FOCUS: Mobile Internet economy share in Russia’s GDP to rise to 4.7% over 5 yrs

By Yekaterina Yezhova

MOSCOW, Sep 25 (PRIME) -- The Russian mobile Internet economy will expand to 5.379 trillion rubles in 2021, or 4.7% of the country’s gross domestic product (GDP), from 3.229 trillion rubles in 2016, or 3.8% of GDP, the Russian Association for Electronic Communications (RAEC) said in a research, which revealed that an indirect contribution to the economy will double over the surveyed period.

“Russia has a young and dynamic population with 45% being under 35. Mobile subscriber penetration is at 178% (with 252 million active SIM cards), which creates many opportunities for the market with 146 million people,” RAEC said in the study, conducted jointly with international research agency OC&C Consulting and with a backup from Google and other market players.

“Local smartphone owners are ones of the most engaged consumers in the world, very active in terms of app downloading and social media.”

In absolute terms, the country’s mobile Internet economy is higher than GDP of the bulk of countries. For example, its 2016 volume was equal to Belarus’s GDP or 15% of Israel’s GDP, and 107 out of 190 countries around the globe has lower GDP than the Russian mobile Internet economy alone.

“Russia is the 13th largest economy in the world with the GDP worth about U.S. $1.281 trillion in 2016. Since 2010, the country has been in an economic recession due to a decrease in oil prices, which has also hit many other markets. However, growth of the ruble and the GDP have started revealing trends of stabilization and the situation is expected to follow this path over the five coming years, which manifests in an increase in all economy sectors,” the association said.

“The country has many favorable conditions for the development of the mobile economy with a wide sphere of influence, which will help Russia to speed up growth rates and approach the level of world partners in the future.”

RAEC divides the mobile Internet economy’s input into the country’s economy into direct and indirect ones. The direct input is a profit received from core companies in the industry, like manufacturers of devices and equipment, mobile connection operators and Internet providers, application developers, and others.

The direct input into the GDP is seen to spike to 1.821 trillion rubles, or 1.6% of the indicator, in 2021 from 1.463 trillion rubles in 2016, or 1.72% of GDP.

Mobile commerce, as a key component of the direct input, soared 66.2% in 2011–2016 and is expected to continue to grow through 2021, turning into the biggest factor of value of the mobile economy after mobile connection operators and Internet service providers.

The indirect input, generated by suppliers and providers servicing the core companies, as well as by companies widely incorporating mobile Internet technologies, is expected to behave much more confidently and increase to 3.558 trillion rubles in 2021, or 3.0% of GDP, from 1.766 trillion rubles in 2016, or 2.2% of GDP.

The country will see a huge increase in effectiveness and profit from sales of enterprises and sectors having nothing to do directly with mobile technologies, for example, higher efficiency of logistical companies or higher apparel sales of small and medium-sized firms thanks to Instagram and advertisements, the association said.

RAEC splits the indirect input into two levels: suppliers and providers of services for the core companies and the so-called “business surplus,” or those companies that enjoy benefits of the mobile Internet.

“Availability of mobile technologies influences activities of companies, regardless of a sector, by ensuring a significant volume of sales and functional advantages thanks to the use of mobile phones and tablets,” the association said.

The share of “business surplus” will bring most of the profit over the five coming years thanks to two factors: its elements are still taking shape, and growth in certain cases could reach up to 71%; providers and suppliers of core companies are tightly linked to them, which mostly show a mature and slower growth.

Head of RAEC’s press service, Yekaterina Dyomkina, said the mobile Internet economy reached a certain saturation point, when basic elements – infrastructure, mobile operators, and Internet providers – have evolved enough, and further growth will slow down. “Besides, the number of smartphone users won’t rise as fast as it used to do, which will result in stagnation in related sectors, like investments in infrastructure or device retail,” Dyomkina told PRIME.

“In addition, we could mention an expected negative impact on the development of the mobile sector of the data retention law, which comes into force on July 1, 2018,” she said. The law obliges connection operators and Internet providers to store subscribers’ exchanged traffic for up to six months, with precise terms and types of data yet to be decided upon by the government.

RAEC pointed out five conditions favoring further expansion of the mobile Internet in the country. They include a young, connected and engaged population, as Russian users are among the most involved smartphone owners in the world; affordable connectivity, since the country has advantageous prices for mobile communications, from the point of view of prices of bundle and stand-alone tariffs for voice connection and SMSs. Mobile traffic in Russia is almost 10 times cheaper than in the U.S. and three times cheaper than in Germany.

The other three conditions are availability of affordable equipment, like low and decreasing smartphone prices imply potential for further growth of mobile services; ongoing shift toward mobile technologies – mobile traffic is rising and replacing desktop one; and technological business environment, as the country has stable conditions for the technological industry.

(57.6527 rubles – U.S. $1)

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