Development of the telecommunication market in Russia
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|Professor Yuri Zubarev | | |
| | |Existence of developed info-telecommunication infrastructure is one of the major factors of |
|General Director of Radio&Reseach Institute | |an upsurge in national economic, increase of business and intellectual activity of the |
| | |society and increase of the country’s authority in the international community. |
| | |Today any business can not be effectively developed without a high-quality communication |
| | |system between its subsidiary and the external world. |
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|Development | | |
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|of the telecommunication market | | |
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|in Russia | | |
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|(Slide 2) | |(Slide 3) |
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|The 87 % of communication sector infrastructure in Russia belongs to telecommunication organizations| |According to the rating data gross revenue of all ‘Svyazinvest’ companies was estimated $3.15 bn on |
|that are a part of the holding company OJSC ‘Svyazinvest’. This leading telecommunication holding | |the whole (in 2000 – $2.62 bn). The holding’s companies toggled on 1.9 mln of numbers |
|company controls 78 enterprises in regions as well as the activity of long-distance communication | |(in 2000 – 1.25 mln). |
|operator OJSC ‘Rostelecom’. Over 90% of Russians are the clients of this holding company. | | |
|(Slide 4) | | |
|It’s evident, that the present and the future of telecommunication sector in the all-country scale | |(Slide 5) |
|are to a great extent determined by the work of the ‘Svyazinvest’ telecommunication operators. This| | |
|is mentioned in “The concept of Russian telecommunication market development in the period up to | |Solving the state importance targets is demanded for changes in holding organizational arrangement |
|2010” – the strategic communication sector document for the next decade. | |and new approaches to business. 7 interregional companies will be founded on the basis of 7 dozens |
|This document encourages Russian telecommunication staff in intensive sector development. | |of the ‘Svyazinvest’ regional enterprises in the near future. |
|Competition will be stimulated in all market segments, including local communication market and real| |Small and uncoordinated companies with limited technical and market opportunities will be replaced |
|conditions will appear for investment in local communication. Regional operators will be able to | |by powerful competitive structures with high investment capability. This is especially important |
|invest in high-tech sectors: mobile communication, Internet, data transmission, etc. | |taking into account that more than $15 bn is required to reach Eastern Europe level. |
|By the end of the first decade of XXI century Russian telecommunications should reach Eastern Europe| | |
|countries level: the number of telephone lines should rise in 1.5 times (from 31.1 mln lines up to | | |
|47.7 mln), and digitalization of local networks would reach 94 % (at the moment it is 26 %). | | |
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|(Slide 6) | |(Slide 7) |
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|Interregional companies will be oriented on provision of complex services to corporate clients, | |Interregional associations will be equitable to the operators of other countries by the number of |
|creation of dedicated lines, provision of access (including the broadband one) to Internet and | |lines and the volume of services. As a result of the merging the number of lines for one |
|provision of number capacity to mobile operators. After the changes in ‘Svyazinvest’ even the | |interregional company will increase up to 3mln in average (at the moment of the reorganization |
|inhabitants of the most remote parts of Russia will gain access to all services of modern | |beginning the statistically average telecommunication company had 310 thousand lines in its |
|communication. | |disposal). |
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| | |(Slide 9) |
|(Slide 8) | | |
| | |For the time being ‘Svyazinvest’ reorganization have been approved by all uniting companies |
|Reforming of tariff system and system of the state regulation of the sector that will provide at | |shareholders. At present the co-ordination with the state bodies is going on. Two interregional |
|least the lossless of tariffs and equal footing spread of finance load, should become the guarantee | |companies – Ural and Far East operators – have already been met with approval by the Ministry of |
|of the reconstruction success. Unfortunately tariffs in Russian communication sector do not even | |antimonopoly policy (MAP). |
|compensate the costs of service production. The average tariff for the population in Russia is | |In case of the MAP grants permission receiving, the process of regional companies structural |
|estimated of $2.5 per month with economically sound costs - $8. The work in the area of the tariff | |reorganization is planned to be have been finished by the end of 2002 – early 2003. |
