Telecommunication

in Russia
GLONASS
3G and broadband in every city
High competition

PAGE

Russia – a provider and consumer of the most cutting edge technologies 2

GLONASS 4
Cellular communication 6
Long-distance communication 10
Internet access 12
Digital television 16
State telecommunications programs 18
 Russia –
a territory of cutting-
edge communication
technology

communication
Modern  services are available
for a majority of residents of Russia. Despite its vast
territories, Russia’s regions are all equipped with
third generation cellular networks. Most cities
provide broadband Internet access. Two capitals —
Moscow and St. Petersburg — surpass large cities
in a number of countries in terms of access to
telecommunication services.

The vibrant development of

new communication
technologies during the last few years has been
a unique feature of Russia’s global standing: the success of one of the first
commercial WiMAX networks has been reported far beyond Russia, while
the GLONASS navigation system — the first and
only alternative to GPS — has got the attention of consumers and
positioning system developers around the world.
2
 CELLULAR
Russian
OPERATORS
are the chief players in the CIS and
are actively investing in network
development abroad.

Rostelecom  —
the state telecommunications
corporation — has undergone
a series of successful reforms
and is developing new markets.
The company has become a unified
provider of electronic services to the
government, and is actively developing
wireless networks and building data
processing centers around the world.

Russia’s communications sector is undergoing a dynamic

development process thanks to strong support and
attention from the nation’s leaders.

President Dmitry Medvedev is both

an avid user and an advocate of modern
technologies. A number of commissions and councils
that coordinate the development of this sector were
created on the president’s initiative. The Ministry for
Communications and Mass Media (Mincomsvyaz)
has prepared a 10-year program Russian President Dmitry Medvedev
is an avid user and advocate
to help foster an information society in Russia. of modern communication
Its aim is to ensure that each Russian resident gets access to technology
communication and information technology.

3
 GLONASS –
Global satellite
navigation system

4
 Russia’s GLONASS
navigation system
— the first and only
competitor to America’s
GPS — has already
drawn the attention of
Russia currently has its own satellite naviga- users and developers
tion system — GLONASS. The technology already covers
the entire country, and by 2010 will be in use around the around the world.
world. Initially the system was developed for the Defense
Ministry, but towards the late 1990s it was decided to put
it to civilian use. Today GLONASS services in Russia are
used for a number of industries, particularly in the trans-
portation sector.
Outside Russia  — in the United States, Japan, and
a number of European countries — positioning devices
based on GLONASS are being used in construction, land
planning, agriculture and other industries. Russia’s larg-
est automaker — AvtoVAZ — has decided to start equip-
ping its cars with GLONASS navigation devices. A num-
ber of international Smartphone and navigator develop-
ers have already announced plans to use Russian tech-
nology in their devices.
Today, the market for Russia’s navigation technology
totals 16.5 billion rubles. GLONASS technology already
occupies 5 % of this market. In total, including planned
shipments until the end of 2010, orders have been
placed for some 43,000 GLONASS devices, including
1600 for ambulances (a total of 17,000 vehicles), 14,000
for the Interior Minister and 30,000 for transportation in
the regions.
In 2011, the federal target program for GLONASS de-
velopment ends, having expanded coverage over the en-
tire world. Currently Russia’s government is developing
plans for a new program that will run through 2020. The
program’s primary aim is to popularize global navigation
systems within the country as well as abroad. According
to forecasts made by the Ministry for Communications
and Mass Media, by 2020 the share of transport vehicles
equipped with GLONASS will reach 70 %. Expanding pen-
etration of these technologies will considerably decrease
reaction time for emergency services on the roads, and
help optimize the use of transportation vehicles.

5
 Cellular
networks
Cellular operators are
actively investing in new
technologies and setting
new standards for the
industry worldwide.
State regulation of the
sector aims to increase
competition, allowing
Russian mobile phone
subscribers to get access
to more cutting-edge
technologies.

