Significant changes are coming to Russia's telecommunications market, as new government initiatives and shifting demand for services are having a strong impact on revenues and the competitive landscape in one of the world's fastest-growing telecom markets, according to the latest report from Pyramid Research, the telecom research arm of the Light Reading Communications Network.

The telecom market in Russia generated an estimated $37.2 billion in service revenues in 2008, an increase of approximately 20 percent over 2007 revenues, notes Andrei Tchadliev, analyst at Pyramid Research and author of the report. Pyramid estimates that Russia's telecom services sector will be worth $48.5 billion in 2013, equating to a CAGR of about 5.4 percent over the next five years, making Russia not only the largest market in the Central and Eastern European region but also the fastest growing one.

As revenue growth continues, Russia's telecom sector will undergo some significant changes that will affect the competitive landscape over the next five years, Tchadliev says. "Mobile voice revenues in Russia will level off and begin to decline by 2011, but revenues from mobile data services will rise by a CAGR of nearly 14 percent over the next five years," he notes, adding that fixed broadband Internet services also will fuel revenue growth.

"Government policies could have a negative impact on the revenue opportunities for competing network operators and their technology suppliers," Tchadliev warns. "Russia remains one of the largest and most promising markets in the world, but its increasingly closed way of doing business, first exhibited in the energy sector, is quickly spreading to all levels of the economy. In the past year, foreign-owned companies, such as Telenor and Tele2, have seen the Russian market and regulators becoming markedly hostile to the concept of majority foreign ownership of telecommunications firms."