Market Overview

Global market1

In 2020, the global mobile subscriber base reached 7.9 billion SIM cards excluding IoT connections, while the number of unique mobile data users grew to 4.0 billion. GSMA forecasts that by 2025 the number of mobile users will grow by 600 million to 8.6 billion SIM cards, and the number of unique mobile data users will reach 4.9 billion.

According to Ericsson, 4G/LTE remained the most popular mobile format in 2020 accounting for 57%2 of all connections excluding IoT. 4G penetration is expected to grow further, but in 2021 it will reach its peak as the network migrates to 5G.

IoT Analytics estimates that in 2020, the number of IoT connections globally will exceed the total number of other connections (via mobile phones, tablets and laptops) for the first time, reaching 11.7 billion (54% of all connections). This figure is expected to exceed 30 billion by 2025. IDC estimates global investment in IoT in 2020 at US$ 742 billion, up 8.2% y-o-y. Investments are expected to grow at an average annual rate of 11.3% in 2020–2024.

According to Ericsson, mobile data traffic was up 50% in 2020 to 60 EB3 per month. The company estimates that monthly mobile data traffic per subscriber will increase almost fourfold by 2026 to 226 GB per month. This growth will be primarily driven by the expanding digital subscriber base and the increased accessibility of high bandwidth mobile networks, and in developed and technologically advanced economies, by new services (augmented and virtual reality, as well as technology for smart homes, buildings and cities).

In 2020, 5G networks were actively developed around the world. At year-end, the number of connected devices was over 220 million, about 130 service providers offered services based on the new technology, and approximately 1 billion people, or 15% of the world’s population, lived within the coverage area.

5G is expected to boom in the coming years, especially in the developed and technologically advanced economies such as Europe, North America and certain Asian countries. Ericsson projects that by 2026, 5G will cover 60% of the global population. Full-scale 5G rollout in Russia is currently hampered by frequency regulation, and Russian operators’ efforts are focused on a dialogue with the state about the allocation of the necessary spectrum.

Global mobile communications and mobile data4

Mobile subscribers, billion subscribers
Connected smartphones, billion devices

Impact of the COVID-19 pandemic

Changes in consumer behaviour and preferences amid COVID-19 restrictions have had a negative impact on mobile operators around the world. According to GSMA’s preliminary estimate, in 2020, the total revenue of mobile operators globally was down 3%–5% y-o-y in advanced economies, and was estimated at US$ 1.03 trillion at the time.

The main negative factors were fewer mobile phone upgrades, a significant drop in roaming traffic, weak performance of small and medium-sized businesses, and lower communications spend by corporate customers. The fact that the problems are primarily driven by economic constraints suggests that 2021 is likely to be a year of transition before the telecommunications industry fully recovers in 2022.

At the same time, in 2020, mass transition to remote work and self-isolation provoked a sharp increase in demand for video calling and entertainment services (video, music, games), which led to a significant increase in traffic over both fixed and mobile networks. Globally, operators have demonstrated their ability to cope with the increased load on their networks. Investments in 4G/LTE, 5G and fibre networks, both actual and planned, will strengthen the sector’s position in the post-pandemic world.

Mobile data, billion unique users

Mobile network coverage, % of global population5

In 2020,
57%
of all mobile devices were connected to 4G

Russian telecommunications market

TMT Consulting estimates that the telecoms market in Russia stood at RUB 1.73 trillion6 in 2020, down 0.7% y-o-y, demonstrating the worst dynamics in the modern history of telecommunications. This was primarily caused by weaker growth rates in the mobile, broadband and pay-TV markets, as well as the lower revenue from fixed-line telephony, B2O and a number of other services.

1.73 RUB trillion
Russian telecoms market in 2020

In 2020, traditional mobile services still accounted for the bulk of the telecoms market, but digital services, such as IoT, M2M, mobile TV, e-commerce and Big Data, were increasingly gaining traction. The Russian mobile market has four major operators: MegaFon, MTS, VEON and Tele2.

As at end-2020, the mobile subscriber base and penetration rate in Russia declined. The decline was mainly due to COVID-19 restrictions – people cut their visits to stores that account for the bulk of new connections. Border closures also had an impact, leading to a reduction in the number of migrant workers who use the services of local operators when they come to Russia.

Fixed-line services, as well as their share in the industry’s total revenue from telecoms services, continued to decline as subscribers steadily abandoned fixed-line services in favour of mobile services.

In 2021, the pandemic is likely to continue making an adverse impact on the market, but a recovery trend can be expected in most segments.