The market is expanding

in spite of the crisis
Cellular communication is one of the most dynamically developing
sectors of the Russian economy. Even during the crisis, key indica-
tors of the sector demonstrated considerable growth. According to
the Ministry for Communications and Mass Media, the market vol-
ume for cellular communications has reached 554.6 billion rubles
($17.5 billion1). Over two crisis years, this segment has grown by
21.5% (in rubles).
The number of mobile phones and cellular devices grew by
15.5% in 2009, reaching 230.6 units. This means that for every 100
Russians there are 162.5 mobile phones.

1) Based on the nominal average exchange rate for 2009 – 31.68 rubles

6
Top three leaders
Not one of the top ten major cellular operators in
Russia has demonstrated subscriber outflow (see
table). The “big three” — MTS, VympelCom and
SUBSCRIBER BASE OF CELLULAR PROVIDERS
Megafon — continue with a strong lead. The fast-
WORKING ON THE RUSSIAN MARKET, 2009
est-growing cellular provider in 2009 was Tele2,
according to analysis by J&P.
OPERATOR SUBSCRIBER BASE 2009
AS OF 31.12.2009 GROWTH, %

MTS 69 340 000 7,3

VympelCom 50 886 127 5,9

Megafon 50 221 630 16

The government is Tele2 14 286 900 37,1

creating a powerful Uralsvyazinform 5 785 080 2,3

cellular asset SMARTS

Nizhegorodskaya Sotovaya
3 501 456 0

AFK Sistema has reached an agreement with the Svyaz 3 465 526 32,3

state to transfer control of Sky-Link, a CDMA- Sibirtelekom 5 218 262 6,4

operator, to the Svyazinvest holding. Svyazinvest
assets all over the country are planned to be con- Motiv (Yekaterinburg-2000) 1 716 413 15,3
solidated around the operator. Sky Link has re- Novaya Telefonnaya Kompaniya 1 333 191 8,3
ceived a  permit from the State committee for ra-
Source: J&P
dio frequency to use frequencies within the 1.9-
2.1 GHz range nationwide, where the operator has
a frequency capacity of up to 450 MHz. As a result,
Sky Link is developing double frequency range net-
works of 450/2100 MHz and offers third generation
communication services. These networks have al-
ready been set up in Moscow and St. Petersburg,
while 450 MHz range networks are already func-
tional in 32 Russian regions. As a result of the con-
3G network coverage
solidation of Svyazinvest assets in Russia, the big
three will soon have serious competition.
across Russia
Despite the crisis, operators of the big three are
actively investing in third generation (3G) networks.
This segment is currently one of the drivers of the
Russia’s telecommunications market. All Russian re-
gions currently have 3G coverage.
By the end of 2009, the number of mobile phones
compatible with 3G networks exceeded 13 million.
Sales volumes of 3G telephones topped $ 414 mil-
lion in the third quarter of 2009, according to J&P
research. During this period, sales of 3G-compatible
mobile phones occupied 13 % of the entire Russian
market for mobile phones. The market share of sales
revenue for these devices was 33 %.

7
 Cellular
networks

Revision of frequency and licensing simplification

In the near future, the government plans to make chang-
es to legislation regulating communication. The new
changes will stipulate that military agencies that own
frequencies within the civilian range (about 5%) will pay
for their use. Thus, regulators are trying to determine the
efficiency of the frequencies and explore possibilities of
expanding the telecoms market without posing a threat
to national security. Roskomnadzor2, meanwhile, has
planned the creation of a unified, integrated radio fre-
quency database for market players using the radio fre-
quency spectrum. This will allow them to use a simplified
application process and improve the quality of expertise
for electromagnetic compatibility, among other things.
The situation involving operator licensing has drawn the
attention of the Federal Anti-Monopoly Service3, which
has suggested simplifying and optimizing the number of
existing licenses for communication services from 20 to
five universal licenses. This will lead to a liberalization of
the telecommunications market.
2) Roskomnadzor – the Federal Service for Communication and IT Control is a feder-
al organ of the executive government that oversees spheres of IT and mass commu-
nication and electronic telecommunication. It also regulates and oversees person-
al data processing to ensure that it conforms to Russian legislation on personal data
processing. It also organizes the activities of services dealing with radio frequencies.
Roskomnadzor is part of the Ministry for Mass Communication.
3) FAS — The Federal Anti-Monopoly Service is a federal organ of the executive gov-
ernment that decides on normative legal acts and regulation within the legislative
sphere pertaining to competition on the market, the protection of competition on fi-
nancial services markets, the activities of natural monopolies, and advertising. Apart
from this, FAS ensures that the placement of contracts and tenders for the produc-
tion of products or the rendering of services for government or municipal needs con-
forms to current legislation. FAS also oversees foreign investment to Russia.

