in case macroeconomic situation gets worth, revenues from traditional services will fall. Exchange rate of ruble vs global currencies will also drop – some companies will face difficulties with servicing debt portfolio and implementation of investment programs.
J’son & Partners Consulting consultants’ forecast that 2015 will be a stable year as of Russian telecom industry situation.
Export-focused companies obviously will win in IT industry, first of all software developers, while key cost items for them are working force, which became twice cheaper in USD equivalent.
Major market share is taken by services - system integration and distribution of foreign hard and software. Increasing USD exchange rate, decline of macroeconomic situation and continuous volatility on currency market will have serious negative influence on this segment because of decreasing demand, major rate risks and lack of access to credit resources.
J’son & Partners Consulting’s consultants forecast for state of IT industry state will be negative for 2015, excluding the segment of production of software on demand.
Perspectives of Users’ B2B and B2C Segments
In terms of the research, J’son & Partners Consulting’s analysts forecasted the state of key Russian industries from the point of B2B for IT and telecom companies.
J’son & Partners Consulting’s analysts researched the following Russian industries: telecommunication, IT, gas and oil, wholesale and retail trade, construction, transport, food, ferrous and nonferrous metals, banking sphere, media market and chemical industries. These industries have over 50% in Russian GDP.
Seven from twelve researched industries (media market, oil and gas, wholesale and retail trade, construction, IT, transport and banking sphere) will face serious problems, which will lead to decrease in manufactured goods and possible bankruptcies.
Telecommunication industry, ferrous and nonferrous metals and chemical industries, according to J’son & Partners Consulting’s consultants, belong to industries with average risk level in case, if macroeconomic situation keeps current level of products manufacturing and volume of provided services in these economic spheres without deduction, and industrial players won’t experience major financial difficulties.
And food industry received a positive forecast.
Ranking of industries was made based on the following indicators:
- Analysis of export potential.
- Estimation of “import” share in prime costs.
- Level of competition in the industry.
- Level of governmental support.
The consumption of telecom services by population depends on geographical distribution of industries. which are stable against crisis, and by their total economic potential. By using macro economic forecast and also data by Russian Government, J’son & Partners Consulting’s consultants prepared a forecast for donors- and recipients-regions’ distribution in 2015 vs 2014.
According to J’son & Partners Consulting, big changes are expected in the number of regions-donors and decrease of available population’s revenues in 2015.
The crisis will have a negative impact on the most of researched industries: recession in 7 from 12. In particular, J’son & Partners Consulting’s analyst have a negative forecast for IT industry, but at the same time software segment will show growth.
The forecast for telecommunication industry is stable in general. Nevertheless, the industry will face not light problems, among which is worthwhile to mention the earnings decrease from voice services, increasing costs on debts in foreign currencies and potential problems with support of reached level of capital costs. In these terms, financial situation of telecom companies can be estimated as “stable” in general, despite the unstable macroeconomic situation and some companies will face difficulties due to this recession.
Detailed Results of the Research are Presented in the Full Version of the Report: Telecommunication and IT Industries’ Development Forecast for 2015
1. Analysis of Macroeconomic Situation (Scenarios)
2. Telecommunication Industry’s Forecast in 2015
2.1. Fixed Telephony
2.1.1. Subscriber Base’s Forecast
2.1.2. Income’s Forecast
2.2. Broadband Access (BBA)
2.2.1. Subscriber Base’s Forecast
2.2.2. Income’s Forecast
2.3. Cellular Communication
2.3.1. Subscriber Base’s Forecast
2.3.2. Income’s Forecast
2.4. Analysis of Financial Situation of Largest Market Players:
2.5. Conclusions and Recommendations
3. Brief Industries’ Analysis
3.1. Industries’ Impact in GDP in Russia
3.2. Estimation of Industries’ Financial Capacity
3.2.2. IT Industry
3.2.3. Media Industry
3.2.4. Oil and Gas
3.2.5. Wholesale and Retail Trade
3.2.6. Banking Sphere
3.2.9. Food Processing Industry
3.2.10. Ferrous Metals Industry
3.2.11. Nonferrous Metals Industry
3.2.12. Chemical Industry
3.3. Industries’ Ranking by Business Capacity in Terms of Crisis
3.4. Conclusions and Recommendations for Telecom Operators
4. Regional Analysis
4.1. Methodology for Financial Regions’ Situation Estimation
4.2. Regions – Recipients
4.3. Regions – Donors
5. Analysis of Companies, on which Sanctions Were Imposed
5.1. List of Companies with Listed Type of Sanctions
5.2. Estimation of Sanctions Level of Influence on Company’s Financial Situation
5.3. Measures of Governmental Support
6. Conclusions and Recommendations
7. List of Companies
This Information Note is Prepared by J’son & 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 reserves the right to revise the data after publication of new official information by the market players.