Market News
Moscow Cellular Penetration is Over 100%
We estimate total number of Russian cellular customers at 78.26 mln as of January 31, 2004. Net additions in Russia were 3.9 mln, 55% decrease compared to December 2004 and 44% increase compared to January 2004.
Russian Mobile Subscribers
| Mobile Subscribers | January 31, 2005 | December 31, 2004 |
|---|---|---|
| Total Russia | 78,260,000 | 73,855,000 |
| Penetration | 53.9% | 50.9% |
| Moscow | 17,617,682 | 16,854,605 |
| Penetration | 103.7% | 99.2% |
| St.Petersburg | 5,797,703 | 5,644,334 |
| Penetration | 91.4% | 89.0% |
| Subscribers outside Moscow and St.Pete | 54,844,615 | 51,356,061 |
| Penetration | 45.0% | 42.1% |
Please note that we have revised upward our December 2004 figure due to more detailed information available.
Russian Cellular | Russian Net Additions, |
Top 10 Mobile Operators
| # | Company | January 31, 2005 | December 31, 2004 |
|---|---|---|---|
| 1 | MTS | 37,220,000 | 35,395,000 |
Moscow | 7,800,000 | 7,470,000 | |
Ukraine (UMC) | 7,730,000 | 7,400,000 | |
Belarus | 1,270,000 | 1,215,000 | |
Uzbekistan | 320,000 | 310,000 | |
| 2 | Vimpelcom | 28,245,000 | 26,550,000 |
Moscow | 7,775,000 | 7,475,000 | |
Kazakhstan | 995,000 | 859,000 | |
| 3 | MegaFon | 14,153,090 | 13,647,807 |
Moscow | 1,941,776 | 1,817,314 | |
Tajikistan | 48,624 | 47,891 | |
| 4 | Uralsvyazinform | 2,167,800 | 2,058,100 |
| 5 | SMARTS Group | 1,905,100 | 1,815,000 |
| 6 | Sibirtelecom | 1,029,742 | 1,001,900 |
| 7 | N.Novgorod Cellular | 725,000 | 656,441 |
| 8 | Ekaterinburg Cellular Communications - MOTIV | 440,000 | 405,467 |
| 9 | New Telephone Company | 280,810 | 262,205 |
| 10 | Skylink | 196,000 | 190,200 |
Moscow and St.Petersburg
Moscow License Area
MTS keeps the leading position in Moscow with Vimpelcom running very closely behind. MegaFon's market share remained stable at 11%.
Moscow Market Breakdown | Net Additions in Moscow, |
St.Petersburg and Leningrad Region
In January 2004 Vimpelcom attracted the largest number of customers in St.Petersburg and in the regions outside the capitals.
St. Petersburg Market Breakdown | Net Additions in St.Petersburg |
Regions outside Moscow and St.Pete
Regional Market Breakdown | Regional Net Additions |
December 2004 Subscriptions Beat Expectations
According to our esimates the total number of cellular subscribers in Russia reached 73.9 mln as of year-end 2004!
Russian Mobile Subscribers
| Mobile Subscribers | December 31, 2004 | November 30, 2004 | December 31, 2003 |
|---|---|---|---|
| Total Russia | 73,855,000 | 65,590,000 | 36,230,000 |
| Penetration | 50.9% | 45.2% | 25.0% |
| Moscow | 16,854,605 | 15,105,908 | 11,487,308 |
| Penetration | 99.2% | 92.1% | 67.6% |
| St.Petersburg | 5,644,334 | 5,313,694 | 3,532,859 |
| Penetration | 89.0% | 83.8% | 55.7% |
| Subscribers outside Moscow and St.Pete | 51,356,061 | 44,641,478 | 21,209,833 |
| Penetration | 42.1% | 36.6% | 17.4% |
Russian Cellular | Russian Net Additions, |
Top 10 Mobile Operators
| # | Company | December 31, 2004 | November 30, 2004 |
|---|---|---|---|
| 1 | MTS | 35,395,000 | 30,595,000 |
Moscow | 7,470,000 | 6,985,000 | |
Ukraine (UMC) | 7,400,000 | 6,266,000 | |
Belarus | 1,215,000 | 1,100,000 | |
Uzbekistan | 310,000 | 287,000 | |
| 2 | Vimpelcom | 26,550,000 | 23,160,000 |
Moscow | 7,475,000 | 6,960,000 | |
Kazakhstan | 859,000 | 745,000 | |
| 3 | MegaFon | 13,647,807 | 12,756,890 |
Moscow | 1,817,314 | 1,603,751 | |
Tajikistan | 47,891 | 38,817 | |
| 4 | Uralsvyazinform | 2,058,100 | 1,937,300 |
| 5 | SMARTS Group | 1,815,000 | 1,690,640 |
| 6 | Sibirtelecom | 1,001,900 | 861,600 |
| 7 | N.Novgorod Cellular | 656,441 | 596,945 |
| 8 | Ekaterinburg Cellular Communications - MOTIV | 405,467 | 354,572 |
| 9 | New Telephone Company | 262,205 | 236,800 |
| 10 | Skylink | 190,200 | 189,000 |
Note: Although Tele2 has approximately 1.05 mln subscribers in Russia we do not list the company in the Top-10 table as the company does not provide officially confirmed figures for its Russian branch. Nevertheless, we do account our Tele2 subscriber estimates in Russia total numbers.
