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Internet Market in Ukraine (segments of fixed broadband) in 2013: Integrated Rating of Internet Providers in Q4’2013

4 years ago

3955 words

Expert & Consulting Group(www.encint.com), interviewed the key market participants and formed an integral rating (description of the methodology is available on the link method). Because this rating is a kind of summary, we also asked players to share their achievements in the field of administrative management.

Integral rating

According to E&C estimation (www.encint.com), the integral rating* of fixed broadband operators in the 4-th quarter of 2013, based on the performance of the subscriber base, its dynamics and ARPU (average revenue subscribers) was as follows:

Интегральный рейтинг

Позиция в категории

Position №

Operator

Total Score

Subscribers

Dynamic

ARPU

1

«Lanet» GC**

56,0% 9 1 3
2

«Ukrtelecom» PJSC

54,4% 1 9 7
3

«Triolan» GC

49,7% 4 2 4
4

«Kyivstar» GС

47,1% 2 3 8
5

«Datagroup» PJSC

44,3% 5 8 1
6

«Freenet» Ltd.

37,3% 10 6 5
7

«Volia» GС

35,5% 3 7 9
8

«NPP «TeNeT» Ltd.

35,4% 7 5 6
9

«Fregat SP» Ltd.

31,7% 8 4 10
10

Vega

31,3% 6 10 2

* This rating is an estimate. «E&C» reserves the right to review indicators in the rating. Total score in the integral rating is the sum of equally weighted rating scores for all categories of operators. Operator’s score in a particular category – the percentage of the value of operator’s indicator in the selected category from the maximum value in the same category, rounded to one decimal place. Operator’s position in a particular category – the serial number of scores in this category, from largest to smallest. The sources of information for companies indicators are operators’s interviews and / or evaluations of «E&C» group.
1. Subscriber base – considered the total (individual and legal persons) active base (based on the internal accounting system of the operator) of subscribers.
2. Dynamics of subscriber base reflects the growth from period to period.
3. ARPU is calculated blended (legal entities and individuals) for each quarter of the relevant period by dividing the revenue received by the company for the quarter for provided services, excluding revenue received for telephone services, TV / video content, and from the sale of computer accessories and other revenues not related to the provision of services by the average number of active subscribers between two quarters.
** Taking into account the companies operating under the brand “Lanet.”

The integral rating consists of leading Ukrainian providers of fixed broadband by the number of subscribers as results of the fourth quarter of 2013:

Позиция №

Провайдер

4Q2013 (тыс.)

1

«Ukrtelecom» PJSC

1 646,5
2

«Kyivstar» GС*

779,9
3

«Volia» GС

584,2
4

«Triolan» GC

237,0
5

«Datagroup» PJSC

183,2
6

Vega

157,9
7

«NPP «TeNeT» Ltd.

132,0
8

«Fregat SP» Ltd.

119,0
9

«Lanet» GС**

104,0
10

«Freenet» Ltd.

98,0

*Taking into account subscribers of legal entities and individuals working on fixed broadband technology,
** Taking into account the companies operating under the brand “Lanet.”

The results of previous ratings are available at: 3Q2012, 4Q2012, 2Q2013, 3Q2013.

COMMENS OF THE OPERATORS

As part of the rating, were received the following comments and forecasts of market development and major events on it.

Vadim Sidorenko, Acting General Director of “Triolan”

Triolan, Vaim SidorenkoMost companies take away from its line the “low-end” packages – either increase the price of the median packages or delete the cheapest. Accordingly, ARPU growth occurs due to the retraction of low-price packages. Also, there was a decline of profitability from the “top-end” proposals (growth in this segment is not as high). As many operators reduces the number of packets in its proposals and, indeed, their packages are not distinguished by services offered (if you do not talk about the additional services for the Internet). The price is different but the service is the same. This is a general trend in prices.

Subscriber growth in the industry is also continuing. New subscribers continue to connect to the internet, providers do not have problems with that. The only thing is that there are too many competitors in the market now and new connections – is origined by migration of the customers from some other provider.