Mobile internet is
surpassing cable broadband
REVENUE FROM THE BROADBAND CABLE AND
The market for mobile data transfer in Russia today is the most
MOBILE INTERNET SERVICES MARKET
dynamically developing segment of telecommunications. Its
growth rate is about 50-60 % a year, and is exceeded by the
180
growth rate for data traffic. The most widely-used device is the
Mobile access USB modem; in 2009 at least 3.5 million modems were sold,
160 while sales in 2010 continued to grow at a rapid pace.
Cable access
140
Despite a late start for introducing 3G networks, operators of
the Big Three that are developing networks in the UMTS / HSPA
120
standard are quickly winning over market share from opera-
tors working in the CDMA 1x EV-DO standard. Both categories
Billions of rubles

100
of players on the 3G service market are placing big hopes on
fourth generation (4G) LTE networks.
80 To a large extent, thanks to the development of third gener-
ation networks, revenue from mobile data transfer networks is
60 growing rapidly. Based on forecasts by J&P, as early as 2010 the
total revenue for mobile operators working in this segment will
40 exceed the revenue of cable operators providing broadband
services in the private sector (over 60 billion rubles, or $ 1.89
20 billion).
Russia’s mobile WiMAX market is dominated by the Skartel
0 company (the Yota trademark), which serviced over 600,000
2007 2008 2009 2010 2011 2012 2013 active clients in covered cities (Moscow, St. Petersburg, Ufa,
(forecast) (forecast) (forecast) (forecast) (forecast)
Krasnodar, Sochi) as of mid year 2010. Networks have been
set up in Kazan, Novosibirsk and Samara, and are current-
ly functioning in test-mode. Investments in the project to-
taled $100 million. Skartel’s total investments have already ex-
ceeded $500 million. Networks in another five major cities are
ready for service. The Russian company is one of the largest
WiMAX operators in the world. In comparison, the Malaysian
PacketOne services 130,000 subscribers, while the American
provider Clearwire services about 173,000, while Japan’s UQ
Communications planned to connect 300,000 subscribers to
WiMAX mobile network by 2009.

8
4G as a key
development vector
Megafon has developed test LTE networks in sports facilities
in Sochi, which will play host to the Winter Olympic Games
in 2014. Other operators of the Big Three — VympelCom and
MTS — are ready to begin developing LTE networks and are
waiting for frequencies and tenders for licensing
Rostelecom, the state operator, got access to 4G frequencies
in 38 Russian regions. Commercial use of the networks is slated
to begin by the end of 2011.

Staying connected
on an airplane
Aeroflot, Russia’s leading airline, has signed an agreement with
Megafon to set up mobile connections on board its airplanes.
Aeroflot has already equipped one of its airplanes to provide
mobile access, and plans to equip three more by the end of
2010. Other operators, if they wish to invest in this type of ser-
vice, will be able to join Megafon on board Aeroflot’s fleet.

