A September 2004 report from market-research group Lighthouse Business Management Russia says that overall mobile penetration in Russia was just 1 percent in 1999. Since then, growth has been explosive, with the latest data from Ericsson indicating that penetration reached 59 percent in March 2005. This upward trend will continue until next year, says Lighthouse, when penetration is expected to reach 68 percent; meaning close to 100 million Russians will be using mobile phones.
Today, usage is heaviest in Russia's two main cities, Moscow and St Petersburg, but the three major mobile operators (MTS, Vimpelcom and MegaFon) have the majority of the country covered by GSM networks. In addition, pan-European operator Tele2 runs mobile networks in several areas, including St Petersburg. These operators are all currently focusing on regional expansion of their GSM networks, as well as on the stepwise introduction of GPRS and EDGE.
For the moment though, non-voice services represent only a small share of traffic on Russia's mobile networks. Statistics from Ericsson for 2004 indicate that value-added services (mostly SMS) accounted for about 12 percent of mobile operators' total revenues; content-based services such as logos, ring tones, and information and entertainment services about 3 percent; and mobile data or internet services just 1 percent.
In a report in the Moscow Times last January, Alfa Bank analyst Andrei Bogdanov said many Russians were ready to use more-advanced services, but that poor marketing and a lack of proper handsets has left them with SMS and ringtone downloads as the only options. He also said mobile phone firms would only take 3G seriously when market penetration reached 70 to 75 percent. For now though this is a moot point, as the Russian government has yet to award 3G licenses. It is expected to do so sometime in 2006.
Meanwhile, major players on the Russian market are moving ahead with plans to roll out higher-speed networks. Ericsson tested EDGE in the city of Yekaterinburg in early 2004 and later in the year completed line certification trials of its EDGE functionality equipment. As a supplier to all three of Russia's major operators, Ericsson is well-positioned to take a leading role in deploying the country's 3G networks.
Ericsson's strong position has been acknowledged by Russia's biggest business newspaper, Vedomosti, which named it as the country's largest telecom supplier in 2004. In addition, the Russian National Association of 3G Communication Networks Operators has welcomed Ericsson as a member, in recognition of its technological leadership. Ericsson is the first telecommunication equipment vendor to be made a member of the association.
