Boston, MA -- (ReleaseWire) -- 02/08/2013 -- BMI View: The Russian telecoms market is the largest in Central and Eastern Europe, with high levels of penetration in mobile, fixed-line and increasingly broadband services. There are major international operators in mobile and fixed line including MTS, VimpelCom, MegaFon, Rostelecom and Tele2 - as well as competition in the wireline segment from ER-Telecom. Competition between these operators has helped to expand the reach of telecoms services and drive down prices. Meanwhile, competition has also contributed to advances in technology, with higher capacity broadband (both wireless and wireline) a key developmental trend in the market as operators roll out LTE, fibre and associated pay-TV services.
- New data from MTS indicate that smartphones have expanded more rapidly than previously expected, with smartphone penetration reaching 26.7% at the end of June 2012. This creates a rapidly expanding market for wireless data services and VAS content.
- Broadband subscriptions continued to expand rapidly, with total wireline subscriptions increasing 16.4% y-o-y to reach 20.277mn at the end of June 2012, equal to a penetration rate of 14.4%. While growth remains robust, it is notably down from 31.2% y-o-y growth to June 2011. BMI believes the market has slowed due to saturation in high-income markets and increasing competition from mobile broadband services with investment in 3.5G and 4G LTE services.
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Key Trends And Developments
In late November 2012, MegaFon completed the listing of 15.2% of its shares on the Moscow and London stock exchanges. TeliaSonera received US$1.3bn in exchange for diluting its 35.6% interest to 25%. The offering raised US$1.9bn and MegaFon plans to use half of the proceeds to repay or refinance existing debt. The IPO had been delayed earlier in 2012 due to market conditions and then by the withdrawal of Goldman Sachs from lead organiser due to corporate governance concerns. The concerns arose because the deal, which allowed Usmanov to merge his MegaFon holding with Yota, required the creation of a new investment vehicle to take control of 100% of Scartel and 50% plus one share of MegaFon. The new vehicle is 82% owned by Usmanov's AF Telecom, with the remainder owned by Scartel's prior shareholders Telconet Capital and Rostekhnologii - the state-owned technology company.
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