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Presentation by Andrey Kupriahin of UFT for the Dutch Delegation of the Digital Perestroika 2.0 Business Trip organized by Coincide & Marketingfacts. June 17, 2009

Presentation by Andrey Kupriahin of UFT for the Dutch Delegation of the Digital Perestroika 2.0 Business Trip organized by Coincide & Marketingfacts. June 17, 2009

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  • 1. United Fun Traders: Digital Perestrojka 2.0
  • 2. Contains •Mobile market size and developments •VAS market in Russia •i‐Free at a glance •United Fun Traders •Q&A and exchange
  • 3. Russia: mobile market size and developments Subscribers base Russian mobile market has grown dramatically in 2002-2005. Now it’s equal to Europe in terms of services and quality. Penetration is more than 100% and was approached during 2 years. Now penetration is stable and it’s about 130% in the whole country (Moscow ~190%, St. Petersburg ~170%, regions ~120%). Territory / Penetration (2008) In future subscribers base won’t grow any more. All new sales made by customers who decided to change their operator. 3
  • 4. Russia: mobile market size and developments Revenue and ARPU Quarter increase / decrease It’s the first time from the beginning of mobile market revenues will decrease in 2009. 4
  • 5. Russia: mobile market size and developments Biggest operators – subscribers (2008) The “Big Three” operators so called federals (MTS, Vympelcom and Megafon),control more than 80% of the market and about 90% of revenue in Russia. There are big regional players: Теле2, mobile branches of Svyazinvest. One of the biggest local companies in past, SMARTS, as well as CDMA Biggest operators – revenues (2008) 2000 operator Skylink, lose their positions under “Big Three” pressure. 5
  • 6. Russia: mobile market size and developments “The Big Three” revenues «The Big Three» – key indicators We can see a trend for all of them to be almost equal in terms of subscribers base / revenues, despite of the fact that Megafon’s revenue 5 years ago was 3 times less than MTS and 2 times less than Vympelcom “The Big Three”’s subscribers base “The Big Three” ARPUs 6
  • 7. Russian mobile market today The most important trends 2008-2009: • Operators try to develop their own retail chains: – Existing chains acquisitions («Euroset», «Eldorado», «Telefon.ru») – Strategic alliances between operators and retail companies («Svyaznoy» - MTS) – Own retail development • Fixed/Mobile operators convergence («Vympelcom»-Golden Telecom, MTS- «Comstar OTS»). • Mobile operators build their own main telecommunication networks. • International expansion (CIS, India, Asia Pacific). 7
  • 8. Russian mobile market today Differences between Russian and European markets: • Poor system complicates connection between mobile/banking accounts. This has negative affect to loyalty programs development and micro credicts. • Due to a poor market segmentation, there are no MVNOs in fact. However, this market opportunity allows users to choose better service and prices in future. • Regulation is not that tough as in Europe. There are no roaming rules or mandatory MVNO creation etc. • The market itself still grow. Europe is “stagnate” nowadays. 8
  • 9. VAS market in Russia VAS market in 2006-2007 was growing almost equally to the mobile market itself: ~40% a year. Now it keeps grow speed, however became more in whole revenue structure due to basic services share decrease. Now VAS share is 14,3%. The whole VAS market value reached $3,9 bln. VAS market growth ($) VAS market growth (RUR) 9
  • 10. VAS market in Russia VAS revenues structure – services (2007) The fastest grown VAS market segment is mobile internet. It’s grown for almost 58% up to $938 mln. User base is about 32 mln people. Mobile access makes revenues either itself or it helps content services to grow as well. They reached $893 mln which is 53% VAS revenue structure – services (2008) more than in 2007. About half of VAS revenues came from peer-to-peer messages, mostly SMS. 10
  • 11. VAS market in Russia VAS revenue structure – operators (2007) The leading operator in VAS for the last 2 years is MTS because of clear strategy and efficient partnership with different players. Key segment here is content which generates about 40% of revenue. Vympelcom, who lost its positions in 2007, still shows decrease in all VAS revenue structure – operators (2008) segments. Now it’s the 3rd after MTS and Megafon. Megafon, who’s the main competitor for MTS in VAS, shows high growth speed in data transfer and operator- focused VAS (mostly RBT). 11
  • 12. Content market in Russia Content revenue growth ($) Content revenue structure – operators (2007) Content revenue structure – operators (2007) Content revenue growth ($) 12
