Marketing: Russia: a pivotal year?

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Marketing: Russia: a pivotal year?

21.05.2006, MForum.ru

To say that these are interesting times for GSM in Russia would be an understatement. It is a market where penetration is estimated at close to 90 per cent countrywide (or 133 million people) and way over 100 per cent in some cities, prompting a continuing drive by operators to encourage content take-up and, presumably, increasing their anxiety about delays in the licensing of 3G. And yet competition remains strong and may even have distorted penetration figures by bringing about multiple prepaid SIM ownership.


Of course, as in any vast, diverse market, there is no end of material to speculate about but it would be fascinating to find out what the views of the country's main operators - MTS, VimpelCom and MegaFon - might be on the prospects for mobile communications in a country spanning ten time zones, covering more than 17 million square kilometres and home to more than 141 million people.

And of course that is exactly what attendees at the fourth GSM Russia (or, these days, GSM>3G Russia) conference and exhibition (June 6 - 7 2006, Radisson SAS Hotel Moscow) can do when representatives of those three operators are interviewed on the first day, in the grandly named mid-morning session Setting the Industry Agenda for Years to Come.

To play the prediction game for a moment, one can guess that events in the past year will offer encouragement to the speakers - but also a few concerns. With the big three picking up 40 million subscriptions over 2005, competition is still strong as Vimpelcom edges closer to the numbers boasted by MTS - 44.8 million and 45.8 million respectively as of March, according to the Informa Telecoms & Media World Cellular Information Service (WCIS). MegaFon is a strong third with 24.4 million.

They may, for instance, want to discuss the possible challenge posed by the continuing growth of small and regional operators, although subscriptions to these total well under 20 million. Or alternative technologies to GSM. Admittedly CDMA networks like Skylink are hardly big hitters; Skylink itself has about one per cent of the market. It is, however, running a CDMA 450-based 3G service using 1xEV-DO, while the big three are still awaiting the long-promised WCDMA licensing process.

That may be another talking point at the event, in part because 3G might make it easier to sell data and multimedia offerings - albeit any way to grow non-voice revenues would probably be welcome. SMS is of course successful already but the whole market must hope that analyst estimates of non-voice revenues generating 30-40 per cent of ARPU by 2010 will be accurate. After all, 90 per cent penetration is near saturation isn't it? Well, not quite.

A further topic for discussion may be the way in which Russian operators have helped boost the level of multiple-SIM ownership by offering SIM promotions in an attempt to increase their subscriber bases. As a result, ARPU levels have been declining in recent quarters. One estimate of real subscriber penetration stands at just 42 per cent.

Such figures will no doubt be studied during the presentation entitled Update on Key GSM Developments in Russia and the CIS, after which the event splits into two streams, with Stream One - Strategy and Services - launching into the often vexed question of how to increase ARPU.

If some of the speakers are any indication, the market is so keen to encourage end user diversification that it desperately wants to hear what experience non-Russian operators have had. Thus, for example, Globe Telecom will look at text messaging in the Philippines, Mobilkom Austria at m-commerce and WIND of Italy at direct-to-consumer mobile content.

As we have noted, much of this content will be most effective over 3G and with 3G licensing (presumably) imminent, Stream Two - the Technology Symposium - strives to cover not only the nitty-gritty (such as evolving a mobile network to 3G, deploying and integrating 2G and 3G networks, access technologies and standards) but the future (through no fewer than four presentations on IMS). To kick off, however, the symposium tries to clarify what it all means in a presentation entitled The Demand for Mobile Content in Russia and the Drive to Develop High Speed Data Networks. An even more 3G-friendly day two offers keynotes on strategy, readiness and even whether Russia actually needs 3G. That may seem a touch pessimistic but no one can ever be entirely certain about market demand - hence events like this.

And stream two also continues the planning and rollout themes with contributions from 3 Italy, Poland's ERA GSM, Eurotel Praha and others covering everything from ‘basics' such as the data capabilities of WCDMA networks and the most cost-efficient deployment scenario, to advanced and/or market concerns like developing a multimedia mobile portal, outsourcing, and pre-launch strategies. And with Russia likely to be an HSDPA-ready 3G market, it may come as no surprise that the afternoon theme, HSDPA and Beyond, is central to at least four of the remaining presentations.

The focus on 3G will be welcome and undoubtedly popular, but that is not to diminish the importance of Stream One where more immediate concerns will come under the microscope. Concerns like real-time rating and charging for VAS, conformity across mobile payments, and encouraging VAS adoption. Also, as a reminder of the sector that seems to be supplying much of the growth at present, attendees can hear discussions on increasing revenues from prepaid users through mobile VAS.

An examination of MVNO prospects and MVNO market entry strategy should be the ideal way to keep attendees interested until the summary that closes the conference, a summary that will ask the questions: What have been the key learnings? And what should be the future targets and milestones? There will by then be no shortage of possible answers in this forward-looking event, taking place during what could be a pivotal year for GSM in Russia.

Click to read - Statistics: Russia: Annual Subscriber Growth in .pdf format.

Informa Telecom's & Media Group press-release

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