Mikhail Oseevsky - about the first results of work at the head of the company, the development of the industry and cryptocurrency mining

Rostelecom President Mikhail Oseevsky, who headed the company in March 2017, in an interview with RBC spoke about the operator’s role in the Digital Economy, the future of e-sports, and why increasing the share in Tele2 is not a priority

Mikhail Oseevsky (Photo: Arseny Neskhodimov for RBC)

In early March, it prematurely terminated the powers of Sergei Kalugin, who had headed Rostelecom since 2013, and appointed VTB top manager Mikhail Oseevsky to the position of president. Analysts said the change of head of the company was unexpected - there were no obvious complaints about Kalugin. According to two RBC sources in the market, Oseevsky’s candidacy for the post of head of Rostelecom was lobbied by the VTB group, which intended to sell to the state operator its stake in their joint venture - T2 RTK Holding (provides mobile communications services under the Tele2 brand). Sergei Kalugin, in turn, opposed such a deal.

The top manager spoke about who invited Mikhail Oseevsky to the post of head of Rostelecom, the vision for the development of Tele2 and the new strategy of the state operator in an interview with RBC.

"I knew it was very big company»

— When and from whom did you receive an invitation to head Rostelecom?

— The final decision on the appointment of the head of Rostelecom is made by the chairman of the government by signing the directive. In fact, the proposal came from him in the winter of 2017, a few weeks before his appointment.

- How did you perceive it? What introductory information were you given about Rostelecom? How did they match what you subsequently saw in the company?

— At that time, work was already underway on the creation of the Digital Economy program. It became obvious that Rostelecom would play a key role in its implementation. I assume that the government’s decision was made with this in mind.

While working at VTB, I formed an idea about Rostelecom, since it was a client of the bank. First of all, about financial indicators: I knew that this was a very large company, with large revenues, high margins, profitable, securities which are traded both in Russia and abroad.

— What have you managed to accomplish in six months as president?

— Like anyone who comes to the management of a company, I focused on setting up the team’s work and immersing myself in key business processes. A new board has been formed to play a more active role in the governance structure. I think that the company performed well in the second quarter - revenue increased noticeably, profits almost doubled, and good margins were ensured (above 32% in OIBDA). The company is growing in almost all major business segments. We pay a lot of attention to optimizing the management model and strengthening management not only at the level of the corporate center, but also at branches. All this is a basic platform for further movement forward.

— These actions are a continuation of the policy and strategy of the previous team or a givenalready by youvector of development?

— A company like Rostelecom is a huge aircraft carrier. He cannot turn sharply either to the right or to the left - he can turn over and drown. The strategy, which was adopted at the end of 2013, envisaged an increase in the share of modern digital products, it is absolutely correct, we are moving in this direction, and even at a faster pace than expected. But over the past years, a lot has happened - external conditions have changed, new digital services and technologies have emerged and become stronger. Therefore, today we are actively working to develop a new five-year strategy, including taking into account the approved federal program for the digital economy.

What does Rostelecom do?

Public Joint-Stock Company intercity and international electrical communications Rostelecom was registered on September 23, 1993 (then in the form of an OJSC). The company provides local telephone services, broadband access Internet and cloud data storage, pay television, services based on our own backbone communication network. Owns data processing centers (DPCs), is the operator of the gosuslugi.ru portal, a contractor for programs to eliminate the digital divide, connect medical institutions to the Internet and other government projects. Rostelecom owns 45% of T2 RTK Holding (the remaining 55% belongs to a consortium of investors consisting of VTB Group, Invintel B.V. Alexey Mordashov and Rossiya Bank Yuri Kovalchuk).

Rostelecom's revenue in the second quarter was 75.2 billion rubles, net profit was 2.8 billion rubles. As of December 31, 2016, the largest shareholders of the company were the state represented by Rosimushchestvo (owned 48.71% of ordinary shares), Rostelecom's subsidiary Mobitel (15.06%) and Vnesheconombank (4.29%). Rostelecom shares are traded on the Moscow Stock Exchange, ADRs are traded on trading platform OTCQX over-the-counter trading systems OTC Markets Group, not listed on the London, Frankfurt and other foreign stock exchanges.

“We need to remove the prefix “long-distance and international electrical communications” from our name.