Value added services

Major retail chains and bring operators
banks are becoming considerable
operators revenue
Russian companies had announced plans to develop the MVNO The revenue operators get from value added
model (virtual operator) five years ago, but they were not able services (VAS) reached 122.3 billion rubles ($3.9
to begin due to a lack of proper legislation. This legislation ap- billion) in 2009, according to AC&M Consulting.
peared by the end of 2008, and the first MVNO licenses start- The share of income from VAS increased from
ed being issued in the summer of 2009. MVNO permits were 14.9% in 2008 to 18.8% in 2009. Revenue from
aimed to help develop cellular communication companies in text messaging increased by 4% and totaled 49
Russia’s regions. They were also supposed to help foreign oper- billion rubles, while revenue from content ser-
ators expand in Russia’s market in order to boost competition. vices reached 32.4 billion rubles.
Since then, over 40 companies have received necessary licens-
es. Currently they are awaiting number volumes from regula-
tors. In the meantime, so-called pre-MVNO models are enter-
ing the Russian market. These companies offer services under
their own brand and determine tariffs and marketing strate-
gies. However, unlike full-fledged virtual operators, they do not
invest into their communication infrastructure, while their cli-
ents subscribe to another mobile operator. According to J&P, by
the middle of 2010, about 10 such projects were underway in
Russia, with a subscriber base exceeding 1.1 million (0.5% of all
active SIM cards). The last pre-MVNO was launched by MTS with
the Auchan retail chain and another with the X5 Retail chain of
supermarkets. Russia’s largest bank – Sberbank – has also an-
nounced plans to launch a virtual operator.

9
 Long distance
connections
Monopolies on Russia’s
long distance connections
market are a thing of
the past. Thanks to
liberalization of the
market, the chief player,
Rostelecom, is gradually
giving up positions to
other cellular operators.

The end of monopoly

The liberalization of the market for long distance con-
nections, which was conducted by the government in
2006, has led to the emergence of a large number of new
market players. By 2010, 15 companies had licenses for
MARKET PLAYERS FOR LONG DISTANCE
long distance services. Eight of them (Rostelecom, TTK,
SERVICE INTERCITY AND INTERNATIONAL
Synterra, Arktel, Orange, Comstar OTS, MTT and Sovintel-
CALLS NOT TAKING INTO ACCOUNT ZONE AND
Vympelcom) offered direct long distance calls (by dial-
NETWORK LEASE IN 2009 ALL OPERATORS
ing 8). The other seven were able to offer direct long dis-
tance calls this year by having the subscriber dial a three-
digit code to choose the service provider (VympelCom, Others 14%
MTS, OSS, Megafon, OptiTelekom, Mobifon-2000, ТТК 1%
Rostelecom
Connect). Arktel 2% 61%
Orange 2%
Rostelecom continues to be the leader in tradition-
Comstar OTS 3%
al long distance service (intercity and international
calls, not including out of zone service or cost of leasing МТТ 7%
technology). Its income from the service totaled 37 bil-
lion rubles ($ 1.17 billion) in 2009, according to compa-
ny reports, accounting for a 5 % drop from 2008. As of 10%
2009, Rostelecom controls 61 % of the market in terms VympelCom
(including Sovintel)
of revenue.
Σ 59,9 Billion rubles
Source: DirectInfo

10
 VympelCom occupies second place, with 10 % of the
market share. Total income for the company from inter-
city, international and inter-zone services totaled about
8 billion rubles ($ 250 million); of that 6 billion rubles came
from long distance services, according to DirectInfo. This
sum includes services rendered to its mobile phone cli-
ents (without taking into account zone connections and
calls within the operator’s network) as well as income
generated from corporate clients with fixed connections.
Third place was occupied by MTT (7 %). Over the year,
the company’s market share decreased by 2 %. A con-
siderable market share (20 %) is occupied by other com-
panies. These are cellular operators (income generated
by MTS and Megafon from inter-city and international
calls to landlines in other regions), major operators of-
fering fixed connections (in particular, Comstar-OTS, TTK,
Synterra, Orange) and other smaller players (Arktel, OSS
and others). Last year, about 10.2 billion minutes of inter-
city calls ( -10 % compared to 2008) and 1.7 billion min-
utes of international calls ( -8 %) were made through tra-
ditional intercity and international networks. A decrease
in traditional long-distance traffic serves as evidence of
continued demonopolization on the market.