Moscow and St.Petersburg
Moscow License Area
The penetration in the Russian largest market - Moscow - was 99.2% (!) as of 31-Dec-04 (68% in 2003). With both MTS and Vimpelcom signing almost equal number of subscribers, the latter did slightly better and re-gained leadership in the capital. MegaFon's contribution to the Christmas sale campaign in Moscow was 18% or 215 thsd subscribers.
Moscow Market Breakdown | Net Additions in Moscow, |
St.Petersburg and Leningrad Region
MTS led in subscriber addition race in St.Petersburg signing up record high 131 thsd users. Vimpelcom came second with 117 thsd which is also a record high net adds for the company in St.Petersburg.
St. Petersburg Market Breakdown | Net Additions in St.Petersburg |
Regions outside Moscow and St.Pete
MTS came #1 in regional net sales. Please note that MTS' regional additions also included subscribers of the two regional telcos acquired in December - Horizont RT (~100,000) and Telesot Alaniya (~50,000). In terms of the regional market breakdown Vimpelcom has maintained leadership with 17.2 mln customers with MTS following with just a few dozen thousands less.
Regional Market Breakdown | Regional Net Additions |
Notice on Subscriber Accounting Policies
As penetration in Moscow approaches 100% there is a growing concern over the widening gap between the human penetration and what is reported based on the churn policy by the operators themselves.
Based on the end user surveys, AC&M believes, that the difference between the actual number of active users and combined subscriber numbers reported by the operators in Moscow license area is about 22%. However, several market observers are even more conservative. They reckon that the gap is between 25% and 35%. This gap is the result of marketing actions (including SIM-card give-aways) by operators.
There is also some discrepancy in the subscriber numbers caused by the difference in the churn policies by the operators. MTS, for example, terminates their pre-paid subscribers after one of the two events occur, whichever comes first: (i) their balance remains $0 or below for 183 consecutive days or (ii) they demonstrate no chargeable transactions within 183 days. Vimpelcom follows similar churn policy, but with a minor modification: provided there is no chargeable activity but the balance still remains positive, the customer is first blocked for 180 days and terminated only after the following 180 days. MegaFon has been historically practicing the strictest churn policy among the "Big Three". They unconditionally terminate the user's account if subscriber is blocked for more than 90 days.
Despite the fact that Vimpelcom's and MTS churn policies differ we believe that at the moment the subscriber base of two largest Russian operators are quite comparable:
- Vimpelcom has performed a significant clean-up of subscriber base back in July-August 2004 when the company was short of numbering capacity. In the effort to free unused numbers Vimpelcom decreased inactivity period for subscribers to 3-4 months (depending on the region) from its normal inactivity time of 180 days. All subscribers inactive for the longer period were terminated. After receiving required numbering capacity the company returned to its usual churn policy in August-September 2004. Therefore, the maximum inactivity time for Vimpelcom subscriber with positive account balance was around 7 months in December 2004, which is pretty close to MTS subscribers maximum inactivity period of 183 days.
- According to our information the share of Vimpelcom subscribers who have positive cash balance at the moment when they may be blocked is insignificant. The company states that this number is less than 5% of users which account is blocked or terminated after 180 days of inactivity.
We expect that cellular penetration will be over 100% in Moscow already in January 2005. One should understand that this is effectively a number of user accounts which are active according to operator's churn policy. The correlation between human penetration and number of active user accounts differs from region to region.