— When you plan to adopt a new strategy, what should it contain?

— We are focusing on the end of this year.​ The strategy will be based on a clear financial model with our forecast results. This is very important for a public company like Rostelecom. In general, the main vector remains the same - the evolutionary development of Rostelecom into a provider of digital services. We believe that it is necessary to transform into a company that will provide smart digital services for end clients - people, companies and the state.

I think we need to take a symbolic step: remove the postscript “intercity and international electrical communications” from our name. The company has long outgrown this definition. IN last years Rostelecom was actively growing in such segments as broadband Internet access, pay television, data centers and “clouds” (cloud services. - RBC). These segments help to successfully compensate for the decline in telephony revenue. Compared to 2012, last year revenue from telephone services decreased by a third, its contribution to total revenue is already less than 30%. At the same time, there is no decrease in total revenue - thanks to the digital segment, which in the second quarter of 2017 provided 47% of revenue. Year on year, digital revenues grew by more than 10%.​​

What is important to keep in mind: as a result, part of what we do today, Internet access, for example, will become an impersonal housing and communal service - like water or energy supply. Only, unlike water and electricity, our traffic is unlimited - it is not paid according to the meter. We want to be a company that sells as many end products as possible - high-margin services. Not the method of delivering the service or, say, not only the method of delivering it, but also the product itself - for example, television and video content. Rostelecom is developing the most advanced pay TV technology - IPTV (controlling, by the way, 74% of the market), which uses a broadband access network to deliver TV and video content. Another promising area is “smart home” for household management and security, and other intelligent services for home and family.

If we talk about the B2B/B2G segment, here we see prospects in the “everything you need as a service” model. When we offer a client comprehensive solution its turnkey communication and IT tasks, including ultra-high-speed communication channels, equipment and IT infrastructure, data centers and cloud software, cyber protection, technical support for all of this. Thus, the client is freed from non-core tasks and can concentrate on his business.

Photo: Sergey Karpukhin / Reuters

​— Will the indicators provided for by the previous strategy (designed for the period from 2015 to 2020) be achieved? For example, by 2020 the company was supposed to occupy 50% of the broadband access (broadband) market in Russia.

— We see that Internet penetration in the country is already at a high level, sales of this product are clearly slowing down. Nevertheless, Rostelecom is growing faster than the market; more than half of new broadband subscribers choose our company. There are still many different players on the market, and consolidation is underway. I think we will not give up this goal. We’ll see in what horizon we will reach it. We see certain prospects for M&A transactions (mergers and acquisitions). — RBC), we are constantly looking at different companies.

“Rostelecom does not need to gain control in Tele2 in order to realize synergies”

— RBC sources said that you were invited to Rostelecom to increase the stake in T2 RTK Holding. At your first press conference, you said that Rostelecom was analyzing the feasibility of increasing its share, but was not considering a full buyout. The last one is that the companies are focused on finding synergies in joint business development. There is no deal and there won't be?

— Increasing the share is not currently our priority. My Tele2 partners and I are focused on improving operational and financial results. As we see today, we manage to organize interaction in such a way that there are results. When I said that we were analyzing the need to gain control at Tele2, I had in mind the question: will this help achieve the desired indicators in terms of efficiency? Today the management of Rostelecom and Tele2 works closely and harmoniously. Tele2 has completely switched to using Rostelecom communication channels, we are discussing the possibility Maintenance Tele2 infrastructure by our specialists. This will allow the two companies to reduce costs and become more efficient.

Rostelecom successfully launched as a virtual mobile operator on the Tele2 network: 500 thousand subscribers in eight months of operation - a good result. Coming soon in retail network Tele2 will begin selling Rostelecom service packages. We continue to move towards providing 4Play services (mobile communication services, fixed telephony, Internet access and pay television in a single package. - RBC). We will start sales in a limited number of regions to test. The global vector of development of companies is the provision of comprehensive turnkey services to the client. It should not matter in what way (wired or wireless) the client receives what he needs - communication, information and emotions.

In the first half of 2018, Tele2 headquarters will move to the Comcity office center in Rumyantsevo, where Rostelecom divisions and ours already operate affiliated companies. This is also important and necessary for the formation of common teams. We pay a lot of attention to marketing and the formation of product lines. In particular, Rostelecom has a strong position in the TV and video content consolidation market, and we want to use this potential in providing services to Tele2 customers. We are discussing a number of other joint products.

