Mobile Economy CIS 2018 – new revenue opportunities sought to boost muted growth outlook
By Jan Stryjak, GSMA Intelligence
A highly penetrated region, but limited growth ahead
The Commonwealth of Independent States (CIS) region is one of the most highly penetrated in the world, with 80% of the population subscribing to mobile services. This positions it just behind other developed market regions such as Europe (85%) and North America (84%) but well ahead of both Latin America and Asia Pacific (both 67%) and the global average of 66%. However, the region is diverse, with the headline numbers masking markets at different stages of development: subscriber penetration rates range from 60% in Turkmenistan and Uzbekistan to 89% in Russia.
At the end of 2017, the region was home to 232 million unique mobile subscribers. The three largest markets – Russia, the Ukraine and Uzbekistan – together account for 80% of the region’s total subscriber base. Given the relatively high level of penetration, growth over the next few years will be limited, with only a 2 percentage-point increase in penetration by 2025. Only Northern America will see a smaller increase in penetration over this time. Almost half the additional subscribers will come from Uzbekistan, a country that is the third most populous but one of the least penetrated in the region. By 2025, there will be 242 million unique subscribers in the region, accounting for 82% of the population.
4G growing rapidlym and 5G launches are on the horizon
Led by the move to 4G, the CIS region is continuing to see a rapid shift to mobile broadband. 4G as a proportion of the connections base tripled over a two-year period to reach 16% at the end of 2017, largely driven by Russia, which was one of the first countries in the region to launch 4G in 2012. 4G will overtake 2G as a proportion of connections in early 2020, will become the leading mobile technology in 2021, and will account for over half and then two-thirds of total connections by 2022 and 2025 respectively.
In terms of 5G, the region will be a fast follower, with network launches expected in Russia from 2020. Rollout will be relatively rapid, covering more than 80% of the Russian population by 2025; by then, there will be 48 million 5G connections across the country (accounting for 19% of total connections). The initial focus in Russia is likely to be on enhanced mobile broadband (eMBB) to add capacity and higher speeds for mobile internet access. Other countries in the region expected to launch 5G services by 2025 include Azerbaijan, Belarus, Georgia and Uzbekistan.
Revenue trends improving, but outlook is challenging
Despite ongoing competitive pressures, relatively low smartphone adoption and relatively low pricing, service revenue trends have been improving in recent quarters, with revenues growing in the low single digits (largely below the level of inflation). Beyond 2019, growth in real terms is forecast to remain subdued at a rate of less than 1%. Rapid growth in smartphone adoption over the coming years (reaching almost 80% of connections by 2025, up from less than 60% now) will fuel an explosion in data traffic. Any upside to existing forecasts will therefore depend on mobile operators more effectively monetising this data growth and developing new revenue streams.
Innovation beyond connectivity on the rise
The Internet of Things (IoT) is an area where mobile operators can grow their business beyond traditional communications. The number of IoT connections in the CIS region will triple over the next few years, reaching 660 million by 2025. While consumer IoT accounts for the majority of IoT connections (68% in 2017), the biggest increase is expected in industrial IoT; it will reach 48% of total IoT connections by 2025. This will be driven by increased interest in smart cities and smart utilities.
Meanwhile, Russia aims to become a global pioneer in blockchain and is already a leading innovator: according to Forbes, as of late 2017, 20% of the top 50 blockchain startups by funds raised were Russian. Both public and private organisations are increasingly experimenting with the technology. Other areas of opportunity for mobile operators in the CIS region include e-commerce (the Russian e-commerce market has an estimated value of up to $25 billion in 2017 and further growth of 33% expected in 2018) and investments in the startup ecosystem (2017 marked a positive trend in the Russian VC market for the first time since 2013, with around $1.5 billion invested).
Fostering development of the digital economy
The implementation of 5G networks should be considered by regulators as not just a new technical advancement for the telecoms industry, but as a condition for delivering the digital economy and to drive the transformation of industries. With such a mindset, the regulation of the mobile industry should shift from controlling and supervising the industry to fostering its development. In the CIS region, there are four key areas where policy and regulation could be used to spur 5G rollout: the timely availability of harmonised spectrum at a suitable price; new approaches to supervise network development; updates to network architecture regulation; and the introduction of legislation covering network neutrality and data collection.
To access the full report and related infographics please visit: https://www.gsma.com/mobileeconomy/russia-cis