Although AC&M have estimations on the subject and conduct regular end-user survey, we do not publish this information as it is always a subject for additional research. If you are interested in more information on any particular region please do not hesitate to contant us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
New Year Sales Started
Russian Mobile Subscribers
| Mobile Subscribers | November 30, 2004 | October 31, 2004 |
|---|---|---|
| Total Russia | 65,590,000 | 61,770,000 |
| Penetration | 45.2% | 42.5% |
| Moscow | 15,634,828 | 15,105,908 |
| Penetration | 92.1% | 88.9% |
| St.Petersburg | 5,313,694 | 5,170,722 |
| Penetration | 83.8% | 81.6% |
| Subscribers outside Moscow and St.Pete | 44,641,478 | 41,493,370 |
| Penetration | 36.6% | 34.1% |
MTS was number one in net sales in St.Petersburg, while Vimpelcom led (for 9 months in a row!!) in regional net additions as well as in total Russia adds!
Russian Cellular | Russian Net Additions, |
Top 10 Mobile Operators
| # | Company | November 30, 2004 | October 31, 2004 |
|---|---|---|---|
| 1 | MTS | 30,595,000 | 28,835,000 |
Moscow | 6,985,000 | 6,830,000 | |
Ukraine (UMC) | 6,266,000 | 5,894,000 | |
Belarus | 1,100,000 | 1,041,000 | |
Uzbekistan | 287,000 | 264,000 | |
| 2 | Vimpelcom | 23,160,000 | 21,580,000 |
Moscow | 6,960,000 | 6,645,000 | |
Kazakhstan | 745,000 | 702,000 | |
| 3 | MegaFon | 12,756,890 | 12,155,280 |
Moscow | 1,603,751 | 1,514,166 | |
Tajikistan | 38,817 | 34,700 | |
| 4 | Uralsvyazinform | 1,937,300 | 1,867,200 |
| 5 | SMARTS Group | 1,690,640 | 1,647,000 |
| 6 | Sibirtelecom | 861,600 | 782,700 |
| 7 | N.Novgorod Cellular | 596,945 | 554,388 |
| 8 | Ekaterinburg Cellular Communications | 354,572 | 336,185 |
| 9 | New Telephone Company | 236,800 | 224,450 |
| 10 | Skylink | 189,000 | 186,600 |
Moscow and St.Petersburg
Moscow License Area
Moscow passed 90% penetration mark (!). Vimpelcom grabbed more than half of total November net adds in the capital and came very close to its major competitor - MTS. The company announced that it had completely resolved numbering capacity issue and switched to its original 6-month churn period for pre-paid customers (up from 4 months introduced in June 2004). That translated in stronger than usual net additions for Vimpelcom in November.
Moscow Market Breakdown | Net Additions in Moscow, |
St.Petersburg and Leningrad Region
St. Petersburg Market Breakdown | Net Additions in St.Petersburg |
Beyond Russia
Quite by coincidence it turned out that in November Ukraine became an arena for both intensive political clashes and fierce competition between the rival GSM operators who rushed to capitalize on unprecedented subscriber growth. As of November 30, 2004 there were 12.2 mln subscribers or 26% penetration. In November MTS (UMC) returned leadership in net additions - 372k vs. 348k of its major rival Kiyvstar.
MTS continues to lead in Belarus and Uzbekistan both by market share and net additions.
There are a few acquisition deals pending in the CIS (Azerbaijan, Georgia).
MTS Wins Net Additions in Moscow while Vimpelcom Takes Regions
For the past several years October and November cellular sales in Russia were slow with following significant rebound in December. October 2004 wasn't an exception. Net sales decreased 20% to 2.7 mln compared to September results. The present trend, whereas the net sales are expected to remain flat in November and almost double in December, will bring the total number of Russian cellular users to 70 mln by the end of 2004.
We estimate the cellular services penetration in Russia at 42.5% as of October 31, 2004 - 20.6% increase y-o-y and 17.6% since the beginning of 2004.