In particular, a growth in the mobile subscriber base is likely to renew and, combined with a partial recovery of roaming traffic, it will drive accelerated revenue growth. Revenues from broadband Internet access and pay TV may also grow.

In the next few years, market dynamics will primarily be determined by operators’ pricing policies. Further revision of existing tariffs can be expected on an ongoing basis and, as the volume of consumed traffic and bandwidth requirements grow, operators will bet on more expensive high-speed tariffs, and tariffs with increased or unlimited traffic.

Based on previous years’ experience, we can expect the telecommunications market to grow by about 2% annually in 2020–2025. Growth is likely to slow down as the opportunities for increasing average revenue per subscriber from communications services are exhausted, while the share of IT (data centres, cloud solutions, security, digitalisation of enterprises and organisations) and media services in operators’ revenues grows.

Mobile services

Mobile services remain the principal source of revenue for the Russian telecommunications industry: TMT Consulting estimates this segment’s share at 57–58% of the total revenue in 2020.

The growth rate of the Russian mobile communications market slowed down to 0.3% in 2020, demonstrating the weakest dynamics in the past four years. At the end of 2020, the market size was about RUB 1 trillion. The main reason for the slowdown was a sharp decline in the subscriber base during the spring self-isolation and lower international roaming revenues due to border closures.

TMT Consulting estimates that at the end of 2020, the mobile subscriber base (number of active SIM cards) decreased by 1.3% to 257 million subscribers, with Russia’s mobile penetration at 175%. In absolute terms, the subscriber base decreased by 3.5 million.

M2M and IoT

Both the Russian and international M2M and IoT markets continued growing. In early 2021, Rostec State Corporation together with other market players (including MegaFon and Mail.ru Group) presented an updated roadmap for IoT development in Russia, according to which sales of Russian IoT developers will grow to RUB 230.9 billion by 2024, compared with RUB 44.4 billion in 2020, with total investments of RUB 41.6 billion.

In mid-2020, J’son & Partners Consulting estimated the number of connected IoT/M2M devices in Russia at just under 23 million as at the end of 2019. According to the company’s forecasts, by 2025 this indicator will reach 56 million devices. This growth will primarily be driven by the development of cloud IIoT platform services7, and increasing usage of these services will determine the dynamics of the market as a whole.

Fixed-line services

In 2020, the fixed-line market declined by 11.6% y-o-y, according to TMT Consulting’s estimates. Over the year, 2.3 million subscribers abandoned fixed-line services, causing penetration for these services to decline by 3 p.p. to 27%.

It is assumed that the fixed telephony market shrinkage was caused by subscribers abandoning the service in favour of mobile communications, as well as by cost cutting at enterprises that increasingly set up communications based on virtual PBXs with just a few external telephone numbers.

Broadband internet access

In 2020, the Russian broadband market showed increased growth rates. According to TMT Consulting, the subscriber base was up 2.1% compared with 1.4% in 2019. Broadband penetration was 61% compared with 60% a year earlier.

Market growth was observed mainly in the B2C segment (+3.1% y-o-y) and was driven by increased demand for the service during self-isolation: users who previously had no fixed Internet access at home were getting connected to work from home.

At the same time, the segment revenue grew by only 1.1% y-o-y. The dynamics were negatively affected by operators offering discounts in an attempt to attract new subscribers, as well as by the government’s requirement not to disable access with a zero credit.

The surge in remote work and online entertainment consumption also caused a significant increase in fixed data traffic usage. According to the Russian Ministry of Digital Development, Communications and Mass Media, in 2020, fixed Internet traffic in Russia was up 35.6% y-o-y to 58.4 billion GB.

Pay-TV

According to TMT-Consulting, the Russian Pay-TV market grew by 1.5% in 2020. The dynamics were significantly weaker than in 2019 (8.6%), mainly due to the fact that only some major operators increased their tariffs in 2020.

At the same time, the Pay-TV subscriber base growth rate in Russia dropped from 2.5% to 1.6%. This decline in the growth rate was driven by IPTV subscriptions being included in bundled offerings and by subscribers migrating from analogue cable TV to digital cable TV and IPTV. The pandemic-driven self-isolation strongly supported the demand for TV services.

  1. All data in the Global Market section are based on GSMA reports unless otherwise indicated.
  2. According to Ericsson Mobility Report: Q4 2020 Update.
  3. Exabyte (EB) is 230 (about one billion) GB.
  4. According to Forest Interactive’s 2020 Telecommunications Industry Roundup report, and GSMA’s data.
  5. According to Ericsson Mobility Report 2020.
  6. Preliminary estimate by TMT Consulting.
  7. IIoT stands for Industrial Internet of Things.
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