Russian mobile market not saturated

 

The Russian mobile market is by far the largest in the Central and Eastern European (CEE) region. Over the last few years it has also been the most dynamically expanding. According to figures published by various companies which specialise in monitoring the market, the overall number of SIM cards distributed by Russian operators has passed the 140-million mark at the end of the first half of 2006. Russia’s population stood at 142.5 million people on 1 May, according to data from the Federal State Statistics Service (GKS). This means that, at least theoretically, the mobile market is very saturated as there should be almost one mobile phone for every person in Russia.

 

 

In fact, the actual number of mobile users is much lower. A survey recently carried out by Romir Monitoring, a market research firm, showed that Russia’s mobile penetration rate amounted to around 62% in May. It should be added that the survey was carried out among citizens over 18 years old who, according to GKS, constitute approximately 80% of the overall population. Nevertheless, it still indicates that the real number of mobile users is much lower than the number of SIM cards, and from that perspective the market is far from saturated.

Findings similar to Romir’s can be drawn from the latest survey conducted by another domestic research firm, the All-Russian Public Opinion Research Center (VCIOM), which was released in July 2006. According to the poll, in fact only around two-thirds of Russian households have access to mobile telephony services.

 

The survey by VCIOM also gives detailed profiles of mobile users in Russia and the levels of spending on mobile services by Russian households.

 

 

According to VCIOM, of the households that use mobile services, 40% have two mobile handsets, 26% have one mobile handset, 21% have three handsets, 10% have four handsets and 3% have more than four handsets.

More than two-thirds of Russian households which use mobile services do not spend more than RUR 500 per month on them. More specifically, some 34% of households that use mobile services spend less than RUR 300 per month, 33% spend RUR 301-500, 17% spend between RUR 501 and RUR 1,000, 10% spend RUR 1,001-3,000 and 1% spend more than RUR 3,000.

 

 

According to VCIOM, the biggest number of mobile users can be found in the 18-24 age group. In this group, around 86% of respondents declare having a mobile phone. Unsurprisingly, mobile handsets are more widespread among people of middle and upper income classes (70-75%) and with a university education (82%).

VCIOM also asked about the consumers’ opinions on recent changes in the telecommunications law in Russia, which came into force on 1 July 2006, and which affected the mobile telephony market. Interestingly, more than three-fourths of the respondents were not aware of this at all.

Mobile operators in Russia remain optimistic about the future of the domestic mobile telephony market. They indicate that although penetration has reached almost 100%, the Russian mobile market still has room for further growth: firstly in terms of further development of a subscriber base, as there are still at least 35 million Russians who do not have a mobile phone; and, secondly, in terms of consumer attitudes towards mobile telephony and possible increased use of the offered services and thus increased ARPU and value of the domestic mobile market. This also includes the development and growing importance of value-added services.

We forecast that at the end of 2006 the total number of SIM cards distributed on the Russian market will reach 150 million and the market’s value is expected to amount to more than €10bn.

 

Pawel Olszynka