Cellular operators get

their own networks
Initially, the Big Three’s expansion was kept in check by lack of net-
works. They ended up being leased from Rostelecom, MTT, and
Transtelecom; as a result, long distance calls placed from mobile
phones were expensive. But in 2008, VympelCom acquired Golden
Telecom with a powerful cable network, while MTS and Megafon
started building their own networks.
As a result, the cost for inter-city and international calls placed
from mobile phones fell noticeably. Prices for these types of calls
dropped to the same level as those of landline operators, but mo-
bile calls proved more convenient.
Cellular operators are using their own channels more active-
ly. MTS already channels more than 70 % of its long distance traf-
fic through its own networks, accounting for over 2.5 billion rubles
in savings over two years. Leasing costs for other channels have
dropped by 40 % over this period. By the end of 2010 MTS plans to
transfer over 90 % of its long distance traffic to its own networks,
which will save another 1 billion rubles between 2010 and 2011. In
2009, VympelCom ran 6 billion minutes worth of long distance calls
through its own networks — a 28 % increase from the previous year.

11
 Internet
Access
Almost half of
Russians are online
Russia’s population is becoming increasingly more
computerized. In 2009, the total number of person-
al computers reached 52.3 million, a 68 % increase
compared to the pre-crisis year of 2007. This means
that for every 100 Russians there are 36.8 comput-
ers. Internet penetration, according to the Ministry
for Communications and Mass Media, was 42.1 %.
Over two crisis years, this indicator has increased by
17.5 percentage points. Two of the country’s larg-
est cities — Moscow and St. Petersburg — boast in-
ternet penetration close to saturation — 71 % and
62 % respectively. For this reason, the regions dem-
onstrate the main growth potential.
Revenues from internet service have more than

42,1%
doubled over the last two crisis years: from 43.5 bil-
lion rubles to 88.8 billion rubles ($ 2.8 billion).

12
As the market for internet access in Russia’s largest
metropolises approaches saturation, providers are
actively expanding to the regions. The segment
is witnessing a robust consolidation process, and
subscribers are seeing new advantages and new
opportunities as a result. The government is actively
involved in expanding and improving internet
access for all Russians.

Liquidating digital inequality

By the end of 2007 all 53,000 Russian schools
were connected to the internet. Dmitry
Medvedev, then first deputy Prime Minister (he
was elected president in March 2008), personally
oversaw the project. Currently there is an active
process of connecting Russia’s libraries (there
are 130,000) to the internet, not to mention state
budget facilities in the education, health and law
enforcement sectors. Improving and expanding
internet access for state budget facilities is under
the President’s personal control.
In 2010 the interregional Svyazinvest com-
pany introduced so-called «social tariffs.» This
has helped level out access to unlimited inter-
net connections between large cities and the
regions. As a result, prices for broadband in
Sakhalin (Russia’s Far East) dropped three-fold.
Thus, digital inequality in Russia has been signif-
icantly curtailed.
Universal service mechanisms are also devel-
oping at a rapid pace, allowing for providing all
residential areas in the country with telephone
access. This includes the addition of payphones
as well as data transferring services and inter-
net access at special public facilities. Every resi-
dential point with a population of 500 people or
more will be required to have at least one pub-
lic facility with internet access. The implementa-
tion and spread of universal service plays a deci-
sive role in developing telecommunications net-
works in rural, remote and hard to reach areas.
A total of 253 tenders have been placed for
universal communication services, for a total
sum of 21.3 billion rubles. Some 24 universal ser-
vice providers are involved in this sphere. As part
of the agreement, a total of 146,000 payphones
are planned to be installed.
An important legislative initiative that will
have considerable impact on the broadband
cable market is currently under discussion in
Russia’s parliament. This is a bill to reform the
residential code so that providers can get access
to residential buildings without necessarily get-
ting permission from managing companies, co-
operatives and other residential agencies. If the
amendments are passed, providers will have
access to the building once they’ve signed an
agreement with at least one resident apartment
owner. That way, service providers will get indis-
criminate access to new subscribers (in the past,
cooperatives and other residential agencies de-
termined what providers were able to offer their
services in the residential building and on what
terms).

