Global Insight Perspective | |
Significance | Having acquired a digital TV provider and made progress in its attempt to obtain a long-distance licence, Golden Telecom now appears close to purchasing rival broadband operator Corbina. |
Implications | The move is indicative of an aggressive approach to broadband deployment from Golden Telecom, which had previously invested in its own broadband infrastructure. |
Outlook | The move will increase Golden Telecom's subscriber base and infrastructure network within Moscow. Further consolidation in the sector cannot be discounted in 2007. |
Golden Telecom is close to securing a 51% stake in rival alternative operator Corbina, and has also acquired a 65% stake in digital TV provider Fortland Limited. It has been a busy week for the operator, which earlier announced that it was expecting official confirmation of receipt of access codes for long-distance licences.
Golden Telecom's deal with Corbina is subject to the approval of the appropriate regulatory bodies in the United States and Russia. If it proceeds it will see Golden Telecom acquiring 51% of Corbina, in exchange for 8% of the former's charter capital and around US$10 million in cash. In November 2005 Corbina began a project of fibre-to-the-building (FTTB) deployment in the capital Moscow, which has to date gained more than 100,000 customers. The company recently announced plans to increase its subscriber number to 300,000 in 2007 and 500,000 in 2009 (see Russia: 13 December 2006: Broadband Growth Continues in Russia as Corbina Considers US$60-mil. Investment). Golden Telecom's deal with Fortland sees it acquiring licences for digital television in a number of major Russian cities. The Digital Video Broadcast technology will allow the provision of high-quality pictures and sound, multiple channels, and pay-per-view programming.
Outlook and Implications
Consolidation Within Moscow's Broadband Market: Activity within Russia's broadband market has been growing, with competition particularly intense in the capital Moscow. As well as Corbina's FTTB project, there have been a number of investments in technologies capable of supporting broadband, from independent local exchange carriers (ILECs) including Enforta, Comstar, and Golden Telecom itself (see CIS: 9 November 2006: Golden Telecom Forges Ahead with Broadband Roll-Out and Russia: 30 August 2006: Broadband Metrics—Russia's Multi-Technology Broadband Market). The deployment of last-mile infrastructure in Moscow has been enforced by MGTS's ownership of the legacy copper-wire infrastructure. However, by purchasing a majority stake in Corbina, Golden Telecom looks set to pull off quite a coup within the frantic atmosphere of infrastructure roll-outs within Moscow. As Golden Telecom CEO Jean-Pierre Vandromme pointed out, the deal allows his company to sidestep the problem of deployment of physical infrastructure, and provides access "to virtually every building in the city". The deal would represent the first major act of consolidation and partnership between ILECs in Moscow's broadband segment. Further mergers may well occur in the coming months if accessing the infrastructure of other operators is deemed a more expedient approach than rolling out new infrastructure. Another alternative which is increasingly being adopted is the roll-out of wireless broadband networks (see Russia: 15 December 2006: Golden Telecom Begins Beta Testing of Moscow Wi-Fi Network).
An Aggressive Edge to Golden Telecom's Successful Strategy: The potential acquisition of Corbina marks a significant step in Golden Telecom's strategy. To date the operator has rolled out broadband networks, made regional acquisitions, and targeted small and medium-sized enterprises (SMEs) with huge success, recording strong profits throughout the year (see Russia: 4 August 2006: Golden Telecom Records Q2 Profit, Acquires Regional Triple-Play Provider). The move to acquire a rival operator is indicative of a more aggressive approach from the operator, although the deal continues to fit within the operator's strategy. As well as a strong broadband subscriber base Corbina also offers switched voice and data services to SMEs, and as such is moving in a similar direction to Golden Telecom. With Vandromme having previously hinted that his company may explore new services, Golden Telecom's latest moves also broaden the range of services it can offer. Access to Corbina's Moscow network has raised the possibility of bundled VoIP, IP TV, and mobile virtual network-based services, while the acquisition of Fortland's digital TV licences also expands the scope of potential services on offer. These deals put the gloss on a successful year for Golden Telecom, and the operator can be expected to consolidate further next year through investments, network deployments, and possibly further acquisitions, as well as exploration of non-voice technologies and bundling opportunities.