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Russia May See Turbulence In Telecom Market

The Russian government may make business more difficult for foreign firms with ownership in the country's telecom companies, according to a Pyramid Research report.

W. David Gardner

February 19, 2009

2 Min Read

The high-flying Russian telecommunications market could encounter some turbulence in the coming years as the market begins to level off and the Russian government considers making business life more difficult for foreign firms with ownership in the country's telecom companies.

Those, at any rate, are conclusions cited in a new report by Pyramid Research, the telecom research arm of the Light Reading Communications Network. Noting that Russia's telecom market generated an estimated $37.2 billion in service revenue during 2008, Pyramid analyst Andrei Tchadliev said the 2008 figures represent a 20% increase over the previous year's revenue.

"As revenue growth continues, Russia's telecom sector will undergo some significant changes that will affect the competitive landscape over the next five years," Tchadliev, who authored the report, said in a statement. "Mobile voice revenues in Russia will level off and begin to decline by 2011, but revenues from mobile data services will rise by a CAGR of nearly 14% over the next five years."

The Russian telecom sector has been on a tear in recent years, and Pyramid estimates the sector will be valued at $48.5 billion in 2013 as it continues as the fastest-growing telecom market in the Central and Eastern European region.

There could be some pitfalls, however, particularly for foreign companies with ownership in Russian firms. Tchadliev warns that government policies that surfaced in the energy sector could increasingly spread to the telecom area.

"Government policies could have a negative impact on the revenue opportunities for competing network operators and their technology suppliers," Tchadliev said, adding that Russia's "increasingly closed way of doing business, first exhibited in the energy sector, is quickly spreading to all levels of the economy.

"In the past year," he observed, "foreign-owned companies, such as Telenor and Tele2, have seen the Russian market and regulators becoming markedly hostile to the concept of majority foreign ownership of telecommunications firms."

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