Global Insight Perspective | |
Significance | As the mobile market has matured, broadband has emerged as the main driver of Russian telecoms growth, but the deal between VimpelCom and Golden Telecom creates a new sphere of integrated, converged telephony. |
Implications | VimpelCom's purchase of Golden Telecom creates for it a new range of synergies and growth opportunities within the converged sector, including prospects amongst corporate customers. |
Outlook | Global Insight expects more convergence in 2008 and beyond. One likely development is a deal between leading mobile operator MTS and broadband operator Comstar. |
VimpelCom has confirmed that it is to purchase Golden Telecom for US$4.3 billion. VimpelCom is the second-largest mobile operator in Russia, by subscriber numbers, while Golden Telecom is one of the leading players within the emerging Russian broadband market. The deal creates the largest telecoms operator in Russia and is the largest ever on the Russian telecoms market in financial terms.
VimpelCom had 41.8 million active subscribers at the end of the third quarter of 2007. It also has mobile operations in six other countries across the Commonwealth of Independent States (CIS), with a combined subscriber base of 50.7 million. Golden Telecom is one of the leading broadband operators in Russia, with 394,900 subscribers at the end of October. VimpelCom has made clear that it plans to offer bundled products and has created the potential to offer quad-play fixed-line voice, IP TV, broadband, and mobile. The operator has also emphasised in a press release that it plans to establish itself as a leading integrated services operator across the entire CIS, as well as Russia.
Outlook and Implications
- Evolution of Russian Telecoms: As well as being the largest-ever deal in Russian telecoms in monetary terms, the convergence of two segments of the telecoms market is a highly significant event within the evolution of the sector. At the start of the decade the Russian mobile market boomed, with subscriber numbers growing exponentially and VimpelCom emerging as one of the leading players. Over the last 18 months, however, the market has matured, with penetration topping 100% and limited room for further organic subscriber growth. This has prompted operators to seek alternative means of revenue generation, such as increasing voice traffic, acquiring smaller regional rivals, and obtaining 3G licences. Meanwhile, over the past 12 months the broadband market has itself begun to boom and is shaping up to be the next main driver of revenue and subscriber growth in the Russian telecoms market. Now VimpelCom's purchase of one of the broadband sphere's leading players has created a whole new range of synergies and growth opportunities. The move marks the birth of integrated, converged telephony on a nationwide scale.
- More Convergence to Follow: This is the first high-profile instance of a crossover between the mobile and broadband sectors in Russia. Global Insight projects that it will have a permanent impact on the Russian telecoms sector, with further convergence likely in 2008 and beyond. Mobile TeleSystems (MTS) had previously been market leader by both subscriber numbers and revenue, but it appears that leadership of the mobile market alone will no longer be sufficient for dominance of the telecoms sector. In the wake of VimpelCom's move, Global Insight expects a similar response from MTS. There has already been speculation this year that a partnership could occur between MTS and major broadband operator Comstar, according to Vladimir Yevtushenkov, chairman of the Sistema holding group (see Russia: 12 September 2007: Sistema Mulls Long-Term Merger of MTS and Comstar). In the longer term more crossovers between sectors are certain, as operators adapt to the new telco created by the VimpelCom-Golden Telecom deal. Future activity could conceivably work in both directions, with broadband operators potentially buying out smaller, regional mobile operators.