IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA
E |C |O |N |O |M |Y WEDNESDAY OCTOBER 7, 2015
BUSINESS: Competition intensifies in telecom sector with Tele2’s push in Moscow posing challenge to Russia’s top three operators
NEWS
Brave new world for tech firms: Russia plans to offer tax breaks AFP/EASTNEWS
Bajaj Auto has begun exporting its popular Pulsar range of motorcycles to Russia. A few containers have been already shipped. The Pune-based manufacturer is the second Indian company after Royal Enfield to export two-wheelers to the growing Russian market. Bajaj has appointed a local partner that will be distributing the bikes across the country. RIBR
Tax incentives will attract more funds and shore up high-tech sector amid economic downturn ALEXEY LOSSAN RIBR
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ussia plans to offer tax incentives to portfolio investors trading in stocks of technology firms in a bid to help the sector attract funds and expand. The move comes as Russia’s Technology, Media and Telecommunications (TMT) industry enters a new stage of development. Telecom firms are battling market saturation and a festering recession, spurring competition for clients and the market share. Meanwhile, internet connectivity has expanded considerably throughout the country, creating new horizons for technology startups and e-commerce. The result is a brave new world of challenges and opportunities for Russian tech firms. Now the Cabinet is prepping plans to eliminate the capital gains tax on income from the sale of securities traded in the innovation and investment market sector of the Moscow Exchange, the Cabinet’s press services said. Deputy Economic Development Minister Oleg Fomichev told Vedomosti newspaper that benefits would apply to both legal entities and to individuals, and would stay in effect until the end of 2022. In order to get the benefit, the investor must own the securities for at least one year. Prime Minister Dmitry Medvedev told a cabinet meeting that innovative companies attract investors’ money by issuing securities for the period of their projects – for one or two years. According to the Moscow Stock Exchange, benefits will be extended to the shares of 29 issuers, including the state-owned technology investment corporation Rusnano. “In spite of the
Army chiefs discuss terror, training, Indra-2015 exercise Chief of the Russian Ground Forces, Colonel-General Oleg Salyukov, held talks with India’s Chief of Army Staff General Dalbir Singh and “discussed issues involving reformation of the Ground Forces of Russia and India, the methods of combating terrorist threats, weapons modernisation, and the development of combat training systems,” said a statement. They also discussed the the Indra-2015 – that will be held in India this November.
India to launch BrahMos missiles from Su-30MKI The Indian Armed Forces will launch a BrahMos supersonic cruise missile, jointly developed by India and Russia, from a Sukhoi Su-30MKI fighter this fall, an Indian Defence Ministry source said.“The first stage of the missile test will start at the end of October — beginning of November,” the military source told RIA Novosti. He added that testing of the missile will take place in four stages. RIBR
It’s comeback time: Indian producers set to stir Russian tea pot
Russia to replicate visa-free group tourism for Indians
Indian tea-producers are firming up strategy to regain their share in the Russian market DADAN UPADHYAY RIBR NIKOLAY KOROLYOFF
Rostourism is working on a visa-free exchange plan for tourist groups between Russia and India, Valery Korovkin, representative of the Federal Agency for Tourism, said. The visafree exchange programme between Russia and China forms the basis for the new project. But the minimum number of members in the group from India will be reduced to three (for China, a visa-free group must comprise at least five people). RIBR
Igor Butman to enthrall India with blind musicians © RUSLAN KRIVOBOK / RIA NOVOSTI
The famed Russian jazz maestro Igor Butman will perform with his band in India this month He will participate in an international jazz festival ‘Jus’ Jazz 2015’ across Goa, Mumbai and Delhi with his quartet, featuring the visually challenged Oleg Akkuratov. His performance will take place in Delhi on October 7-8. RIBR
economic downturn, the activity of mobile phone and mobile Internet users continues to grow rapidly,” Hedge. pro’s Managing Director Ilya Buturlin told RIBR. Meanwhile, competition in Russia’s telecom sector is set to heat up further still amid an aggressive push by telecom operator Tele2 into the capital city, Moscow, in October. The move poses a challenge to the country’s big three telecom firms: MTS, MegaFon and VimpelCom. “The operator will offer easy-to-understand tariffs at low prices and without any hidden conditions to residents of Moscow and Moscow Region,” Tele2 said. The Tele2 brand is still being used for mobile services in Russia despite the exit of its previous owner, Sweden’s Tele2, from the market last year. The telco serves 14 percent of the 242.3 million mobile subscribers in Russia as of the end of June, according to experts. Most Russian companies in the telecommunications industry show steady growth. In particular, the proceeds of Russia’s most popular social network VKontakte surged in the second quarter of 2015 by 41.4 percent and reached 1.4 billion rubles ($21.17 billion). The company has said its growth is mainly due to the development of mobile and video advertising. According to recent reports, the revenue of T2 RTK Holding (the firm operating the brand Tele2) increased by 7.1 percent year-on-year in the second quarter of 2015 and amounted to 23.6 billion rubles ($357 million). “Tele2 shows good progress in the ‘new’ regions, the combined company’s positions are also strong in the key regions. But much will depend on how well the new operator will be able to