13
 Internet
Access

Access technologies
SUBSCRIBER BASE FOR RUSSIAN SERVICE PROVIDERS are rapidly upgrading
The share of urban internet users with broadband access
OPERATOR FEBRUARY FEBRUARY
from home has grown from 54 % in 2007 to 76 % in 2009.
2009 2010
There has also been a considerable decline in the use of
1 Comstar 1 105 000 1 267 000 old-fashioned dial-up connections — its share currently
2 Tsentrtelecom 740 000 1 250 000 stands at just 7-8 %.
3 VympelCom 830 000 1 107 400 The most widespread connection speed in Russian re-
5 ER-Telecom 628 000 1 015 000 gions — not including Moscow and St. Petersburg — ex-
ceeded 1100 kbit / s — this is almost three times the aver-
4 Volgatelecom 810 000 928 015
age speed during the previous year. In Moscow the aver-
6 SZT 636 000 869 000 age internet connection speed is about 5200 kbit / s.
8 Uralsvyazinform 542 000 706 350 Even during the crisis internet providers never
7 Acado 600 000 651 000 stopped updating their networks. In April 2009, Acado-
9 Sibirtelecom 394 000 562 800 Stolitsa completed modernizing its purchased net-
works, with a subscriber base exceeding 90,000 peo-
10 YuTK 378 000 536 000 ple in 19 Moscow districts. This was the first stage. Now
Source: AC&M Acado-Stolitsa plans to perfect the weaker segments of
its network (affecting 20,000 subscribers), built using the
DOCSIS technology (data transfer through a coaxial ca-
ble), and then proceed to the segmentation of the en-

Providers are merging tire network. Comstar-OTS has begun modernizing net-
works in cities in the Central Federal District of Russia
with cellular service (which includes Moscow and the Moscow region). The
operator plans to modernize existing networks and set
All internet providers within the Top-10 catego- up new ones using FTTB technology in order to connect
ry demonstrated a growing subscriber base, while an additional 500,000 apartments. ER-Telekom has ac-
some even showed 150 % growth. Comstar-OTS quired multi-service routers to modernize networks in
continues to lead this segment, but the gap in in- nine cities. In five of them, the provider began offering
dicators between the top five companies is negli- service in March 2010. Modernization with expand net-
gent, which suggests a high degree of competition work volume and allow the provider to service four times
on the market. as many subscribers.
One of the main trends in the cable internet ac- The vibrant development of bandwidth streaming
cess market in the last few years was asset consoli- through the internet, various multi-media applications
dation around major cellular operators. In late 2007 and online games has led to the telecommunications
VympelCom acquired Golden Telecom, one of the market acquiring ever newer technologies that cater to
leaders of internet access on the corporate market. the needs of the most demanding consumers.
In 2006, meanwhile, Golden Telecom gained con-
trol of Corbina Telecom, with strong positions on
the Moscow market. In 2009, MTS acquired a con-
trolling share of its sister provider, Comstar OTS. In
2010 Megafon took over Synterra, which had a large
subscriber base in Russia’s northwestern regions.
Currently, Svyazinvest, the state-owned holding, is
negotiating the purchase of the Acado provider.
For average subscribers, this kind of consolida-
tion offers a number of advantages. Having merged,
companies will have a single brand and a unified tar-
iff policy, as well as a single tech-support system. In
the near future, subscribers can expect a whole slew
of convergent products for a single service price.

14
FORECASTS FOR HIGHSPEED INTERNET ACCESS
FOR INDIVIDUAL CONSUMERS FOR 2010 Source: MForum Analytics

30

26% 26%
25
23%
20%
20 18%
18%

15 14%
11% 11%
10
8% 7%
6% 6%
5
3% 3%
1%
0
128 Kbit/s 256 Kbit/s 512 Kbit/s 1 Mbit/s 1-2 Mbit/s 2-5 Mbit/s 5-10 Mbit/s 10 Mbit/s
and below and above
Moscow and Moscow region Regions