Russian Mobile Subscribers
| Mobile Subscribers | October 31, 2004 | September 30, 2004 |
|---|---|---|
| Total Russia | 61,770,000 | 59,040,000 |
| Penetration | 42.5% | 40.7% |
| Moscow | 15,105,908 | 14,852,613 |
| Penetration | 88.9% | 87.4% |
| St.Petersburg | 5,170,722 | 5,028,259 |
| Penetration | 81.6% | 79.3% |
| Subscribers outside Moscow and St.Pete | 41,493,370 | 39,159,128 |
| Penetration | 34.1% | 32.1% |
Russian Cellular | Russian Net Additions, |
Top 10 Mobile Operators
| # | Company | October 31, 2004 | September 30, 2004 |
|---|---|---|---|
| 1 | MTS | 28,835,000 | 27,600,000 |
Moscow | 6,830,000 | 6,700,000 | |
Ukraine (UMC) | 5,894,000 | 5,530,000 | |
Belarus | 1,041,000 | 970,000 | |
Uzbekistan | 264,000 | 260,000 | |
| 2 | Vimpelcom | 21,580,000 | 20,550,000 |
Moscow | 6,695,000 | 6,645,000 | |
Kazakhstan | 702,000 | 676,500 | |
| 3 | MegaFon | 12,155,280 | 11,487,353 |
Moscow | 1,514,166 | 1,448,832 | |
Tajikistan | 34,700 | 28,000 | |
| 4 | Uralsvyazinform | 1,867,200 | 1,778,000 |
| 5 | SMARTS Group | 1,647,000 | 1,600,400 |
| 6 | Sibirtelecom | 782,700 | 759,800 |
| 7 | N.Novgorod Cellular | 554,388 | 523,300 |
| 8 | Ekaterinburg Cellular Communications | 336,185 | 326,713 |
| 9 | New Telephone Company | 224,450 | 211,605 |
| 10 | Skylink | 186,600 | 182,000 |
Moscow and St.Petersburg
Moscow License Area
The number of cellular customers in Moscow passed 15 million milestone! MTS was the leader in the net sales race in the capital attracting more than 50% of net additions. MegaFon was runner-up, while Vimpelcom showed modest results, mainly due to the company's strict churn policy (4 months) aimed to "clean up" inactive subscribers. Cellular penetration in Moscow will break 90% already in November.
Moscow Market Breakdown | Net Additions in Moscow, |
St.Petersburg and Leningrad Region
MegaFon signed the largest number of subscribers in St.Petersburg among competition, while for the 3rd month in a row Vimpelcom was the leader in overall net additions
St. Petersburg Market Breakdown | Net Additions in St.Petersburg |
Russia Reaches 40% Penetration
Russian Mobile Subscribers
| Mobile Subscribers | September 30, 2004 | August 31, 2004 |
|---|---|---|
| Total Russia | 59,040,000 | 55,630,000 |
| Penetration | 40.7% | 38.3% |
| Moscow | 14,852,613 | 14,333,793 |
| Penetration | 87.4% | 84.4% |
| St.Petersburg | 5,028,259 | 4,830,395 |
| Penetration | 79.3% | 76.2% |
| Subscribers outside Moscow and St.Pete | 39,159,128 | 36,465,812 |
| Penetration | 32.1% | 29.9% |
MTS has the largest market share in Russia, though Vimpelcom is catching up agressively, mainly thanks to successful sales in regions. Vimpelcom has the largest number of regional networks in operation - 72 compared to 63 of MTS (excluding CIS subsidiaries) and 69 of MegaFon.
Russian Cellular | Russian Net Additions, |
Top 10 Mobile Operators
| # | Company | September 30, 2004 | August 31, 2004 |
|---|---|---|---|
| 1 | MTS | 27,600,000 | 26,440,000 |
Moscow | 6,700,000 | 6,535,000 | |
Ukraine (UMC) | 5,530,000 | 5,267,000 | |
Belarus | 970,000 | 895,150 | |
Uzbekistan | 260,000 | 244,200 | |
| 2 | Vimpelcom | 20,550,000 | 18,470,000 |
Moscow | 6,645,000 | 6,430,000 | |
Kazakhstan | 676,500 | 647,000 | |
| 3 | MegaFon | 11,487,353 | 10,508,263 |
Moscow | 1,448,832 | 1,312,901 | |
Tajikistan | 28,000 | 26,593 | |
| 4 | Uralsvyazinform | 1,778,000 | 1,709,000 |
| 5 | SMARTS Group | 1,600,400 | 1,555,000 |
| 6 | Sibirtelecom | 759,800 | 735,100 |
| 7 | N.Novgorod Cellular | 523,300 | 503,720 |
| 8 | Ekaterinburg Cellular Communications | 326,713 | 315,840 |
| 9 | New Telephone Company | 211,605 | 180,920 |
| 10 | Skylink | 182,000 | 180,100 |
Moscow and St.Petersburg
Moscow License Area
Despite the overall subscriber increase in Russia in September compared to August, net adds in Moscow, the Russia's largest market, decreased slightly. We believe one of the reasons for that is that more and more families purchase mobile phones for their children in August, before the start of the school year, thus accelerating August sales to a more than usual level.
Moscow Market Breakdown | Net Additions in Moscow, |
St.Petersburg and Leningrad Region
St.Petersburg market demonstrated impressive growth. In our view that was mainly thanks to the resolution of the Vimpelcom's numbering capacity problem which ceased the market development for the company in August. In September Vimpelcom outperformed competitors in St.Pete attracting more than 75 thsd new users.
St. Petersburg Market Breakdown | Net Additions in St.Petersburg |
Beyond Russia
Vimpelcom finalised the acquistion of KaR-Tel (K-mobile), 2nd largest operator in Kazakhstan. That brought 670,000 subscribers in to Vimpelcom portfolio.
