The buzz in the Russian mobile market is reminiscent of the European heyday of 1999. However, operators such as Vimpelcom can learn from the western Europeans’ mistakes. As the market matures and concentrates in the hands of the major players, investment in messaging is important. In the longer term, the industry’s prospects look bright.
Russian mobile operator Vimpelcom has reported 2001 net income of $47.3 million.
Vimpelcom, one of Russia’s largest mobile operators, has announced its 2001 results. Net income rose to $47.3 million from a net loss of $77.8 million in 2000. Annual revenues rose by over 50%, subscriber base by over 150% and EBITDA by more than 200%.
While Russia is certainly not in the mobile dark ages, it lags behind many of its counterparts. The low population density brings network coverage problems. It has also ensured a highly fragmented industry, with too few Vimpelcoms and too many small regional operators.
Low GDP is also a drawback – although the gulf between the wealthy and the less affluent does make operators’ target markets more clear. A wealthy Russian’s price tolerance is on a par with the rest of Europe, if not higher. A less affluent Russian is most likely a would-be pre-pay customer, happier with a less advanced handset. This allows Russian operators to buy cut-price models in Europe and then retail them at a profit to pre-pay users.
The telecoms industry is maturing: Vimpelcom’s ARPU fell by 30% in 2001, despite a rise in minutes used, and prepay customers should account for around 70-80% of its users in the next three years. It must now learn from the experience of other countries.
In particular, the resource of text messaging has not yet been tapped among pre-pay customers. The Russian psyche and the language’s structure lend themselves to text messaging. Youth desire for the service is proven, and the status value of mobile handsets sweetens the proposition.
Operators must invest in inter-network messaging operability – especially in the Moscow-Petersburg corridor, where penetration is approaching saturation. They also need to ‘gird their financial loins’ ahead of 3G licensing. With heavy investment and technology from Scandinavia, they have a good chance of building inter-operability quickly.
In the longer term, as long as the government and 3G Association learn from western Europe’s mistakes, the future looks rosy for larger Russian operators. After all, fixed-line phones often stop working when it starts raining…