Broadband Boom in Russia Continues into Q1

Outlook and Implications

• Broadband the Growth Driver: The latest regional fixed-line incumbent to reports its first quarter of 2008 results reflects the ongoing story of broadband as the growth driver at Svyazinvest. In the first quarter of 2008, revenues from data and internet services grew by 63%, compared to a 4.8% growth in local telephony and 1.4% growth in long-distance telephony. Given the relatively weak exposure of the Svyazinvest units to the mobile market, it is imperative that they maintain and expand their share of the broadband market in their respective regions.
• New Services and Market Entrants: Such growth, as well as the ongoing trend of convergence, is also driving both new, broadband-based services and the entry of new players into the market (see Russia: 22 April 2008: North-West Telecom Begins Testing Regional Triple-Play Service) . Earlier in May 2008, VimpelCom, which now controls Golden Telecom, was denied WiMAX frequencies (see Russia: 8 May 2008: VimpelCom Misses Out on WiMAX Licences in Russia). Its peer, MTS, is also considering broadband deployment (see Russia: 23 April 2008: MTS Mulling Fixed Broadband Roll-Out).