PESTLE ANALYSIS OF RUSSIA

1. TELECOMMUNICATION INDUSTRY IN
RUSSIA
BY-
SHRUTI MULAY
CHETAN MORALWAR
ASHISH MUDE

2. INTRODUCTION AND HISTORY
• Russia was among the first countries to introduce radio and television.
• Russia leads in the number of TV broadcast stations and repeaters.
• There were few channels in the Soviet time, but in the past two decades
many new state-run and private-owned radio stations and TV channels
appeared.
• Telecommunication is mainly regulated through the Federal Law "On
Communications" and the Federal Law "On Mass Media“.
• The telecommunications system in Russia have undergone significant
changes since the 1980s, resulting in more than 1,000 companies licensed
to offer communication services today.

3. POLITICAL ASPECT
• Soviet-time - Ministry of communications of the RSFSR
• 1990s - Ministry for communications and informatization
• 2004 - Ministry of information technologies and communications
• 2008 - Ministry of Communications and Mass Media
• The foundation for liberalization of broadcasting was laid by the decree
signed by the President of the USSR in 1990.
• Government itself has a controlling stance in many issues, driven by a
combination of “neo-authoritarianism”.
• The Regulator is Government dependent, and suffers from non-verifiable
data and information, due to insufficient transparency and governance.
• public-private partnerships where only Government decides the rules.

4. TELECOM HOLDINGS IN RUSSIA

5. ECONOMICAL ASPECT
• Russia is one of the fastest-growing economies in the world.
• The country’s economy is expected to reach $3.18 trillion by 2018.
• Russia’s economic performance suffered during the global financial crisis
but recovered in 2010 and 2011, due to factors such as government
stimulus packages and export growth.
• Strong domestic demand is the key driver of the Russian economy.
• A solid workforce and abundant natural resources drive the economy.
• Domestic demand of population consumes almost half of the GDP.
• Russia’s strategic geographic location acts as a strength of the country,
connecting it with the other valuable markets of Europe and Asia.
• The Russian telecom market generated $43.4bn in-service revenue in
2012, a 6.1% increase year on year in local currency terms.

6. • Demonstrating an attractive revenue-generating potential with a CAGR of
4.2% over the next five years, to reach $53.2bn in 2017.
• Over the next five years, mobile data is expected to grow at a CAGR of
11.3% with Rostelecom’s joining the Big Three (MTS, MegaFon and
Beeline ) in offering UMTS/HSPA services started in December2012.
• At almost 164% of the population, mobile SIM penetration in Russia is
one of the highest in Europe. Continued market growth is expected at a
CAGR of 2.4% to 2017,with penetration reaching 190% of the population.
• Macroeconomic development forecasts for Russia for 2013-2014 are
positive. GDP is expected to reach 4.5% annually.
• This remains a good background for the business development and
investments in telecommunications services and networks.
• The Russian telecommunications market will continue its upward trend
over the next two years or so, triggered by the growing internet services
market, both in fixed and mobile networks.
• One strategic advantage of the Russian ISP market over other Central and
Eastern European countries is its big size, poor development and
territorial coverage, therefore, almost all providers and all wire and
wireless technologies will have a chance to get their niche.

7. RUSSIA COMMUNICATION MARKET
REVENUE,2010-2017

8. SOCIAL ASPECT
• Communication needs steadily increasing.
• Mobile phone usage evolving with longevity of service use and wealth of
the customer.
• Demand for infotainment is driven by technology and wealth of
population

10. INTERNET USERS AND PENETRATION
IN RUSSIA

11. • Communication technologies
 Public switched telephone network
 Mobile phone
 Radio
 Television
 Internet
 IPTV
 International connection
TECHNOLOGICAL ASPECT

12. • B2B accounts for app. 40% of the total telecom spend in Russia.
• Increasing scale and scope of B2B clients will create demand for more
sophisticated data-centric solutions.
• 4G mobile broadband opens the gate for new generation of value added
services e.g. chat, video streaming, etc.)
• Ability to deliver quality content becomes a key competitive advantage.
• Fibre-based technology will replace traditional xDSL
• Bundling of IPTV and broadband.

13. KEY SOURCES OF GROWTH IN
RUSSIAN TELECOM

15. MOBILE MARKET IN RUSSIA

16. LEGAL ASPECT
• The Russian Federation joined the WTO on 22 August 2012 and made
commitments under the GATS regarding telecommunication.
• The provision of telecoms services is regulated by Russian state authorities
on the federal level. Most telecoms services are subject to state licensing.
• Roskomnadzor is the main Russian regulatory authority under the Ministry of
Communications and mass media, including use of radio sector, mobile
services, fixed line telecommunications, TV and radio, personal data privacy,
and the Internet.
• FAS – Federal Antimonopoly Service of Russia.
• Encryption licensing – (a) product licensing, (b) activity licensing
• A license may be issued for a period of 3-25yrs.
• Network-to-Network interconnection and access mandated.
• Tariffs are subject to state authority.
• 112, 121, 122 and 123 are used for emergency services

17. ENVIRONMENTAL ASPECT
•Russia is served by an extensive system of automatic telephone
exchanges connected by modern networks of fiber-optic cable, coaxial
cable, microwave radio relay, and a domestic satellite system; cellular
telephone service is widely available, expanding rapidly, and includes
roaming service to foreign countries.
•Fiber to the x infrastructure has been expanded rapidly in recent years,
principally by regional players including Southern Telecom Company,
SibirTelecom, ER Telecom and Golden Telecom.
•Collectively, these players are having a significant impact of fiber
broadband in regional areas, and are enabling operators to take
advantage of consumer demand for faster access and bundled services.
Telephones – main lines in use: 44.152 million
Telephones – mobile cellular: 236.7 million

18. CHANGES IN TELECOM ENVIRONMENT

19. CONCLUSION
• What Russia has done in an explicit and
different way-
• Russia switched to mobile “calling-party pays” (still largely preserved in
USA), but did not drop distance based long distance fixed tariffs (alike
China and India).
• Russian users have only used to a limited extent value added services
(intelligent network applications, SMS, value added applications such as
mobile banking and localization), even generic one’s, a situation different
from almost all countries and regions.
• Most small or financial foreign investors, although having shareholder
rights, very often got diluted or side-stepped in many ways

20. • What Russia has explicitly not done
 Authorize and regulate network sharing, which was not even considered
to ensure coverage.
 There is a very bad segmentation of customer bases and there are no
differentiated brands; MTS made some attempts.
 Address the needs of the poor (except some groups inside privileged
categories like veterans or former Army personnel).
 Distribute technical skills were needed ; a critical case is the lack of
technical skills in Siberia and the Far East; there has been a dramatic
increase in the variety of networks and network elements , but people
employed to support operations has not kept pace .
 Outsourcing of network operations is seldom; MTS has outsourced a
small operation to Nokia Siemens Networks for 3G.
 Invest long term in technology and international property rights for
telecommunications infrastructure , applications and real time software
for commercial use.
 A fundamental difference of Internet search in Russia is that many of the
social networks don’t make their info available to search engines, but
instead build their own.