MTS' unconsolidated subsidiary in Belarus became the market leader in September. The company started operations in the country in June 2002 while its major rival, GSM operator Velcom, works since April 1999. MTS was a leader in terms of net additions for last 17 months in a row (!) and finally won the largest market share.
Operations of MTS' daughter company in Ukraine (UMC) have also been quite impressive. Monthly net adds were above 200,000 for last 6 months and the company has been outperforming its major competitor, Telenor-controlled, Kyivstar for 9 months in terms of net adds.
Mobile Sales Soar in August
Despite the traditional August slowdown in mobile sales observed in previous years, the last summer month of 2004 brought as many as 3.1 mln new subscribers, outperforming record July 2004 sales. The subscriber net additions were also 1.5 mln (!) higher than a year ago. Penetraton in the country is growing steadily. According to our estimates it has reached 38.3% as of August 31, 2004 (36.2% in July 2004 and 19.6% in August 2003).
Russian Mobile Subscribers
| Mobile Subscribers | August 31, 2004 | July 31, 2004 |
|---|---|---|
| Total Russia | 55,630,000 | 52,520,000 |
| Penetration | 38.3% | 36.2% |
| Moscow | 14,333,793 | 13,759,384 |
| Penetration | 84.4% | 81.0% |
| St.Petersburg | 4,830,395 | 4,684,195 |
| Penetration | 76.2% | 73.9% |
| Subscribers outside Moscow and St.Pete | 36,465,812 | 34,076,421 |
| Penetration | 29.9% | 28.0% |
Vimpelcom revs up sales both in Moscow and in the regions encouraged by the resolution of the numbering capacity problem. MTS keeps leading positions in the Moscow License Area. Impressive net adds in Moscow demonstrated by MegaFon should be attributed to introduction of a new tariff whereby customers are being charged for connection only rather than actual air-time used.
Russian Cellular | Russian Net Additions, |
Top 10 Mobile Operators
| # | Company | August 31, 2004 | July 31, 2004 |
|---|---|---|---|
| 1 | MTS | 26,440,000 | 24,937,500 |
Moscow | 6,535,000 | 6,350,000 | |
Ukraine (UMC) | 5,267,000 | 4,960,000 | |
Belarus | 895,150 | 817,500 | |
Uzbekistan | 244,200 | 230,000 | |
| 2 | Vimpelcom | 18,470,000 | 17,300,000 |
Moscow | 6,430,000 | 6,204,000 | |
| 3 | MegaFon | 10,508,263 | 9,758,995 |
Moscow | 1,312,901 | 1,145,484 | |
Tajikistan | 26,593 | 25,300 | |
| 4 | Uralsvyazinform | 1,709,000 | 1,617,500 |
| 5 | SMARTS Group | 1,555,000 | 1,491,000 |
| 6 | Sibirtelecom | 735,100 | 710,175 |
| 7 | N.Novgorod Cellular | 503,720 | 453,000 |
| 8 | Ekaterinburg Cellular Communications | 315,840 | 304,906 |
| 9 | New Telephone Company | 180,920 | 203,543 |
| 10 | Skylink | 180,100 | 178,100 |
Moscow and St.Petersburg
Moscow License Area
Moscow Market Breakdown | Net Additions in Moscow, |
St.Petersburg and Leningrad Region
So far Vimpelcom failed to fully capitalise on additional numbering capacity in St.Petersburg. The operator increased the churn in order to free numbers for new customers, while MTS and MegaFon performed quite well in the city, signing 45 thsd and 70 thsd net additional subscribers respectively.
St. Petersburg Market Breakdown | Net Additions in St.Petersburg |
Beyond Russia
Steady cellular growth is observed in the rest of CIS markets where cellular boom either just started or is to start within the next 6 to 12 months.
Vimpelcom has won the tender for the 2nd largest Kazakhstan operator KaR-Tel . The acquisition deal is to be closed shortly and probably already in September we will add KaR-Tel subscribers to Vimpelcom statistics. That will bring 600+ thsd users under Vimpelcom umbrella.
MTS is about to outnumber its major competitor Velcom in Belarus. MTS has been leading in net additions since April 2003 and finished August with 48% market share. The difference between the two market leaders is just 5,000 subscribers (Velcom had 900 thsd subscribers at the end of August according to Mforum.ru). The remaining 4% of the market is being held by BelCel - NMT/CDMA-450 operator in Belarus. The announcement of the tender results for the 3rd GSM national license may also give a new momentum to the cellular market development in the Republic.