CJSC Transtelecom Company (TTK)

Fixed-line operator. Shareholder – Russian Railways (100%). Financial indicators (IFRS, 2011): revenue – 24.8 billion rubles, net profit – 1.03 billion rubles.

In February, TTK's total subscriber base for fixed broadband Internet access reached 1.1 million users, the company reported yesterday. According to TTK Vice President Svetlana Shamzon (her words are quoted in the press release), last year was a turning point for TTK's retail business: the company became known in the regions and the rate of connection is growing - since the beginning of 2013 alone, the operator has connected more than 100,000 households.

TTK began actively developing services for the mass market – primarily broadband Internet access (BBA) – with the arrival of Artem Kudryavtsev as its president (this happened in the fall of 2010). TTK's strategy involves focusing on small cities with a population of 50,000 people, Kudryavtsev told Vedomosti, and the main increase in subscribers comes from cities with a population of up to 200,000 people.

The acceleration of connections in recent months is primarily due to the fact that at the end of 2012, TTK commissioned access networks in many new cities and began selling services there, Shamzon told Vedomosti. At the same time, the operator was actively developing pay TV, and more than 100,000 subscribers are currently connected to it. Residents of small cities, which TTK is targeting, travel abroad less often for the New Year holidays, but they still need the Internet, and this also affected the dynamics of connections in December - January, Shamzon says. But large cities, according to her, are also potentially interesting for TTK.

In a year and a half, TTK has connected more than 1 million households. The share of retail business in the operator's total revenue increased in 2012, according to preliminary estimates from TTK, almost fourfold - from 5% in 2011 to a level close to 20%. Among Russian broadband providers, only Er Telecom has a higher growth rate, notes AC&M-Consulting partner Alexander Shatikov. Er Telecom added 460,000 users in the fourth quarter of 2012, says its representative, although these are mainly subscribers not only to Internet access, but also to paid TV and telephony. Er Telecom practically does not go to small towns, it is present in cities with a population of 300,000-500,000 people, says its representative: the level of broadband penetration there is already high, about 80% excluding dilapidated housing - but the demand for connections is high.

Cities with a population of up to 200,000 people are also important for the largest Russian broadband operator, Rostelecom, says its representative Valery Kostarev, drawing attention to the fact that Rostelecom has the widest geographic coverage of such cities. Almost all of them are connected via high-speed fiber-optic lines, on the basis of which other services are being developed that increase the return on investment – interactive TV, content services, etc., says Kostarev.

In cities with a population of over a million, the market is already saturated, so growth is happening at the expense of smaller cities, representatives of MTS and VimpelCom agree. MTS has broadband networks in 160 cities, but the company focuses on development not so much by the size of the city, but by the potential demand for fixed-line Internet and the ability to quickly deploy networks, adds the head of its press service, Valeria Kuzmenko. VimpelCom, according to its press secretary Anna Aibasheva, has broadband in more than 100 cities and its priority goal is to strengthen its position there.

TTK grew not only due to network construction, but also due to acquisitions, Shatikov reminds. Demand for broadband in small cities is high, but only on condition that the operator offers a price of no more than 300 rubles per month, he says. The payback period for investments at this price level stretches out to five to six years, he believes. In small cities, the average bill per user may be lower than in larger ones, Kuzmenko agrees, but with a low penetration level, the operator quickly builds up a base and recoups investments, she adds.

Transtelecom Increases Number of Internet Users by a Third