In this period we have made a fundamental decision to provide cable TV services for free – even those subscribers who do not use the Internet still have free access to television. This innovation occurred in late 2013. There is no similar to our proposal “Cable zero” on the market right now, although with time, someone will copy our approach. Thanks to it we get more connections to cable television, and together with it were the Internet connections. Social programs are also conducted in Kiev, Kharkov and other cities of Ukraine. We have established free access WI-FI points in schools and other educational institutions. Thus we have provided free Internet access to several hundred schools.

In 2013, we will finish to build our existing network.

Fundamental changes in 2014 will not happen. Overall growth in subscriber base and ARPU will continue, but this, again, because of the paradox of tariffs that exists in many companies: 3-4 different tariffs may offer the same service at the same speed at different prices. Lower tariffs are removed, or their prices rise. Significant processes of building the infrastructure is not expected, even the existing players will reduce the rate of building the networks. It may be even a fall in investment and construction. Likely the expand of the networks of operators will be due to purchases, but not to the construction of new networks.

There will be further consolidation of the market, the number of small players will reduce.

Principles and unique methods in management

Virtually all companies will provide network connection for free, but we charge a fee for it. This money are obtained and earned by the master though. This increases staff motivation. We do not need additional managerial techniques to get them to properly do their job. In other respects, our management system is not significantly different from that adopted in many companies.

In the basic cable TV package we exclude the most pay channels, filling it increasingly by free channels. For pay channels we run separate platform OTT on which a person can acquire individually or by packages paid content they like. It is also one of the unique offerings that no one does today.

Alexander Danchenko, CEO of “Datagroup”

Alexander Danchenko, CEO of DatagroupIt is the segment of the retail broadband where special events did not happen, everything is in stable stagnation. Operators work on existing networks, as are deficient in investment capital. Five players finally came to the conclusion that dumping is not the best approach in the market, and begin to align the tariffs. All began to actively develop niche TV and access to a variety of content. However, I have yet to see in this segment big profits, likely until it is the way for retention and extension of services package.

Speaking generally about the telecommunications market, we can note three trends: Ukrtelecom sale into private hands. Now we consider this as a fact, as further strategy development of operator new company’s top management was not provided. The second trend – the growing importance of digital content and, finally, the stagnation of voice services, both fixed and mobile.

In today’s political and economic situation it is very difficult to give any forecasts and estimates. If the situation starts to change, it is only the end of this year.

I would like operators to focus on standardizing the rules of market access to the Internet and wholesale sales. We need to start protecting our business. Growth prospects and quantified in money market is at wholesale, but untill only few players in Ukraine will be interested in it, there will have be no effect. In all of this, all the tools are already there, you just need to fix the legislative level, the key provisions and restrictions on foreign operators.

Among trends can also be noted the growing popularity of cloud services. Several months ago we conducted a survey among our corporate clients: how they are interested in this technology and whether they are ready to move on its use. Our study showed that the corporate sector is not in a hurry “in the cloud”, this service is still more interesting to the mass-market.

Principles and unique methods in management

“Datagroup” is focused on the development and implementation of unique technical products and services. Our task is to offer to our customers every year novelties that improve business processes, help to optimize costs, etc.

Everything related to the development and motivation of staff in “Datagroup” is traditional: salary, motivational fund, annual assessment of staff of compliance to their positions, corporate events for employees and children. Among unique – a technique of corporate training, but we do not hire external speakers, the employees themselves exchanging knowledge and experience. Frankly, some of the training has to be repeated several times because they are popular.

Vadim Prikhodko, head of fixed tariffs and products “Kyivstar”

In 2013, the market of fixed broadband Internet access in Ukraine continued to develop. In the absence of access to modern speeds in the mobile market, broadband remains essentially the only way to popular consumption today of super-heavy content. The market is still far from consolidation. A lot of small operators provide subscribers with questionable quality and reliability. The key to the market uncertainty in 2013 – a new sale of “Ukrtelecom”. The company has the largest access network, but “Ukrtelecom” uses outdated web standards, which limits the company’s ability to provide really high speeds consumption.