Today, Rostelecom does not need to gain control in Tele2 in order to realize synergy. We see that Tele2, as a company owned by different shareholders, is developing successfully. In general, I can say that Tele2’s results for the first half of 2017 are very good.

Photo: Casper Hedberg/Bloomberg

“But because they do not open up, there is a suspicion that something is wrong with them.”

— It was decided not to disclose [indicators] for a number of reasons. But take my word for it that operating rooms and financial results noticeably better than even what we expected.

— Did I understand correctly that due to the fact that Tele2 has improved its financial results, the issue of reducing the share of individual shareholders of the company has ceased to be relevant?

— You need to ask other shareholders about this.

- But you must know their position...

— Today, all major shareholders of Tele2 are aimed at increasing the company’s efficiency. We, VTB, and Rossiya Bank are actively working together on the board of directors on how to help the development of Tele2. There is no need to fuss, we are big, serious players who make key decisions based on strategic interests, and not on the current situation.

— When will Tele2 be able to recoup its investments in network construction in Moscow? Many analysts doubted that entering the capital market in the fall of 2015 was a wise step for the company - due to high competition in Moscow and the high costs of such expansion.

— It is incorrect to count separately. Any company, including Rostelecom, operates with different margins and profitability in different markets and in different regions. It depends on the infrastructure, the moment of entry, and competition. It is impossible not to be in Moscow. This is the country's key market. If a company does not operate in Moscow, consider it does not exist on the global Russian market.

— Due to the fact that Rostelecom intends to focus on the end client, will a 45 percent stake in Tele2 be enough for the company? Tele2 has a large subscriber base...

— Future model business is a partnership. We do not plan to produce alone all the products that we intend to offer to customers. The idea that only by gaining control can you achieve results seems to me to be outdated.

“None of the cellular operators alone will be able to create the 5G infrastructure”

— You said that Rostelecom’s new strategy will have a connection with the Digital Economy state program, which the government launched in July. How will this be expressed?

— First of all, this is the development of infrastructure. The creation of fifth generation networks (5G) is very important. This is a separate large area that will be reflected in our strategy. We believe that Rostelecom can serve as an infrastructure operator and partner for the entire industry. None of the cellular operators alone will be able to create a 5G infrastructure - it is very expensive.

— Are we talking about transport communication networks?

— Not only, we are talking about the entire access infrastructure: both communication channels and base stations, which will need to be installed tens of times more than in networks of previous generations. We believe that the most effective solution would be to create a joint company using optical networks (fiber-optic communication lines. - RBC) Rostelecom.

— Have you already discussed this idea with someone other than Tele2?

— We are not only starting to service communication channels and equipment of Tele2, but also other operators, including the Big Three. As an outsourcing or infrastructure company, we are consistently gaining capacity and believe that this is a good basis to gradually move towards deeper cooperation, towards the creation of a common infrastructure.

— Do regulators and the government agree to the creation of such a single company?

“The matter has not yet come to concrete proposals and decisions. But it is very important that there is a dialogue between market participants, everyone understands the current problems.

Photo: Andrey Rudakov / Bloomberg

— In addition to infrastructure, what do you plan to do under the Digital Economy program?

— We will participate in the development of plans and policies in all five areas of the program - regulation, personnel, infrastructure, research platforms and end-to-end technologies, cybersecurity. For example, Rostelecom has created a special Center for Cyber ​​Security and Protection, which is deservedly considered one of the strongest in the country.

We consider the creation of applied digital platforms for various sectors of the economy to be very promising. Digital technology platforms are created in the interests of individual industries, because each of them has its own specifics. This is intelligent software that accumulates a huge array of industry data and provides convenient tools for processing it. The platform helps to extract and process “raw” information into a system of industry knowledge. Today, even a simple field can and should become a source of digital data. You can install sensors on the field that automatically collect information about humidity and precipitation, temperature, sunny days, and soil. This data flows into the industry platform, is systematized, applications begin to process it, machine intelligence is connected - as a result, recommendations are issued for watering, fertilizing, and the optimal start of planting and harvesting. Everything is automated and objective, the influence of the human factor on data collection and analysis is excluded. The result of the platform and applications running on it is a good harvest and an effective business.

