La Russophobe has moved!

You should be automatically redirected in 6 seconds. If not, visit
and update your bookmarks.

Take action now to save Darfur

Friday, July 21, 2006

Bottom Drops out of Saturated Russian Cell Phone Market

The Moscow Times reports that, contrary to the absurd propaganda campaign being conducted by the Kremlin regarding Russia's oil wealth, nothing has changed for the ordinary Russian on the street. Already the cell phone market has become saturated and begun to dry up:

Mobile phone sales fell by 20 percent to 13.51 million handsets in the first six months of the year compared to the first half of 2005, Yevroset electronics retailer said Tuesday.

The ongoing crackdown on illegal imports has pushed up phone prices, contributing to a drop in sales, market watchers said. They predicted that sales would remain sluggish through the end of this year.

Phone retail prices climbed 20 percent to a six-month average of $190 per handset, Yevroset said in a statement. Since the volume of handset sales dropped by the amount of the price hike, the retailer said, total sales remained at $2.59 billion in the first half of 2006, the same as in the first half of last year.

An especially bitter winter contributed to the slowdown in sales during the first couple of months of this year, when "sub-zero temperatures hurt all retailers," said Mikhail Alekseyev, a telecoms analyst with AC&M Consulting.

Still, rising prices were the main culprit in the slowing handsets sales, said Eldar Murtazin, head of Mobile Research Group.

"I don't see any reasons for prices to drop in the near term," Murtazin said. The market is set to shrink by about 30 percent by the end of the year, he said, because people are buying new phones less often due to rising prices.

The number of handsets sold in the second quarter of the year dropped 21.9 percent compared to the second quarter of 2005, with the total sales volume shrinking 8.9 percent in dollar terms, Yevroset said.

This helps to explain why, as the Moscow Times documents, Russia was utterly shut out at the G-8 meeting, humiliated and denied at every turn, because the G-8 members know full well that the idea of Russian economic potency is pure fiction:

No major breakthroughs were made. Talks on energy security, Russia's priority for the summit, went nowhere and took a backseat to international crises such as violence in the Middle East. U.S. President George W. Bush met the heads of leading nongovernmental organizations. German Chancellor Angela Merkel singled out NGOs as an issue that worried her. British Prime Minister Tony Blair's wife offered legal aid.


copydude said...

Sorry, but there is no correlation between a saturated market and consumer wealth. Surely you make a very tenuous link between mobile phone ownership and the G8 summit.

As it happens, the mobile phone market doubled in Russia every year for four years between 2000 and 2003, showing strong consumer purchasing power. (Source: The Economist Intelligence Unit.) That the market is now totally saturated is actually a global situtation, as evidenced by the UK's Vodafone.

On 30 May 2006, the company announced a loss before tax of £14.9 billion ($27.9bn) for 2005, the biggest loss in British corporate history.

May I also suggest that mentioning Cherie Blair in support of your arguments is self-defeating. Mrs Blair's law firm is bankrolled by such needy human rights cases as Mr Berezovsky and her interest in NG0s is far from altruistic.

La Russophobe said...

COPYDUDE: Thanks for the comment and welcome to La Russophobe! Thanks for adding value to the blog by noting source material, in the future perhaps you would be so kind as to post links so readers can find and review the material for themselves, as La Russophobe allows them to do.

Sorry, but I disagree with you that the Russian and British markets are in any way comparable. Despite having one-third as many people, Britain's GDP is much larger than Russia's and its dynmic, vibrant economy leaves Russia in the dust in any way one cares to name. Attempting to compare Britian and Russia on any economic terms is like trying to compare a Lada and a Jaguar on any automotive terms.

There's a difference, for example, between a market getting saturated because 98% of the people have phones and one getting saturated when only 25% have them because those are the only ones who can afford them. You choose to ignore the statement in the report that Russians are being priced out of the market for cell phones by a variety of factors. There is no such indication in any evidence you cite concerning Britian.

You also ignore (or maybe you simply don't know) that virtually all cell phones sold in Russia are pay-as-you-go, no market for contract phones has developed because the population is so impoverished. In fact, consumer credit of every stripe is non-existent in Russia, for the very excellent reason that the average salary is $300 per month and the vast majority of the population has no money. Even if it did, as Russia is ranked among the top 40 most corrupt nations in the world, Russians wouldn't qualify for credit.