For our company, the top 3 tasks:

  • Regional changes. In 26 cities of Ukraine subscription fee was reduced by 33%. Because of this the number of connections to the “Home Internet” have grown. In 2013, we have built private clients base by connecting on 31% more households than in 2012.
  • Running popular services – Static IP, the development of video-portal.
  • Strengthening the capacity of the network.

We believe that fixed broadband will grow in the future. This – long enough product that is capable to complement any high speed mobile technology perspective. The existing broadband subscribers will continue to grow traffic consumption, so the question of network support will remain to be important.

Principles and unique methods in management

We believe that the most successful companies on telecommunications market will be those which provide customers with integrated solutions and services. And the broadband market is not exception – the company offers more than just high-speed Internet with high quality, but also other services are always very popular among the customers. In particular for Kyivstar, this is the offer of mobile and fixed network in one package. Today, all subscribers of Kyivstar have the opportunity to save on mobile communication. When paying Kyivstar’s service «Home Internet» subscribers receive in full the entire amount of money spent on Internet as a discount on mobile communication Kyivstar. For many customers of the fixed Internet the offered discount allows to use mobile services virtually for free. This is unique offer for the Ukrainian market, in large part it is the success story of Kyivstar broadband market.

Victor Frolov, CEO “Freenet”

Victor Frolov, CEO «Freenet»The past year was characterized by lack of pronounced dumping proposals, stabilization of ARPU and maintaining a balanced tariff policy by the key market players. The market continues to evolve, but remains to be highly fragmented: the consolidation and acquisitions of smaller players are still slow, despite the activation of these processes in 2013 year.

Top 3 events of 2013:

  • acquisition of the national operator “Ukrtelecom” by SCM;
  • developing of the draft of the Law of Ukraine “About the joint use of infrastructure of telecommunications networks”;
  • illegal cutting by Kharkov utilities of of cables of different providers except “Triolan” and the almost complete inaction of law enforcement agencies in solving this problem.

The market of broadband services in major cities is close to saturation, further new active subscribers are possible due to the absorption of small providers and expanding network coverage in small towns.

Principles and unique methods in management

Considering the trends in the market of promotion various content services, in 2013 Freenet introduced a series of complex tariff proposals, which allow subscribers to access not only the Internet, but also a variety of television and media content. Among its partners – DIVAN.TV, Oll.tv and Megogo.net.

With regard to technological innovation, in 2013 “Freenet” has successfully tested GPON technology, which is expected to continue to use in the construction of individual network segments.

Press-office of “Ukrtelecom”

ukrtelecom_logoIn 2013 there was the trend of increased competitive pressure in the telecommunications market. Increased competition in the major cities was expressed last year in the conduct of various activities to attract new customers, often at dumping conditions. As a result, the main players practically do not increase their network coverage outside major settlements, besides significantly slowed the rate of growth of the market in terms of subscribers.

With an extensive network infrastructure, Ukrtelecom is the only one of the major players in the market who is actively expanding the coverage in rural areas.

In an increasingly competitive environment, as before, significant attention was paid to the development of additional services, the key of which is access to the licensed video content. Most major providers, including Ukrtelecom (services “OGO! Cinema”, “OGO! TV”), has launched such services for its subscribers.

As for Ukrtelecom, the key focus for our company was and remains greater efforts to improve the quality of service and customer care. We do our best to improve our customers’ satisfaction to ensure the growth of new connections and hold leadership positions in the Ukrainian telecommunications market for the number of users, and for economic indicators too.

Internet is a key direction of Ukrtelecom over the last few years. The company will continue the development of Internet services. So, in 2013, the company expanded the geography of Internet services in different regions of the country – more than 130 new sites. We all continue to work hard to provide all customers with quality modern facilities and services. Our experts will study all aspects of Internet services using a variety of modern technologies to meet the needs of potential users.

