The growth of the Russian telecommunications market has slowed. In 2011 the Russian market of telecommunication services grew by only 3.3 percent, reaching 29 billion euros. This is the lowest growth rate since 2004. In recent years, the market showed increases from 12.1 percent to 32.9 percent per year, with the exception of the 2009 crisis year, when the market dipped by 14 percent. Analysts state that the Russian market of telecommunication services has reached maturity, for both mobile and fixed voice services, which stimulated the sales growth of operators in the past. As such, the market is now entering a plateau phase. The only segment to show growth in 2011 was fixed and mobile access to the Internet and pay-TV. However, the growth of those sales and the volume of those segments were not so significant as to affect the overall dynamics of the market.

The volume of the Russian Internet market in 2011 amounted to 553.8 billion roubles, or one percent of GDP. According to the calculations of the Russian Association of Electronic Communications and the Higher School of Economics, the market in 2012 could grow by 30 percent to 720 billion roubles. The leading sectors of the Russian Internet market are e-commerce, e-payments, and advertising.

MTS in the third quarter of 2012 lost its place on the list of top three Russian operators of fixed broadband Internet access (broadband), according to news agency TelecomDaily. Its place was taken by ER-Telecom, which served 2.27 million subscribers for the quarter (10.6 percent of the market). MTS had only 2.18 million subscribers, or 10.2 percent of the market. Market leaders are still Rostelecom with 8.43 million subscribers (39.6 percent) and VimpelCom with 2.31 million users (10.8 percent).

M&A transactions in the communications industry since the beginning of 2012 also slowed down. In particular, in September 2012, there were no mergers or acquisitions, while last year, significant transactions took place every months. From January to September 2012, there were 13 M&A transactions for USD4,787.2 million, while for the corresponding period of the previous year there were 25 for USD8,611.7 million.

The significant slowdown in M&A activity has been observed in the broadband segment. For operators, the cost of building their own networks is almost equal to the cost of purchasing the assets of other companies. In view of the cost associated with facilitating the integration of an acquired business and with the need of modernizing its technological assets, the purchase of companies becomes less attractive.

With falling revenue from their core activities, telecommunication companies are increasingly investing in related areas, such as media, retail, the production of entertainment content, software development, payment systems, and banking, all of which can be easily merged with their existing platforms.