The Russian
Internet (Runet)
is the fastest
growing segment
on the World
Wide Web. Now
with a Cyrillic
.рф domain
Some 3 million URLs have already been reg-
istered on Russia’s.ru domain. An addition-
al 1,130 sites spring up on the domain eve-
ry day. In 2009, the absolute growth rate of
new sites was 36.35 %. Thus, the Russian in-
ternet became the fastest growing seg-
ment of the World Wide Web. Of all national
domain zones, Runet occupies sixth place
in the number of registered URLs.
Meanwhile, the national Cyrillic domain
is also gaining popularity. Over 18,000 sites
have already been registered in this do-
main; including 6,700 that have already
been delegated. Priority registration was
recently completed, with trademark own-
ers, government agencies and the mass
media entitled to take part. The next step
is open registration for all Russian citizens,
which should begin in the next few months.
HD and 3D content and
online government services
as market stimuli
According to forecasts by iKS-Consulting, an additional 8 million us-
ers are expected to get a broadband connection within the next five
years, increasing the number of subscribers by 77 %. The Ministry for
Communications and Mass Media expects that by 2020 some 85 % of
Russian households will have broadband internet access with a min-
imum speed of 50 Mb / sec. Internet penetration is expected to reach
80 %.
Despite the development of wireless internet access, cable internet
providers are not expected to be pushed out of the market. Most sub-
scribers (50-75 % across Russia) will use both cable and mobile internet
access. On the one hand, high speed data transfer is already available
in cable networks; on the other, consumers can expect to get access to
multimedia resources from any point with 3G / 4G mobile network cov-
erage within the nearest future.
In the long term, the emergence of «heavier» content (for instance,
high-resolution television, or 3D television) will encourage the devel-
opment of cable networks using optic technologies.
One of the chief stimuli of internet access for the elderly population
has been the recent option of obtaining government services online.
Citizens can already file online applications for new passports and driv-
ers licenses as well as other services. By 2015 all government services
will be taken online.

15
 Digital
television
Russians are becoming active users of
digital television. In major cities they
are supported by cable operators, while
in smaller towns they get help from
the government. Rural residents watch
television via satellite.

FORECAST FOR SUBSCRIBER BASE GROWTH FOR

PAIDFOR TELEVISION IN RUSSIA IN 20082014,
IN MILLIONS OF HOUSEHOLDS
25

Market expected 20 20,8

22,5

to double 15 16,3
18,0
19,4

14,5
Currently a wide number of companies in Russia offer 11,9
10
access to digital television. In 2009, they serviced about
14.5 million subscribers. Compared to 2008, the sub- 5
scriber base for digital television last year grew by al-
0
most 21 %.
2008 2009 2010 2011 2012 2013 2014
Analysts from J&P believe that the market has all the
Source: J&P
potential for further subscriber base growth, and by
2015 the number of households that pay for cable tel-
FORECAST FOR REVENUE GROWTH ON THE CABLE TELEVISION
evision will grow two-fold compared to 2008, and reach
MARKET IN RUSSIA, 20082014, IN MILLIONS OF DOLLARS
22.5 million.
2000
According to J&P, digital television market volume in
2007 was about $ 750 million; in 2008 it grew by about 1500
1530
5 % and reached $ 780 million. In 2009, revenue growth 1361
on the market was 6 % (reaching $ 850 million) 1000
1197
1050
940
By 2015 analysts forecast a possible growth in cable 780 830
TV revenues, up to $ 1.53 billion. 2010 is expected to see 500