​In digital platforms, the competence centers in the program are Rosatom and Rostec, but we work with them in partnership. We have chosen four priority sectors: oil and gas production, energy, mechanical engineering and Agriculture. Each industry has its own specifics; the agro-industrial complex and oil production require different sensors and a special approach to data analysis. The platform approach is also applicable for social services. IN Lately We pay great attention to developing projects in the field of “smart” healthcare. The transition to digital medical records and their accumulation in a secure centralized electronic archive of medical information opens up great prospects. In the future, analysis of constantly updated information will help predict the need for medicines and medical personnel, and develop preventive plans. Remote access to medical history (with the patient's permission, of course) will make it easier to provide the right care wherever the patient is.

— Recently, everyone has been talking about blockchain technology, about the extraction (mining) of cryptocurrency. Are you considering mining cryptocurrency on your data centers?

- Let's split the question. We believe that blockchain as a system for distributed secure storage of information undoubtedly has a future. Russia must move in this direction. We'll see what the future of cryptocurrency will be like. I am very reserved for now, because this is, in general, a question of faith. Everyone played with candy wrappers when they were kids. Candy wrappers “Bear in the North” or “Red Poppy” had different “values”. More precisely, the children believed that it was a value. It's the same with cryptocurrency. This is a very risky story for now.

— But you could mine cryptocurrency using your infrastructure and exchange it for real money.

“We won’t do this ourselves, but companies have the opportunity to rent power from us in the data center and mine.” If this type of activity does not contradict current legislation- Please.

— As a person new to telecom, was it difficult for you to immerse yourself in technological aspects?

- I was lucky. For the first time in the last 25 years of my life, I started working in a company where the engineering education I received would be useful. For quite a long period (eight years) I studied quantum physics and laser physics: many things from the point of view of information transfer are clear to me. Much is new, of course. Especially in the part that concerns modern Internet and other high technologies. But this is also an opportunity to gain new knowledge. I really have discovered a lot of new things for myself over the past six months.

The industry as a whole is changing very quickly in terms of technology and products. But the industry is not growing—the dynamics of income from communication services is around zero. It's not very good. Today Russia is one of the leaders in the availability of telecom services - both mobile communications and home internet. For us and our colleagues in the industry, this is the main challenge (challenge - RBC) - how to move forward in conditions of a rather low ARPU (average bill per subscriber. - RBC). There is only one direction - new products, services and offers. The client is ready to pay for comfort, the convenience of solving everyday problems, on the one hand. On the other hand, he is ready to pay for emotions. For example, for good film or a series - please, it can be found on our IPTV. For a great online game - please, we are developing special products for gamers. In general, I think that e-sports will actively develop. We follow the development virtual reality and other technologies that may make the delivery of emotions even more vibrant and high-tech in the future.

Photo: Arseny Neskhodimov for RBC

- You have own business?

— I have been keeping all my money on deposit in state banks for a long time. Having gone through a long journey of various experiments, having managed the exchange, I realized what risks exist and how much time needs to be spent on eliminating them. Therefore, it was clearly determined that a high-level hired manager does not need to enter into any conflicts of interest and worry about assessing any risks that are not related to what he does.

Six facts about Mikhail Oseevsky

1983 - graduated from the Leningrad Polytechnic Institute named after M.I. Kalinin with a degree in engineering electrophysics.

1986-1993 - worked at the D.V. Efremov Research Institute of Electrophysical Equipment (NIIEFA).

1993-1999 - was deputy manager and then manager of the St. Petersburg Currency Exchange.

2003-2011 - Vice-Governor of St. Petersburg, in 2011-2012 - Deputy Minister economic development Russia.

From July 2012 to March 2017, he was Deputy President and Chairman of the Board of VTB Bank.

The number of subscribers and Internet users today continues to increase, so the question remains relevant: “Which operator to choose?” One of the players in the telecommunications market and a major employer is OJSC Rostelecom. What is this provider? What are employee reviews of Rostelecom?

About company

The telecommunications services market in our country is steadily developing. OJSC Rostelecom has been an interregional operator since 2006 and operates in several Russian regions. It occupies far from the last positions, but is not one of the “big three” operators. What services does the company provide?