  • 13. Content market in Russia In 2008 Russian on-portal market value reached $330 mln. Growth speed slightly, slows down, however is still high enough. It’s about 70% in 2008 (to compare, in 2007 was more than 150%). On-Portal services market value On-Portal market structure Since 2007, the biggest part of on-portal sales comes from Ring Back Tones. They brought more than 50% of revenues in 2008. 13
  • 14. Content market in Russia RBT came to the market in 2005. Since that time, the service became commercially successful. It has more than 15 mln subscribers who purchased more than 35 mln melodies during 2008. RBT users RBT revenue RBT is one of the highest growth services on Russian content market: 134% in 2008 which is up to $165 mln. 14
  • 15. Content market in Russia Due to on-portal sales stabilization, European and US operators are seeking partnership with off-oprtal players. However, up to ¾ of whole revenues still comes from operators portals. In opposite, in Russia off- portal sales are the main part of whole content sales (excluding traffic charges). Off-Portal sales Off-Portal revenue structure 2007-2008 were years of micropayments (mostly service charges and content charges in mobile/fixed Internet). There is high potential in “legal” mobile commerce, new technologies (i.e. LBS) as well as mobile/fixed Internet convergence. 15
  • 16. Content market in Russia Micropayments market growth In 2008 micropayments market was at least $190-200 mln. (9 times growth if compare to 2007). And it still has very high potential. During 2007-2008 some kind of hierarchy was created: each operator works with several high-level aggregators. These companies co- operate with several micropayments service providers as well as directly with content or service companies. Top-15 aggregated revenue is $97,4 mln or 50% of the whole micropayments market value. Total amount of players here is about 50. 16
  • 17. Content market in Russia 85% of revenues come from the biggest aggregators. Each aggregator is close to one of “The Big Three” operators. Off-portal market is high competitive. It’s 80% distributed amongst 30 content providers. ТОП-10 Russian content providers and aggregators Despite of serious structural off-portal market changes, top list is the same for the last 2-3 years. Each company works in different segments and react adequately to the market weather. 17
  • 18. i-Free i-Free is an international innovation-driven company, developing and marketing mobile technology products. i-Free has consistently remained among Russia’s and CIS market leaders and trendsetters in mobile services and content ever since it was established in 2001. The company currently serves more than 57 million individual users. Headquartered in St. Petersburg, i-Free has offices in Moscow, Mumbai (India), Sao Paolo (Brazil), Beijing (China), Kyiv (Ukraine) and Almaty (Kazakhstan). i-Free products and services are available in 83 countries. i-Free serves a broad spectrum of industries and businesses, providing innovation solutions for financial markets, electronic and mobile commerce, mobile content services, the FMCG market, mass media, and other sectors. Main activities: Content design and distribution (video, images, music, Java and BREW games) Development and marketing of communication solutions, SNS and communities Infotainment services Development of On-Device Portals (J2ME, BREW) Mobile marketing and integrated media projects Production and aggregation of mobile video content for 3G networks Mobile-CRM Mobile-Banking Mobile-Vending Mobile-Payments
  • 19. i-Free group at a glance Was founded in 2001 with headquarters in Saint-Petersburg About 350 employees in Russia, Ukraine, Kazakhstan, Brazil, India, China, Mexico More than 54 mln unique customers More than 30 mln requests daily 1st place in Vympelcom rating (2008, 2007, 2005, 2004), 2nd place in MTS (4thq 2007), 2nd place in North West Megafon (2007), 3rd place in Megafon (2007, 2006), 2nd place Megafon (1st q2008) i-Free services are available in 12 countries.
  • 20. Side projects and strategic partners Sales/ Games/ Content Market IT-solutions WEB- Payment Projects Development creation Analysis projects systems
  • 21. United Fun Traders company (UFT) is part of the corporation holding leading positions in the Eastern European mobile telecom market. UFT business activities are targeted to the Russia/CIS/international markets with the main goal of marketing and distribution of own-developed and licensed products/services globally. The corporation also includes: • I-Free: leading service provider in Russia/CIS, specialized in development, aggregation and distribution of mobile products and VAS services. • Herocraft: the biggest Russian producer of top-quality J2ME games with successful D2C and B2B distribution world-wide. • Foundreams: design and development studio specialized in multimedia content and services, targeted primarily on innovative video/graphic products for 3G mobile networks. Holding exclusive first-hand IP rights and full feedback control of production and development, UFT performs as international front-office for corporate sales and marketing internationally.