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n Indian delegation comprising 11 major tea producers and three distributors visited Moscow in September to meet buyers at the World Food Exhibition-2015. It was the tea delegation’s second visit this year after a trip in February, coinciding with “Prodexpo-2015.” Sujit Patra, additional secretary of the Indian Tea Association, led this delegation which underlined India’s strength, particularly in higher-value orthodox (hand-processed) tea over the more usual CTC (crush-tear-curl) tea. The Russian market has been a major consumer of Indian orthodox tea, but now has also taken to CTC in a big way. India exports around 208 million kg of tea annually, around a quarter of which went to Russia. However, recently India’s tea exports to Russia have fallen to 40 million kg. Indian tea exporters feel there is huge scope to bring it back at least to the previous level of 50 million kg. Russia imports around 160 million kg of tea annually. Russia is the world’s fourth largest tea consumer, and India is making a strong effort to tap this large market aggressively, after a gap of ten years. Indian tea exporters have been trying to woo the Russians to increase imports of tea from India as a balancing act following India’s slumping exports, mainly since the Iran payments crisis. They also now want to take advantage of the falling rupee against the dollar, as this will help the Indian tea exporters to raise their earnings. The task of bridging this gap will not be easy. A member of the Indian delegation told RIBR that producers and exporters in India face several problems which they must resolve to win back a large share of the Russian tea market. This includes very tough competition,
in terms of quality and lower pricing of tea from rivals, Sri Lanka and Kenya. Sri Lanka, a producer of the orthodox variety, and Kenya, a producer of CTC tea, have emerged as major exporters of tea to Russia. Tea producers from European countries, including “Ahmad Tea” and others, have also gained a place in the Russian market. In their talks in Russia, the Indian delegation discussed issues related to quality, pricing, packaging and shipment of tea to Russia. They also discussed trademark protection and Geographical Indicator (GI) tags given to Indian tea, including world-famous brands “Assam,” “Darjeeling” and “Nilgiris.” Russia has agreed to extend the benefit for registration of trademarks and GI for Indian tea as available to WTO member-countries. “I think the measures discussed during the meetings with our Russian counterparts and buyers will certainly help protect the quality of famous Indian tea brands and boost tea exports to Russia in the near future” said Patra. To avoid negative consequences of the sliding ruble, the Indian tea industry is also exploring possibilities to adopt the rupee-ruble trading mechanism for stepping exports to Russia. A joint working group of representatives from central banks of both countries is working on the issue. The Indian Tea Association asked the Indian Tea Board to seek an early resolution to this payment mechanism. An agreement could be signed during Prime Minister Narendra Modi’s Moscow visit for the annual Indo-Russian summit with President Vladimir Putin this December. Indian tea companies are also looking to revive tea exports to Russia by forming joint ventures with Russian counterparts to meet their warehousing needs, to pack and store tea under strict control.
GETTY IMAGES
Bajaj begins export of Pulsar range of bikes to Russia
The number of 4G subscribers in Russia increased by 9 percent in the second quarter of 2015
“We register the growing demand for mobile data services,” said Ivan Tavrin, head of mobile operator Megafon. compete with the big three in the ‘capitals’ – Moscow and St. Petersburg,” said UFS IC analyst Peter Dashkevich. The companies in the sector that showed negative returns have suffered mainly due to the collapse of the ruble. However, they have improved their basic indicators. Thus, the net profit of
the mobile operator MTS decreased by 19 percent year-on-year to 28 billion rubles ($423.4 million) in the first half of the year. However, MTS’ income increased between January and June by 3.3 percent to 202.9 billion rubles ($3.05 billion). MegaFon’s revenue from mobile services increased by 0.8 percent and amounted to 66.8 billion rubles ($1.01 billion) for the second quarter of 2015, compared to the same period last year. “We register a growing demand for mobile data services. Our optimal line of batch tariff plans contains an increased volume of mobile Internet, a wide variety of devices with support for 4G,” said MegaFon’s head Ivan Tavrin. He added that the
number of 4G subscribers increased by 9 percent in the second quarter of 2015. Undervalued Stocks Due to a range of factors, including international tensions and deprecating ruble, the shares of Russian firms currently trade at steep discounts to their international counterparts. Russian companies’ valuations are currently roughly between a third or half that of their foreign counterparts, he said. According Dashkevich, an additional risk for the Russian TMT companies is posed by the need for the purchase of equipment in foreign currency while having their earnings in rubles.