In 2014, the broadband market continues to evolve, as it has potential for growth. Despite the significant saturation of demand in cities 100K+, where we expect a slowdown in subscriber growth, we believe that potential growth drivers for broadband providers should be the expansion in the 50K cities. We believe that a key characteristic for the coming year will be a change in the key areas market competition in the industry from price dumping to forming long-term relationships with customers, forming loyalty of existing sunscribers and winning new clients as well.

In a competitive envirronment the operators will focus on the development of additional services and new products to meet the increasing demand of customers.

As for the Ukrainian telecommunications market as a whole, Ukrtelecom hopes that each of the players will make every effort to the entire population of the country has been able to use high-quality modern services, regardless of their place of residence to the telecommunications industry to develop their potential.

Public Relations Department of Volia

VoliaVolia completed the upgrade of Internet networks in most cities of its presence, which allowed to run high-speed (100 Mbps) packages for most of the network.

Also in those cities where the company provides DOCSIS Internet access technology there is a program for free replacement of obsolete modems. Over the past year has doubled the number of Volia’s users of Internet services with modems that use a new Internet-standard DOCSIS 3.0.

Last year Volia totaly invested about 270 million hryvnia in innovation and modernization of networks. These investments have a positive impact on subscriber base – during the period October-December, the number of our Internet subscribers increased by 18,000.

In the last quarter the interactive television service “Volia Smart HD» had significant improvement. To the opportunity to watch 130 channels in digital and HD-quality, more than 30 thousand movies and shows from online film libraries, videos from YouTube, the company has added multi-screen service “Volia Smart Touch» for mobile devices (smartphones and tablets) and its own online cinema “Volia Cinema.” Also it was developed a boxed service “Volia Smart HD» without contract opportunity and connecting it by purchasing online or in retail networks. As a result, this service became available throughout Ukraine – where there is access to the Internet from any provider at the rate of at least 5 Mbit / sec.

In the 4th quarter were recorded increased in comparison with the beginning of the year assessments of the quality of service that were received from subscribers. This was the result, in particular, of the introduction by the company earlier this year of several programs of quality control of Internet access of subscribers (“Seamless connectivity”, “Impeccable technical issues”, an online measurement speed, etc.), which allow to proactively respond to the challenges service and maintenance.

In 2014 Volia will remain faithful to the mainstream of last year. The company will develop the convergence TV services, Internet, OTT, additional equipment and services into a single complex multimedia services, where the subscriber can choose the one he set of services that best suits his needs and tastes. The boundaries of the Internet and TV gradually disappearing, turning into an interactive service that Volia already offers and will improve in the future.

PR-office of Vega

VegaBy the end of 2013 can be called a major trend in the telecommunications market in Ukraine – the expectation of change. During the year the market participants expected changes in regulation, and changes in policy of the operators after the change of ownership and management. In anticipation of future changes planned new M&A transactions, efforts were made to increase the subscriber base. Most of the expectations have not had time to become a reality in 2013 and has been rescheduled for 2014.

Top events in the telecommunications market in Ukraine:
Broadband access service providers focused on increasing the subscriber base, often at the expense of revenues from services, again in vogue shares short shock discount (in the style of “six months free”).

During 2013 renewed the interest of providers to M&A deals. nd if previously active players were major operators that went into the new city for themselves through the purchase of local operators, it is now that medium-sized regional companies are in involved in the process.

Highlights of the Company:
1. International cooperation and work with the operators:

  • Vega joined the Google Global Cache
  • Vega organized connection with Russian telecom operator TTK
  • British Telecom Company entered into a partnership agreement with Vega
  • Vega has signed an agreement to provide services of IP-transit.