  • 22. 3 sides of VAS market: UFT is the holistic solution i-Free HeroCraft FounDreams Billing/Content/Portal Applications development/Portal Multimedia content creation and development development/Marketing deployment Leading VAS provider in CIS/Russia Leading J2ME/WinMobile/Symbian/Palm Multimedia specialists games developer in Eastern Europe Direct billing connectivity with top rev Portfolio of more than 60 Full range of products in pics, share to operators in Russia, Ukraine, branded/casual high quality games animations, video, themes, etc Kazakhstan, Belarus Aggregated local and foreign Own D2C channel with more than 120 Catalogue of more than 3000 content (including branded) content connections worldwide items D2C channels (print media, wap- A lots of awards and prizes in different Own production base portals, TV, Operators’ decks) nominations Maintains portals: TELE2 Russia, MTS High-scoring, community games, in- IP rights owner Women, Svyaznoy, NTK, Samsung game purchase possibility in all new Fun Club Russia/CIS) games UNITED FUN TRADERS Connectivity/ Billing Content D2C / B2B experience Russia, CIS, Eastern Europe, Mexico, Local content aggregated in all TELE2 Croatia, Estonia portal, Telcel Brazil, India, China mentioned areas portal presence, Brazil portals presence, community service Jamango launched on portals in India
  • 23. Russia / CIS / Europe #1‐3 in revenue (depends on the operator), Strong D2C and B2B presence, Direct billing and connectivity in Russia, Ukraine, Belarus,  Kazakhstan, etc (different price points for various types of content, Own D2C channels (printed media, wap‐portals, 3rd party wap‐ portals management and content provision), Mobile Social Network Jamango launched 3 years ago. About 2  mln subscribers for now, Local content aggregated, deals with all rights holders, Strong marketing experience, Outstanding technical background (i‐Free manages Samsung Fun  Club in Russia/Ukraine) Future plans •Innovative sales schemes (community development, wap‐portal enhancement,  on‐device‐portal development, in‐game purchase model), •WAP‐advertisement (own channels, community Jamango), •Ad‐supported games model, •New media application advertisement (J2ME‐magazines, mobile leaflets), •Territorial presence expansion.
  • 24. India •Connectivitity/billing: Reliance CDMA, Airtel, Idea. Reliance GSM, Tata are  coming, •WAP‐portals launched: Reliance (games, content), Airtel (games, content), •Mobile Social Network Jamango launched: Reliance, Airtel, Idea, •Local content aggregated (graphic content, games). Future plans •Connectivity expansion (all operators will be available very soon,  different rates), •Cross‐operator content portal should be launched (graphic  content, demo‐games, games with in‐game micropayment features,  text services, •Cross‐operator free Jamango service should be launched. Will  generate revenues for targeted ads.
  • 25. Mexico •Direct connectivity/Billing: Telcel, Movistar (Telefonica) – 100% coverage, •Our content is available on Telcel portal, •Off-deck games/multimedia portal is launched, •Local content to be aggregated, •Local representative available. Future plans •To develop in‐house content especially for Mexico, •Own off‐deck portal enhancement, •Strong promotion of Mexican portal, •To aggregate more local content (various types).
  • 26. China, Brazil China Brazil •Operator portal presence: China Mobile,  •Connectivity/Billing: TIM Brasil White Label, Oi,  Brasil Telecom, Claro, CTBC connectivity,  games Sercomtel (different price points for various  •Strong local partnership + office, types of content), •Free games with in‐game micropayments  •Local content aggregated, launched (connectivity/billing available). •Off‐portal wap‐site launched. Future plans Future plans •Further games localization, •Connectivity/Billing expansion, •Innovative sales schemes  •Innovative sales schemes  implementation, implementation, •On‐Portal presence expansion. •On‐Portal presence expansion.
  • 27. Thank you For further information please do not hesitate to contact me E-mail: cooper@u-f-t.com Mobile: +7 911 920 1655 Office: +7 812 318 3100 Cheers, Andrey Kupriahin, United Fun Traders, Business Development Director