• Local and long-distance telephone communications.
• Interactive television.
• Cellular.

Areas of activity of the company

Rostelecom carries out various tasks related to the creation and development of electronic government, ensures the functioning of elections, etc. It is a leader in the market of telecommunications services provided to Russian government agencies and corporate users. It occupies a leading position in the provision of pay television services (more than 8 million users). The company has the largest backbone network in the Russian Federation, with a total length of 500 thousand km. According to international credit ratings, the company has a stable financial position. Revenue for the 1st quarter of 2015 amounted to more than 70 billion rubles, net profit - more than two billion rubles.

Rostelecom as an employer

The company is a large employer, providing official employment, a full benefits package, stable workplace, white wages without delays. Often noted with positive side the team in which they work. Feedback from Rostelecom employees draws attention to the company’s commercial approach to solving many issues. For example, installation is carried out even with poor line parameters. The priority is to capture the market, fulfill and exceed the plan, and not personnel. They mainly recruit salespeople, while laying off other specialists. Work at Rostelecom, about which employee reviews should be studied before an interview, varies depending on the department and region.

Positive staff reviews about the company

Employees note that the company has recently changed for the better, and positive development dynamics are emerging. The few positive reviews from Rostelecom employees reflect the following advantages of the employer:

• the work is stable, simple and clear, well organized;
• opportunity career growth in a prestigious company;
• acceptable working conditions;
• close-knit team and high;
• increase in salaries and funding after a change in leadership in a number of regions.

Negative employee reviews about Rostelecom

According to employees, the company's old qualified specialists were reduced to 90%. Large reductions have meant that new and remaining employees are forced to take on a number of responsibilities of those who were laid off, with wages the same level. Rostelecom employees reacted negatively to the policy pursued by management regarding personnel. Many reviews point out the same shortcomings of this employer.

• Incompetence of the management team.
• Unfavorable socio-psychological climate.
• Bureaucracy and red tape. Software It works very poorly; before you do anything, you need to coordinate your actions with many people. Contracts take a long time to conclude, about a month.
• High staff turnover. Lack of literacy personnel policy. They don’t retain or value good specialists.
• A small one worthy only of top managers.
• Traditional types of communication have collapsed. Outdated equipment, cables, gaskets, etc. Major repairs are not planned. The company is not able to provide quality communications even for its employees.
• Installers buy equipment and pay for gasoline at their own expense.
• They misinform applicants during interviews and clients.

Work at Rostelecom, the feedback from employees about which should make management think about the company's problems, is characterized by a heavy workload and low motivation of the staff. Many were not satisfied with the 35% bonus, depending on the loyalty of senior management, large fines up to 95%. The company's head office does not comment on employees' requests and complaints.

Customer reviews about the Rostelecom provider

It is written about the Rostelecom company great amount reviews, some of them are both positive and negative. Among the advantages of the services provided by the provider, clients highlight:

• favorable conditions and tariff prices;
• stable Wi-Fi;
• In terms of television, archive and clear images are noted.

In general, negative reviews from Rostelecom employees and consumers predominate. The predominance of negative opinions about this provider can be partly explained by the fact that, having not found understanding in the company’s support service, a disappointed client is more willing to express his dissatisfaction. Consumers of Rostelecom services note a number of shortcomings.

• The quality of lines, maintenance and services is low.
• There is no service. Irresponsible attitude towards clients.
• Poor quality support service and technicians.
• They don't handle customer complaints.

Why are Rostelecom customers unhappy?

Many customers note very low Internet speeds, often not at all consistent with those stated in the tariffs, constant crashes, interruptions and Internet outages. The provider Rostelecom, reviews of which are mostly negative, according to many consumers, misinforms customers. Receipts for payment are sent late, and then a penalty is charged. Technical problems often arise with processing consumer payments.

Rostelecom Contact Center, which receives very contradictory reviews from employees and clients, also causes a lot of criticism. Consumers note that it is very difficult to reach technical support, support service workers do not delve into the problem and try to quickly end the conversation, do not answer questions, use the same memorized phrases during negotiations, in addition, they answer the phone at the workplace so that clients do not bother with calls.

