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North-Western Federal District’s telecommunications industry


Northwestern Federal District is one of the seven federal districts of Russia. It was created on May 13, 2000 and is currently ranked 4th by its area and 2nd by the size of the telecommunications market.


As of January 1, 2008 its population was 13,501,466 people (9,5% of total country’s population) living on an area of 1,677,900 km² (9,9% of Russian Federation total area). 11 subdivisions composing the district are Arkhangelsk Oblast, Nenets Autonomous Okrug, Kaliningrad Oblast (with no land connection to the rest of Russia), Republic of Karelia, Komi Republic, Leningrad Oblast, Murmansk Oblast, Pskov Oblast, Vologda Oblast and Federal City of St. Petersburg. 

The district produces 9,7% of country’s GDP which gives it 5th overall result. The level of GDP per capita is 3rd in the country. In 2007 industrial production has reached the level of 35% in regional GDP’s structure. Over the last five years average monthly cash income per capita in North-Western Federal District exceeded the country’s average amounting up to 13 171 rubles.
During 2007-2008 region’s telecommunications sector has continued to grow due to strengthening of fixed-line services along with continuing growth of wireless technologies outnumbering fixed-line subscriptions in all region’s subdivisions’ markets.

Consolidated volume of sales in the regional telecommunications market in 2007 has continued its growth, too. Despite annual decreasing of its impact on the regional market St. Petersburg has remained his position as the key-element of the regional market. The biggest market among the other region’s subdivisions over the last few years has been Komi Republic. The most modest markets in terms of money have been Pskov and Novgorod Oblasts. 

The telecommunications market of North-Western Federal District is marked by the presence of many major companies several of them operating on a federal scale. As for 2007 the region’s 25 leading operators’ overall revenue per year exceeded 75 billion rubles.

The level of penetration of cellular communications in the region has passed the threshold of 100% which gradually makes the growth of the actual number of companies’ subscriptions go on a slower pace. Therefore the market’s breakdown by the percentage almost does not change. There are as many as 5 operators working on the local market — Megafon, MTS, BeeLine, Sky Link and Tele 2. Under these conditions the market has come to the limits of its saturation and the price isn’t any longer the main criteria when it comes to acquiring new subscribers. 

The fixed-line sector of NWFD has been divided between a number of key-players such as SZT, Peterstar, Metrocom, TKT, West-Call, Golden Telecom and many others considered as being of the rear echelon. Regional market profile shows St. Petersburg being the crucial point of the NWFD telecommunications industry generating almost 70% of the total proceeds. According to Ministry of Telecommunications of the Russian Federation St. Petersburg contributed 8% to the Russia’s overall telecommunications industry income compared to 34% contributed by Moscow. 
In general over the last several years St. Petersburg telecommunications market was growing at the pace comparable with the rest of the country’s with only two exceptions of 2006 and 2007 when the growth of the industry’s in terms of money equaled to 35,5% compared to the previous year when the average Russian numbers were going around 24%-26,5%. In 2007 on the contrary local growth got slightly behind Moscow and the rest of the country — 28,1% and 28,6% conformably. 
The alternative operators (which hold the lesser parts of the market compared to the natural monopoly – SZT) market’s share in St. Petersburs is one of the highest in the whole Russia as they occupy the leading positions on the local market. Their share in the sector’s revenues amounted up to 80,9% compared to 76,6% in Moscow and 65% in Russia as a whole.  
Coming of biggest Moscow’s operators (Comstar UTS, Corbina Telecom etc.) on the St. Petersburg market raised the level of local competition much higher. Capital’s companies have very bald plans about NWFD market’s future by taking over different market’s segments —according to their field of operations.  
Most promising domains in this regard seem to be two sectors: broadband access to the Internet and cellular market. In the short time span operator’s struggle will be affected by the first results of 3G-servces’ implementation as all the leading operators except Tele2 have got one. 
In the future any distinctions between the telecommunications markets of two principals Russia’s cities will be lessened. So far they are manifested by the lower prices of broadband access to the Internet in Moscow and lower lever of its penetration in the residential sector of St. Petersburg. 

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