Analysis of the Russian Telecommunication Industry at the Case of Mts
Course: Contemporary Strategic Analysis (fall 2011)
Analysis of the Russian telecommunication industry - the case of MTS
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Speculate on the distinctive features of the telecom industry and define their effect on the company strategy.
Historical background
To start with, the telecommunication industry for a long time seen as a provider of public goods, next to post service and railway, also involves heavy investments at a steady but relatively small cashflow income. Hence, it was seen that economics of scale are need to lead such a business successfully. Historically this industry was highly regulated in form of monopolistic companies owned by the government.
According to Fransmann (2011) in the days of the Old Telecoms Industry the conventional wisdom was that telecoms was an example of ‘natural monopoly’, that is due to increasing returns to scale telecoms services could only be provided efficiently by a monopoly provider. Accordingly, in most industrialized countries was dominated by a monopoly network operator. The situation could be described as closed innovation system, very high entry barriers (in fact impossible to enter), very few innovators, fragmented knowledge base, medium-powered incentives, Slow, sequential, innovation process. Because of missing competition the price-quality relationship of telecom services in most countries was a disaster and companies still didn’t manage to operate profitably.
This was the case in almost all countries before the 1980 and 90’s when liberalization made it possible for private “high-tech” players to enter the market when in the mid-1980s, for different political-economic reasons, Japan, the UK and US decided to end the monopolies of their monopoly network operators. The result was the birth of the original new entrants.
The new era
From the late-1990s, it was clear that a qualitative change had occurred in the Telecoms Industry in the
Analysis of the Russian telecommunication industry - the case of MTS
1. -------------------------------------------------
Speculate on the distinctive features of the telecom industry and define their effect on the company strategy.
Historical background
To start with, the telecommunication industry for a long time seen as a provider of public goods, next to post service and railway, also involves heavy investments at a steady but relatively small cashflow income. Hence, it was seen that economics of scale are need to lead such a business successfully. Historically this industry was highly regulated in form of monopolistic companies owned by the government.
According to Fransmann (2011) in the days of the Old Telecoms Industry the conventional wisdom was that telecoms was an example of ‘natural monopoly’, that is due to increasing returns to scale telecoms services could only be provided efficiently by a monopoly provider. Accordingly, in most industrialized countries was dominated by a monopoly network operator. The situation could be described as closed innovation system, very high entry barriers (in fact impossible to enter), very few innovators, fragmented knowledge base, medium-powered incentives, Slow, sequential, innovation process. Because of missing competition the price-quality relationship of telecom services in most countries was a disaster and companies still didn’t manage to operate profitably.
This was the case in almost all countries before the 1980 and 90’s when liberalization made it possible for private “high-tech” players to enter the market when in the mid-1980s, for different political-economic reasons, Japan, the UK and US decided to end the monopolies of their monopoly network operators. The result was the birth of the original new entrants.
The new era
From the late-1990s, it was clear that a qualitative change had occurred in the Telecoms Industry in the
References: * Gupta, Aman; BPTrends: ‘Pursuit of the Perfect Order: Telecommunications - Industry Perspectives’, November 2008 * Fransman, Martin; Telecoms Policy Magazine: Mapping The Evolving Telecoms Industry: The Uses And Shortcomings of The Layer Model, 2011 * Business Monitor International; Canada Telecommunications Report: Regulatory Environment & Industry Developments, Canadian Radio-television and Telecommunications Commission (CRTC), 2010 * Dubovskov, Andrey; Financial times: Company interview: MTS Group (MBT); 2011 * Lisitsyn et. al, Journal of East-West Business: ‘Russian Telecommunication Company MTS Goes to the CIS’, 2008 * Huyghebaert, Nancy; Universiteit Leuven Academic papers: Determinants of Growth through Mergers and Acquisitions - An Empirical Analysis, 2008