Customers in the Moscow region left negative reviews about Rostelecom because the company did not enter into agreements with payment systems and terminals, which led to consumers incurring additional costs and experiencing inconvenience when paying for communication services. Unlike other telecom operators, Rostelecom does not activate home telephony services immediately after the payment has been processed, but only three days later.

Conclusion

A large number of negative reviews about Rostelecom are an alarming signal. Feedback from Rostelecom employees also reflects concerns that the company is falling apart. It is extremely important for a company to take into account the opinions of ordinary employees, since they are the foundation of the organization.

The Russian telecommunications market is developing. In the future, the takeover of regional operators and small providers will continue large corporations. Companies that do not meet modern requirements and cannot withstand competition will either rebuild or disappear from the market.

» served more than 10 million pay TV subscribers, according to the Telecom Daily report. Compared to the first quarter, its subscriber base increased by approximately 100,000 subscribers. Thus " Rostelecom"became the first Russian wireline operator to gain more than 10 million pay TV subscribers, says Telecom Daily CEO Denis Kuskov.

« Rostelecom» is the second Russian pay television operator by the number of subscribers. In first place is the National Satellite Company (Tricolor TV): according to Telecom Daily, its subscriber base reached 10 million subscribers back in the fourth quarter of 2013, and at the end of June the operator served more than 12.2 million subscribers.

Rostelecom representative Valery Kostarev did not comment on Telecom Daily’s calculations. The operator will sum up the results of the second quarter on August 2, he says. But it is expected that by the end of April-June the total number of pay TV subscribers will exceed 10 million, Kostarev notes.

Kostarev names the World Football Championship, of which the company became an official partner in the spring, as one of the factors that increased interest in Rostelecom’s pay television. Under the World Cup " Rostelecom" made several special offers, says Kostarev.

Both in the second quarter of 2018 and in previous quarters “ Rostelecom"shows the highest rates of organic growth, notes Kuskov. He is perhaps the only one among large Russian operators that is still building networks in the regions, he claims. According to him, new viewers are, as a rule, residents of small towns who have connected to Rostelecom Internet television (IPTV). Previously, high-quality TV, with the exception of satellite, was often inaccessible to them - and together with Rostelecom’s IPTV, they also receive the Internet, explains Kuskov.

In general, during the quarter the number of pay TV subscribers in Russia grew by less than 0.5% (the increase over the year was just under 2%). The market is growing extremely slowly, since 75% of Russian households are already connected to pay TV - we are already talking about oversaturation, Kuskov believes. In addition, the circle of those who do not watch TV is growing: users are increasingly reading news on the Internet and watching online videos - this audience is constantly growing, he says.

The presence of Rostelecom in the pay TV market is very noticeable; it is a very strong player, notes Iskratelecom CEO Alkhas Mirzabekov. For Rostelecom, television is one of the key services that ensures business growth, he says. According to him, " Rostelecom» attracts new users by building communication lines in remote communities where there was often no connection at all. In the same time " Rostelecom“builds networks under co-investment agreements in large development projects,” he says.

At Rostelecom high quality television services, interesting content, balanced tariff policy, Mirzabekov lists. One of the advantages of IPTV from Rostelecom is that the user can get a set-top box for watching it almost free of charge, by rent, but in most cases you have to pay for equipment for watching satellite TV.

INDUSTRIAL TRENDS

In the global telecommunications services market, including Russia, there is a decline in the role of traditional services and a rapid increase in the popularity of ecosystem and platform solutions. The most important role in the transformation of the industry is played by the rapid development of technologies and the spread of solutions in the areas of the Internet of Things, artificial intelligence and the use of big data.

Consumer behavior is also changing: there is a rapid development of visual communication channels, an increase in the use social networks and increasing the value of personalized solutions.

As the growth of the IT services market significantly outpaces the market for traditional services, companies are concentrating on new solutions beyond the “core products” to increase customer loyalty and increase sales. An important aspect of market development is also the need for investment to implement large-scale infrastructure projects, on which the industry will rely when introducing innovative technologies.

The growth of the telecommunications market in Russia in 2018 was 3.4%, which was the best result over the past five years. Market volume reached 1.7 trillion rubles . The telecommunications market in Russia is consolidated by four main players; Rostelecom holds leading positions in many segments.