12 % growth, up to $ 1.05 billion, and 14 % in 2011, up to

$ 1.197 billion. 0
2008 2009 2010 2011 2012 2013 2014
Source: J&P

16
Satellite to take the lead
The growing subscriber base for satellite television, as well as
paid-for cable television in general in 2008-2009, was driven to a
large extent by an increase of subscribers to the Tricolor-TV ser- PAIDFOR TELEVISION PROVIDERS, 2009
vice, which subscriber base grew from 4.3 million to 6.2 million
HOLDING MILLIONS OF
in a year. Meanwhile, 4.2 million Tricolor-TV subscribers today si- HOUSEHOLDS
multaneously pay for cable television as well. Tricolor-TV 4,2
Apart from Tricolor-TV, major players on the digital televi-
Comstar-OTS 2
sion market in Russia last year were Comstar-OTS, with 2 mil-
lion connected households, the regional providers ER-Telecom (1 Divan-TV (ER Telekom) 1
million) and Multiregion (0.86 million), NTV+ (0.75 million) and Multiregion 0,86
Svyazinvest’s MRK subsidiary (0.61 million).
NТV+ 0,75
Technological competition continues on the Russian market
today. According to J&P, the correlation between HFC, DOCSIS Svyazinvest 0,61
and IPTV is gradually shifting towards the latter. Thus, the share Source: J&P
of HFC (Hybrid Fiber Coax) in 2009 dropped by 6 % in 2009, down
to 64 %, while the share of DOCSIS (Data Over Cable Service
Interface Specifications) grew by 14 % and took up a third of mar-
ket share. IPTV’s share is modest, but yet it grew three-fold over
the last year, reaching 3 %.

The government
as modernizer
In late 2009 Prime Minister Vladimir Putin signed the federal tar-
get program for television and radio broadcasting through 2015
into law. The program’s aim is to turn television broadcasting dig-
ital. Some 122.5 billion rubles have been set aside for this pro-
gram. Out of those funds, 73.6 billion rubles will come from the
state budget, while the rest will be financed by loans and capital
from contractors — state corporations like RTRS (Russian televi-
sion and radio broadcasting network) and Kosmichekaya svyaz.
Thanks to the program, subscribers will get free access to
about 24 channels. The main audience of state-financed digital
television will be in small cities and towns in the regions. In ma-
jor cities, cable networks have already become the most popular
way receive broadcasts, while satellite technology is the most ef-
ficient in rural areas.

17
 Government
telecommunications
programs

1 INFORMATION
SOCIETY  — a long term target program
(2011-2020) which aims to spread the use of information
technologies and telecommunication by citizens and
organizations by providing equal access to information
resources, developing digital content, implementing
innovative technology and radically increasing the
efficiency of government management while also
improving security in the information sphere.

18
GLONASS  — a state program
to develop and efficiently implement
the global navigation satellite system
GLONASS (2001-2011). The aim is to
introduce leading satellite navigation
technology for use in socio-economic and
defense programs, to maintain Russia’s
leading position in satellite navigation, and
to provide guaranteed navigation signals
to domestic and foreign customers.

2
 Sources

3
Rosstat (Federal Service for State
Statistics) – a system of state statistics that in-
cludes a central apparatus on the federal level,
as well as territorial organs of Rosstat located in
all regions of the Russian Federation, compris-
ing over 23,000 employees.

CNews Analytics has been special-

izing in research and annual ratings in informa-
tion technology and telecommunications since
2002. The agency has broad experience in pre-
paring analytical reports for government agen-
cies in Russia and the CIS.

J’son & Partners

TELEVISION AND Consulting — an international consult-
ing company specializing in telecommunica-
RADIO BROADCASTING tions market, media, IT and innovative technol-

DEVELOPMENT ogies in Russia, the CIS and Central Asia since

1996.
IN THE RUSSIAN
FEDERATION  — a federal target Direct Info — a research and consult-
ing company that has been working on the
program (2009-2015) aimed at creating digital television
Russian market since 1996. The company of-
infrastructure in Russia. Its main aim is to develop
fers a wide range of services that include gen-
distribution networks for national television and radio
eral statistical information and database devel-
channels, to provide guaranteed access of the main
opment for the main industries in Russia and
television and radio channels to all residential areas
the CIS.
in Russia, to maintain analog broadcasting while
the program is being implemented, and to provide
nationwide state radio broadcasting of an appropriate AC&M — a Russian consulting agency
quality. specializing in telecommunications research.

MForum Analytics — a research

group specializing in analytical reports on var-
ious segments of the telecommunications
market.

19
Prepared by the Ministry of telecom and mass communications
of the Russian Federation together with CNews Analytics
2010