Interestingly, you don't say whether you thing Russia's future consumer economic prospects are good or not. If you agree that Russia is heading for disaster, then your comment is not only wrong but a distinction without a difference. If you disagree and are willing to go on record saying that you think Russia's consumer economy has a bright future, La Russophobe would love to have you do so.

Finally, La Russophobe really doubts that it's much comfort to Russian cell providers who are going bankrupt that British providers are also going down. But that's just her.

copydude said...

quote 'Britain's GDP is much larger than Russia's and its dynamic, vibrant economy leaves Russia in the dust'

You should try living here. The average Brit lives on credit where disposable income is eaten by interest. The false economy is based on consumer borrowing against inflated property values. Since young couples can no longer afford to buy property of any kind, this economy really is doomed.

As it happens, I have a pay and go mobile and only it use to text. I can't help noticing that everyone in Russia has a much whizzier mobile than me. In fact, mine looks postively dusty.

Mobile operators basically gave away handsets to lock people in to expensive call charges on non-cancellable contracts. As these contracts expire, most people in Europe are switching to pay and go and expensive handsets are only for gismo freaks. The mobile was in part a novelty market and the novelty has worn off. Adding a camera was desperation marketing.

I shed no tears for cell providers, Russian or Brit. The companies overpriced a service to make huge profits. They killed the golden goose, as we say.

La Russophobe said...

COPYDUDE: Au contraire. YOU should try living in Russia. It might give you a renewed appreciation for the many wonderful qualities of life in Britain. Granted, Britain isn't perfect, after all you've still got that nasty monarchy.

In Russia, where the average salary is $300 per month, young people can't afford much of anything, much less buying property, and as Mr. Khodorkovsky knows, even if you can afford to buy property the government can come along and take it from you any time it wants. After all, if things were really better in Russia than in Britain there would be net immigation from Britain to Russia, which is in fact the OPPOSITE of what is actually occurring because, of course, the opposite is true.

You write: "most people in Europe are switching to pay and go and expensive handsets." La Russophobe can't abide this kind of statement. Souce it, fella. Otherwise it's just propaganda.

I'm not "shedding tears" for providers, I'm saying that the Russian cell phone market is in trouble just like every other asepct of the Russian economy, and if you want evidene of that I suggest you take a tour through the sidebar category called "La Russophobe on the Economy." Or better yet, read a book on the subject by the respected Brookings Institution which says that Russia's economy is all smoke and mirrors. It's called "Russia's Virtual Economy" and its touted on the main page of this blog.

copydude said...


COPYDUDE: Au contraire. YOU should try living in Russia. It might give you a renewed appreciation for the many wonderful qualities of life in Britain. In Russia, where the average salary is $300 per month . . . etc

As a matter of fact, I have tried it. I have lived in several countries and all have allowed me to form a comparative view on the 'qualities' of life in Britain.

To parrot average salaries - always a contentious statistic - is no guide to quality of life as you know. The sausage sandwich index has more relevance. And it fuzzies further with how an individual spends money. Since I smoke, I would need to earn at least ten times as much as a Russian to live in the UK and, since I drink wine every day, five times as much as a French citizen.

By the way, quoting the Brookings Institute doesn't afford you much cred either. They'll say anything. They are official providers of quotes to Lieberman et al who want to talk up the 'wunnerful Iraq economy' as the result of the US 'hilpin them Iraqi peoples'. They're CIA. Maybe that's where you're coming from? Is it time to 'out' the Russophobe?

La Russophobe said...

COPYDUDE: Did you live in Russia on a salary of $300 per month? Are you saying that you think the quality of life for an average Russia is the same as or better than that of the average Briton?

I agree that average salaries are misleading. Because the term AVERAGE means that half the population is BELOW average, living in abject poverty and privation. Quite literally, those Russians are now dying off, and the country is expected to lose tens of millions of people by the middle of this century.

Brookings is one of the most respected think tanks in the world, and they are very far from being the only ones to have documented Russia's virtual economy. A five minute conversation with any Russian will convince you that it exists, and make you wonder how the Russian economy has survived as long as it it has done. We stand by our statements about Brookings, and you certainly have not documented that any of them are wrong.