The Russian Federation: Among the Top Five BWA/WiMAX Opportunities in the World

ARTICLE

The Russian Federation: Among the Top Five BWA/WiMAX Opportunities in the World

By Artur Mironenko, Senior Analyst - Russia and Ukraine
Contact the author at Artur@maravedis-bwa.com

Our new report launched yesterday makes it clear, the Russian Federation remains among the world’s top five Wireless Broadband opportunities. The Russian economy is flourishing. GDP per capita has risen from $4000 in 1999 to $12,000 in 2006[1]. The demand in telecom services is rapidly outpacing the capacity of legacy infrastructure. Even now, investment in telecom is mostly coming into large cities, still leaving many places without coverage. Over 75% of Russians still do not have access to basic dial-up Internet access. Wireless Internet Service Providers (WISPs) have the chance to tap into this latent demand for broadband connections.

Several WISPs, such as Enforta, Quantum, and Synterra, have already launched services in numerous regions of Russia and they are enjoying early successes and considerable demand from consumers and businesses. Our forecast for BWA shows the vast potential for this marketplace and is accompanied by an in-depth analysis of its existing wireless operators.

We notice that consolidation has already started among the 200 current BWA service providers in the country. After interviewing the Top 10 WISPs, we concluded that the most active players will be the cash-rich companies belonging to one of the three major holdings in Russia, namely Alfa, Sistema, and Telecom Invest, which control both fixed and mobile service providers. Others such as Enforta also benefit from a sound investment capacity.

We, at Maravedis, are convinced that the Russian Federation will remain a price-sensitive market. Mobile WiMAX needs to offer much lower prices to be competitive, as penetration of conventional broadband technologies is rapidly rising (though still at a low level). While demand for broadband services explodes, both service providers and residential users require low cost CPE ($100 range) before they fully adopt WiMAX.

This 125-page report provides an exhaustive review of the BWA/WiMAX markets and regulatory activity currently taking place in Russia.

key findings include:

The accumulated WiMAX subscriber base in Russia will reach 4 million in 2012.
WiMAX subscribers will dominate by 2012 and represent around 75% of the total BWA subscriber base. The majority will be residential users and the SOHO/SME segment.
BWA/WiMAX combined equipment market size will reach $320 million in Russia in 2012, representing 5 times today’s market size.
Around 70% of the BWA equipment installed during 2010 will support the 2.5 GHz and 5 GHz frequency bands.
BWA projects are still considered as high-risk and have difficulty raising capital.
By 2012, we expect at least two national BWA operators to operate in 80% of the regions.
Low PC penetration, excessive bureaucracy, and high CPE costs limit Russian BWA market growth. However, the large penetration of mobile phones might facilitate the transition to heavier broadband applications, as more users become accustomed to MMS, mobile email, etc.
Shortage of spectrum and intricate regulation contribute to delaying massive adoption of BWA/WiMAX in Russia.
Low personal incomes in many Russian regions will slow down the penetration of mobile WiMAX in rural areas.

The most promising regions for BWA/WiMAX are Moscow city, St. Petersburg, Samara oblast, Sverdlovsk oblast, Rostov oblast, Tatarstan republic, Krasnodar krai, Tyumen oblast, Chelyabinsk oblast, and Bashkortostan republic. The Central region will concentrate one-third of total subscribers.

“Russian Federation Broadband and WiMAX Market Analysis and Forecasts” 2008-2012 is a must read for companies wanting to enter the Russian marketplace. It provides a roadmap that will help the reader maneuver around obstacles and find the real opportunities. A free table of contents can be downloaded at www.maravedis-bwa.com.

1] Source: Country Briefings - Economist Intelligence Unit site (December 2007)

For more information you can contact the author. Artur@maravedis-bwa.com