FOCUS: Russia’s Rostelecom fully deploys mobile services to keep clients, revenue

By Yekaterina Yezhova

MOSCOW, Nov 28 (PRIME) -- Rostelecom, a Russian landline incumbent, seems to be aiming at creating its own eco-system with the launch of mobile services on the network of its half-owned cellular operator T2 RTK Holding, known as Tele2. Analysts said the state-controlled company is diversifying to stop an outflow of clients and offset declining revenue from fixed-line telephony.

“With mobile connection services under the Rostelecom brand, we offer our subscribers to take customary connection services and content with themselves: they’re available outside home or office. For example, one can watch the same range of TV channels as at home,” Vladimir Kiriyenko, Rostelecom’s senior vice president for development, said in a statement.

“For the first time our company has amalgamated into a single network landline and mobile phones, and inter-network calls will become the most profitable. In the future, we’ll develop family tariffs, for example, a bundle package for home and mobile Internet services.”

On November 16, Rostelecom provided access to its mobile connection services in 65 regions, where its partner, T2 RTK Holding works. It is a full mobile virtual network operator (MVNO), as Rostelecom has its own numbering capacity and sets tariffs. Phone screens show the Rostelecom sign. Services are available both for individual and corporate clients.

In order to use mobile connection, one should be subscribed to at least one service of the operator: landline telephony, home Internet or pay TV, and receive a SIM card at an office of the company or its partners. The company intends to open a single account for landline and mobile services in 2017.

Mobile tariffs with a monthly fee vary from 199 to 1,199 rubles and are active nationwide. There is also an offer without a monthly fee and an Internet tariff for modems and tablets.

“We’re moving toward full-fledged bundle offers, or 4Play, including four services: landline, mobile telephony, broadband and TV,” Andrei Polyakov, a spokesperson for Rostelecom, told PRIME without disclosing either the volume of investments or the model of partnership.

Konstantin Prokshin, head of the strategic communications department at T2 RTK Holding, said the mobile operator will get additional revenue from the project. “Besides, Tele2 views the MVNO direction as one of the priority ways for further progress,” he said.

T2 RTK Holding will not sell SIM cards in its monobrand stores. “Rostelecom focuses on its subscribers and its own distribution. Tele2’s SIM cards will continue to be sold by Rostelecom as an individual mobile product, if a potential buyer needs no convergence,” Prokshin said.

Vitaly Solonin, head of the wireless department at J’son & Partners Ñonsulting, told PRIME that the main reason behind the MVNO launch is the intention to cut the churn rate thanks to bundle offers, keep the existing clients and, in the long run, to abort falls in revenue.

Revenue of the state-controlled operator from fixed-line services plummeted 12% to 21.2 billion rubles in July–September, while revenue from pay TV rocketed 23% to almost 6 billion rubles, and revenue from broadband added 4% to 16.5 billion rubles.

“The project’s success will mainly depend on the efforts of marketing staff to promote the product and its tariff policy. Anyway, we think the bundle offer, comprising mobile services, could be bought by at least 5% of Rostelecom’s existing clients,” Solonin said.

“We could see several hundreds of subscribers in a year on condition of very aggressive promotion, reasonable tariffs and a high quality of services.”

Polyakov of Rostelecom said the operator expects up to 15% of its existing fixed-line clients to use mobile connection services until the end of 2020.

The number of Rostelecom’s local landline telephony clients shrank 8% on the year to 20.9 million in July–September. Broadband clientele expanded 7% to 12.2 million, and the pay TV subscriber base added 9% to 9.2 million.

(64.6174 rubles – U.S. $1)

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