The main driver of market growth was growing revenue from mobile data for the second year in a row. The industry's strong performance in 2018 continues to be supported by last year's operator initiative to phase out price competition and increasing the offer of additional services. The broadband access and pay TV markets also showed stable positive dynamics. Volumes of fixed-line telephone services and some inter-operator services continued to decline, but the rate of decline slowed. More than two thirds of the market, as in previous years, is formed by the client segment individuals.

The Russian telecommunications market is divided between several major players with a combined market share of about 80%: MTS, MegaFon, Rostelecom, VimpelCom and Tele2 Russia.

Structure of the Russian telecommunications market by client segments, 2018, % Source: TMT Consulting.

Revenues of the Russian telecommunications market, 2015–2023, billion rubles. Source: TMT Consulting.

Penetration of broadband Internet access among individuals in 2018 approached 60%. The total subscriber base reached 34.9 million due to the connection of new housing stock and small towns. The growth in industry revenue from access to broadband access in 2018 was 3.2%, operator revenue reached 192.3 billion rubles. An important factor market growth in 2018 was an increase in the average subscriber bill, which confirms the trend towards rationalization of competition and the subscriber’s willingness to pay more for stable and high speed internet.

Structure broadband market in the B2C segment by operator income, 2018, % Source: TMT Consulting.

Structure of the broadband access market in the B2B segment by operator income, 2018, % Source: TMT Consulting.

Rostelecom market share by operator income, broadband access, 2016-2018, %

Source: TMT Consulting.

Number of broadband subscribers, 2015–2023, million Source: TMT Consulting.

The growth in the number of pay TV subscribers slowed down in 2018, but the segment showed positive dynamics, increasing by 2.6% to 43.9 million subscribers; the service penetration level exceeded 77%. Revenue in the segment also increased by 10%, to 92.6 billion rubles. The average bill per subscriber was 177 rubles excluding VAT, which is 10 rubles more than in 2017. The cable television segment continues to hold a leading position in the market in terms of revenue compared to IPTV and satellite TV, but its share is gradually declining.

Market structure by income of pay TV operators, 2018, % Source: TMT Consulting.

Revenue structure by pay TV technologies, 2018, % Source: TMT Consulting.

Rostelecom market share by operator income, pay TV, 2016-2018, %

Source: TMT Consulting.

Number of pay TV subscribers, 2015–2023, million Source: TMT Consulting.

The mobile virtual operator (MVNO) market has been demonstrating strong growth over the past two years and remains one of the promising directions in the telecommunications market. According to a study by TMT Consulting, at the end of 2018, the number of subscribers of virtual mobile operators amounted to 7 million, which is 18% more than a year earlier. Rostelecom is the leader in the MVNO market in the B2B segment with a market share of 56% Source: TMT Consulting data, 2019..

The MVNO market is being developed by companies from related industries. In 2018, Sberbank PJSC launched own brand virtual mobile operator "Sbermobile". Sberbank became the second bank after Tinkoff Bank to introduce a virtual telecom operator to the market in 2017.

Number of MVNO subscribers in the B2B segment, 2016–2018, million Source: TMT Consulting.

MVNO market structure by number of subscribers, 2018, % Source: TMT Consulting.

In 2018, the decline in fixed telephony in the market continued. Service penetration fell by 3 percentage points to 34.5%, and the number of subscribers decreased by 1.9 million to 26.3 million Source: TMT Consulting data, 2019.. PJSC Rostelecom remains the leader in the fixed-line communications market in all segments.

Fixed telephone market structure by operator, 2018, % Source: TMT Consulting.

The market continues to show consistently high growth rates. Big role Its development is driven by the growing supply of exclusive content by online cinemas, increased user loyalty to legal OTT VoD services, and the entry of such major Internet companies as Yandex and Rambler into the market.

According to TMT Consulting, the volume of the online cinema market in 2018 grew by 48% and reached 11.2 billion rubles. The revenue generated by the paid model grew at the highest rates - the share of revenue from it increased to 69%. At the end of the year, the market volume grew by 75% and amounted to 7.85 billion rubles. Advertising revenue brought in 3.52 billion rubles, an increase of 10% over the year.

According to forecasts, by 2023 the volume of the OTT video services market will be about 36.0 billion rubles, and revenue from paid services will account for 86% of revenue. The market average growth rate (GAGR) in the next 5 years will be 26%.