Russia is the country with characteristics most like Brazil between the countries named BRICs (Brazil, Russia, India and China) (more details)
| 2006 | Brazil |
Russia |
| Population (Millions) | 187 |
143 |
| PIB- gross domestic product (US$ Billions) | 1,068 |
979 |
| PPP US$ | 9,108 |
12,096 |
Source: FMI, PPP - Purchanse Power Parity
Cellular growth in Russia has been stronger than Brazil.
In 3 years Russia which had cell phone's density lesser than Brazil in 2003, doubled its cell phone's density in 2006.
Differences on active cell phone counting process and bigger tax base in Brazil are not enough to explain the huge difference between both countries.
Cell phone's growth in Russia sped up since 2002 when the operators introduced pre-paid plans, which represent 90% of the cell phones of Russia.
The prices of cell phone operators services in Russia are also lesser than Brazil, as you can see in the following table :
| Russia | Cell Phones (millions) |
ARPU (US$) |
MOU* |
Net Revenue/ minute |
| MTS | 52.7 |
9.2 |
151 |
0.06 |
| Vimpelcom | 49.6 |
12.3 |
193 |
0.06 |
| Brazil's Average | - |
15.2 |
80 |
0.19 |
| Tim | 27.5 |
17.9 |
94 |
0.19 |
| Vivo | 30.2 |
15.5 |
77 |
0.20 |
* Minutes of usage
MTS and Vimpelcom are the biggest cell phone operators of Russia with 32.9% and 30.9% market share in the Q207 (more details)
These operators chose to use low prices and despite low ARPU, have EBITDA margin superior to 50% in the Q207. This performance is because of low acquisition cost of clients (SAC) of these operators.
| Jan-Jun/07 | Net Revenue * |
Ebitda Margin |
SAC** |
| MTS | 2.791 |
52,0% |
29 |
| Vimpelcom | 2.737 |
53,2% |
16 |
| Tim | 3.059 |
23,9% |
72 |
| Vivo | 3.042 |
23,7% |
55 |
US$ Millions; ** US$ per gross add.
MTS and Vimpelcom use dealers specialized in the commercialization. In the Q207, the expense with comission to dealers per new client, in MTS, represented 47% of the US$ 29 of SAC. The subsidy to devices is minimum in Russia.
As result, even having big revenue and bigger ARPU, Tim and Vivo have Maket Cap around 40% of these operators.
The example of Russia shows that it's possible to have profitable operations even with low ARPU in a country of continental dimensions. To bet in volume, stimulating the usage with low service prices, and reduce the cost of client's acquisition seems to be the key for the success.
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