Russia’s telecoms market is expected to stay relatively resilient with a number of short- to mid-term effects to tracked telecom market indicators. Taking into consideration the impact of Covid-19 and other market dynamics, the total telecoms service revenue in Russia will decline by 4% compared to 2019. This represents a three percentage points downward revision to the pre-Covid-19 baseline forecast that expected the market to only decline by 1%.

Mobile services revenue in Russia will contract by circa 5% in 2020 compared to 2019, with a recovery and gradual comeback to its initial growth trajectory from 2021. Fixed broadband services will show more resilience, yielding only 1% fewer revenues as compared to the base scenario, and recording a positive growth in 2020. The pay-TV market is also expected to remain relatively resilient.

RUSSIA TOTAL TELECOM AND PAY-TV SERVICES REVENUE BY CATEGORY, 2018-2024 (US$ BILLIONS)

To help curb the spread of the Covid-19, Russian telcos have restricted the operations of their physical points of sale. As such, the total number of mobile subscribers is expected to be approximately 2% lower in 2020, compared to the baseline scenario. The decrease is primarily due to slowdown in new customer acquisition and steeper disconnections in the prepaid segment partly driven by an expected decline in migrant labour force.

Telecom store closures have contributed to a decline in service

According to its Q1 2020 results, Beeline Russia, for instance, has already felt the Covid-19 impact on its operations. The telco closed a number of stores during the crisis, following government advice. By April 29th, 34% of Beeline’s own stores and 25% of franchised stores were closed. Store closures have contributed to the decline in device and SIM sales. Beeline’s mobile service revenue has also contracted on the back of declining roaming revenue and the sustained dominance of unlimited tariff plans that have somewhat limited telcos’ options for further monetization of mobile data traffic.

Nonetheless, the mobile segment is expected to come back to its initial growth trajectory in the short- to mid-term as Russian authorities have started lifting the lockdown on May 11th and restarting the economy. Increased mobility and economic activity will support the recovery of the mobile market in Russia.

Online orders could mitigate Telecom store downturn

In order to offset the downside impact of the closure of a number of physical stores, major telcos offer delivery of SIMs and selected mobile devices ordered online. The increasing use of digital sales channels, including eShops and the telco customer mobile apps, might help mitigate the negative impact from store closures and customers’ limited mobility.

On the fixed services side, at the end of March, several telcos announced an increase in new fixed residential connections. GlobalData’s forecast expects a 1% increase in residential fixed broadband lines in 2020 compared to the baseline forecast, as people continue to work from home and to rely on their fixed broadband line.

The business fixed broadband segment is, however, expected to experience downside pressures on the short- to mid-term, amid a decline in demand driven by business closures and contracting ARPUs on the back of rising economic challenges. The segment’s revenue will, thus, see a slowdown in growth in 2020 but will remain resilient over the forecast period, aided by the restart of the economic activity and the increase in fiber service revenue.

Room for growth in fiber to the home

The fixed broadband segment in Russia is dominated by fiber to the home (FTTH) which will make up 77% of the lines in 2020. With fixed broadband penetration of households forecasted to reach 55% in 2020, there is still room for growth in FTTH adoption, for both the residential and business segments. This will fuel the future expansion of Russia’s fixed services market revenue.

Pay-TV service revenue will show a relative robustness to the crisis. Pay-TV is a widely adopted service in the country, with penetration of households at 77% in 2020. The relatively low pay-TV prices in Russia, at US$2-US$3 per month, will further help keep churn levels down during the economic downturn.

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