The volume of paid communications services to the population has decreased, according to the latest issue (No. 1387) of AK&M Information Agency's "RUSSIAN INDUSTRIES: PRODUCTION, FINANCE, SECURITIES. Telecommunications" monthly paper dated August 26, 2020.
In June 2020, the volume of communication services provided to businesses of all types reached RUB 169.7 billion (+2.2% year-on-year, +4.5% compared with May 2020). In the first half of 2020, telecommunications services amounted to a total of RUB 1,028.5 billion (+2.5% year-on-year). In June alone, the paid communication services to the population amounted to RUB 112.8 billion (-8.3% year-on-year, -0.6% against the previous month).
The self-distancing of Russian people contributed to the wired Internet segment, with about 290,000 households going online in the second quarter. According to TelecomDaily, the total number of households connected to the Internet reached 33.79 million (about 190,000 households were connected to the Internet in 1H20). According to TMT Consulting, 270,000 new subscribers entered the market in the second quarter, while the segment revenue decreased by 2% due to a number of promos and special offers and the readiness of telecom companies to provide Internet access to users with a zero balance.
VimpelCom and MegaFon start offering subscribers the virtual SIM card (eSIM) connection service. To recap, Tele2 pioneered the pilot connection of eSIM cards of iPhone users last year; early this year, activation of the company's eSIM cards was enabled via re:Store, with Svyaznoy joining the project in July. In May 2019, Russia's Ministry of Communications asked Tele2 to suspend the project until all security issues are resolved. In September, the Ministry confirmed that there were no regulatory restrictions for using eSIM cards in Russia, and the company unfroze the pilot project. Since March 2020, virtual operator Tinkoff Mobile employing the Tele2 network has been offering subscribers eSIM cards.
The development of 5G technologies in Russia has slowed down significantly. 5G networks do not appear on a mass scale, experts say. We do not see expansion of the existing 5G networks either. They were actively rolled out in 2018, but their development actually stopped in 2019. There are two main reasons: the lack of frequencies which the security forces are not ready to provide, and the terms and conditions applying to the rolling out of 5G networks, according to the Ministry of Communications. However, telecom operators can already purchase 5G licenses. At the end of July, MTS announced the receipt of the first Russian license to provide 5G/IMT-2020 mobile communication services in 83 regions of Russia.
The M&A activity in the telecom sector remained fairly weak in the first half of 2020. According to AK&M Information Agency's MERGERS AND ACQUISITIONS MARKET bulletin, 4 transactions were registered during this period, their total value reaching $197.8 million falling 11 times year-on-year ($2.09 billion in the first half of 2019). The largest M&A transaction of the period was the friendly takeover by AVK Investments of a controlling stake in AKADO Holding, a major telecom provider, from Viktor Vekselberg for an estimated amount of $143 million.
For a more detailed review, see issue No. 1387 of the "RUSSIAN INDUSTRIES: PRODUCTION, FINANCE, SECURITIES. Telecommunications" monthly paper issued on August 26, 2020. The paper reviews the Russian communications and telecommunications market, including mobile and broadband Internet services, as well as digital TV and online cinema theatres. This is complemented by a brief overview of the stock market and an M&A update, as well as news of the leading industry players.