|regulation is one of the most important directions of activity of ‘Svyazinvest’. | |Serious changes are also taken place with the activity of a trunk and long distance communication |
| | |operator – OJSC ‘Rostelecom’. The monopolist of long distance communication market should be |
| | |transformed step by step into the transnational operator that provides a wide complex of |
| | |telecommunication services at the world standards level both to operators, i.e. large whole-sale |
| | |consumers, and to business-clients. |
| | |At its end-of-the-last-year meeting the board of OJSC ‘Rostelecom’ decided to reorganize its branch |
| | |chains. The company’s structure will correspond with the new structure of holding subsidiary |
| | |companies: in 2003 the national long-distance operator will have one filial in each of 7 federal |
| | |regions. |
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|(Slide 10) | |(Slide 11) |
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|However the merger of regional companies into interregional companies is only a part of the holding | |At present an effective system of finance-economical planning and supervision is being formed in the|
|reform. The management of aggregative companies business should be based on principally new | |companies. The unification of accounting policy is going on. A method of calculation of |
|approaches. The corporate reform of ‘Svyazinvest’ touches all basic activities of the company: | |economically sound costs takes root in the practice of the operators. A budgeting procedure has been|
|finance, economy, marketing, networks development, personnel. | |rooted into the companies’ policy since 2002. Unified procedures for holding companies and standards|
| | |of budgeting are being developed considering the ISBC standards. |
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|(Slide 12) | |(Slide 13) |
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|Without a sharply defined marketing policy it will be difficult for the joint companies to develop | |Great attention is paid to the technical policy of OJSC ‘Svyazinvest’. Networks integration is |
|and seize successfully new segments of up-to-date services market. The work of communication | |planned within the bounds of general plan of interregional communication companies’ and OJSC |
|operators in the area of marketing starts | |‘Rostelecom’ development. Today, principles and basic ways of networks development are being worked |
|practically from nothing. | |out using the sector science and the search for network-system decisions of their development is |
|OJSC ‘Svyazinvest’ has initiated the work on market factual accounting and a market strategy for | |going on. A unified general plan for holding companies development should be accepted by 2004. |
|medium-term period is being formed for the interregional companies. | |No reorganization initiatives of OJSC ‘Svyazinvest’ will be realized if they are not supported by |
| | |the personnel reform. At the moment a training program for managers is being developed and it’s |
| | |directed to raise the level of regional company’s management skills. |
|(Slide 14) | |(Slide 15) |
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|As the specialists appraise, the effects of ‘Svyazinvest’ enterprises reorganization will be | |According to the analytics estimations, the reforms in the holding will result in a significant cut |
|estimated at dozens of millions of dollars per year. | |in costs and to an appropriate investment appeal growth of the companies. According to the forecasts|
|Besides, the business world has positively reacted upon the changes in the holding even at the | |the additional investment capabilities will be evaluated in $1.2 bn per year. This will enable to |
|beginning stage of reforming. The market value of Far East and North-West companies on the interval | |introduce 2.4 mln telephone lines annually or 60 thousand km of long-haul cable links. |
|between the boards, which have approved the reorganization, and the stockholders meetings on this | |One might say with certainty that the present activity of the holding ‘Svyazinvest’ is a new step on|
|question has increased in 1.8 and 1.3 times in respect. | |the way to creation of a high-quality telecommunication infrastructure in Russia. Our main objective|
|A daily volume of regional communication operators’ stock trade has grown up in 10 times in the | |is to bring Russian telecommunication sector on the level that will enable Russia to take a |
|period of October 2001- January 2002 in comparison with the period of January-March 2001. | |deserving place in the global information society. |
|Since October 2001 up to now the evaluative capitalization of holding have been increased by 73 % | | |
|and reached the level of $1.68 bn. The cost of the holding will be increased in several times in the| | |
|case of Western European tariffs being reached and of a successful completion of the reorganization.| | |
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|(Slide 16) | | |
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|Thank you for your attention! | | |
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