2. Capital costs of “Farlep Invest” PJSC (company engaged in operations management of Vega) on the results of 2013 amounted to 47 853 thousand UAH. Basically, it is an investment in the development and construction of connections zones with modern technology Wi-Fi and FTTx in large cities and in the private sector.

3. In 2013 innovative products appeared on the market. Vega received a license for IPTV services in Sofiivskoy Borshchagovke region and has launched the “Vega Video”.

Forecasts for 2014
First and foremost forecast for 2014 for the industry as a whole, we believe, is the continuation of cooperation with state regulators in the direction of the development of transparent and uniform legal and regulatory standards for the operation and development of the broadband market.

Broadband market in Ukraine is characterized by saturation of 100K+ cities in connection with this projected slowdown in subscriber growth. Therefore, possible points of growth for broadband providers may be the expansion of the city in the 50K-. This is also reflected in the key vectors in our companies, the reorientation of competition with price policy on building lasting relationships with the customer through the provision of quality of service. Obvious prospects for 2014:

Further consolidation of businesses in the broadband market.

  • Continuation of the trend of M&A activities.
  • More demanding user.
  • Increase in traffic volumes.
  • Operating cost efficiency.
  • Innovative solutions for all areas of life and business.

Company Plans
In 2014 Vega will focus on development projects that will increase your customer base and expand the offer of products and services to new and existing customers. These projects include:

  • Investment in the development and modernization of the network, including the construction of new zones of FTTB / FTTH / Wi-Fi.
  • Modernization of telephone backbone network, SDH networks in urban cities where we available now.
  • Development of new integrated services and additional services for businesses and individuals.
  • Expansion of loyalty programs.

PR Office of «MATRIX»Matrix

2013 marked by several events that, to a greater or lesser extent, influenced the development of Ukrainian telecom market. Fixed access operator “Ukrtelecom” was acquired by SCM; OTT technology got widespread in 2013, which is responsible for viewing legal video, “Media Group Ukraine” has acquired the rights to broadcast programs of Comedy Club Production producing center in Ukraine. In general, the Ukrainian telecom operators have focused on IPTV service. By the end of 2013, digital television has moved from a position of additional services for the position of one of the main.

Consolidation of prices – one of the characteristic features of the development of the broadband market in 2013. The cost of Internet services virtually unchanged.

Along with this, there is dumping in promotional offers. Quite often, in 2013 operators attracted new customers with the best offers low prices with high speed Internet access services. The desire of operators to generate maximum attractive offers is quite clear in terms of market saturation and the high level of competition.

For MATRIX significant event in 2013 was the launch in telecom market of Krasnoarmiysk city (Donetsk region). Special tariff and promotional offers were made for subscribers of the city.

MATRIX also paid special attention to IPTV service: implemented a number of measures to improve the quality of the offering, developed and implemented new services and applications necessary for convenient use services. Integrated solutions for the new TV-sets with SmartTV technology.

We assume that in 2014 the major providers will move in small towns and villages. Perhaps many operators will pay more attention to the development of the private sector, offering a fixed connection.

We can expect that the nationwide providers who only provided Internet up to this moment,will offer IPTV service to the users. Perhaps first and foremost, the nationwide operators will start this service in the regional centers, and later – in all the cities of their presence.

Principles and unique methods in management

As for innovations in management, in 2013 we implemented the project “The best employee.” Specially designed for MATRIX criteria were identified among the best specialists of all structural units of employees of our company. The purpose of the project – an extra motivation specialists to maximize quality indicators of labor. To guide the company with a positive effect of the project is to obtain feedback (opinions and suggestions) from employees.

In addition, we have developed and successfully introduced special corporate site for our employees. INTRAnet has a wide range of tasks within HR-strategies, allows for more rapid exchange of information and solve many operational issues as efficiently as possible online.

As intangible encouragement for all of our employees work a special “privilege program”, allowing to use discounts and promotional offers of partner companies – cultural institutions and other organizations of the city.

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Source: Expert & Consulting (www.encint.com). Reference to the source and active clickable link is obligatory. Google