28 February 2006

Do Not Condemn Putin Out of Hand

Anaotle Lieven writes a very very good op ed piece in today's FT urging the west to be a little more rationale in its assessment of VVP; Do not condemn Putin out of hand. (Subscription Only) Maybe the single best piece on Russia I have read for a while. Even Konstantin might approve!!

I pay for my subscription and whilst I don't feel that you should the FT has made a point of replacing print revenue with a great business portal so will not block copy and paste. A couple of quotations to give you a feel;

Unfortunately, this hostility can take on an irrational and hysterical tone absent from western attitudes to China, for example.
The new Russian elite of Mr Putin’s conception is supposed to be dynamic and capable of competing in the free market, but also to be deeply patriotic: it should be committed to the interests of the state and deferential to the wishes of the state, especially in foreign affairs....Its members will never lobby for foreign support against their own government.

But for every historical case where such attempts have worked, there have been two or three where this approach only leads to a new form of economically retrograde kleptocracy, in which the state elites, far from developing the economy, wreck it through a mixture of incompetence and looting.

Sistema Acquires United Cable Network ("UCN")

Morgan Stanley have had UCN on the block for a while. I had assumed that the game of prisoners dilemma had put the deal on hold but sources confirmed last week that Sistema/Comstar UTS had paid what is known as a full price (over 12x forward EBITDA - I hear).

Prime Tass (paid subscription) is the only link I can find confirming the deal.

UCN is a collection (motley?) of regional cable operators with 240Mhz cable all, or substantially all, of which needs to be upgraded to provide hi-speed Internet which is where the $$ are today, despite what the website says. They have some interesting cities; Ekaterinburg, Penza and Voronezh. In effect Sistema has paid big bucks for a footprint.

Valuations are out of whack with reality. They assume that the Russian consumer will bail them out of expensive purchases and that management will execute. The first is a safe (ish) bet. The second is a triumph of hope over reality.

The other saving grace is the ludicrous valuations that western money are providing such that $150mn is barely a hole in Comstar's over-stuffed balance sheet.

Update - Here is a link in english.


Technorati Tags: ,

27 February 2006

Scotland the Brave

I refer to myself as British rather than Scottish; believing that nationalism is only marginally worse than religion at killing people.

However, when Scotland play England at Rugby any form of rational debate is useless.

Saturday had me sitting in an English sitting room yelling at the television (it helps really) as Scotland pulled off a truly memorable victory. 18-12 in case you were vacationing on Mars over the weekend.

My man of the match; Ali Hogg - open side flanker (my old position) who gave the whole English back row a lesson in daylight burglary.

It's pretty difficult to explain to Muscovites what its like to be from a divided nation (North versus South; East versus West) of 6 million people in a country of 60 million people. Especially as Scotland is fairly unlikely to be able to manage its own economy but instead blow the lot on one huge piss up.

Anyway once a decade will do.

Technorati Tags:

Looking For Russian Tech Bloggers

I'm on the hunt for either Russian or English language bloggers who post (primarily) on technology in and from Russia.

Does anyone know any bloggers from inside Yandex? I am not interested in Yandex per se but Russian language morphological search (Yugro-Finnish is OK as well).

Traditional blog search engines are useless.

Thanks. If you find me in the real world (assuming I exist) I'll buy you a beer for a good link and a keg for a great link.

Technorati Tags: ,

24 February 2006

You light up my life Like I said, I sense that th...

James Enck continues his theme on FTTH, he is worth a read..

Like I said, I sense that the buzz we got from VoIP three years ago (just for the record, I didn't inhale) is being revived on fiber this year. A couple of Double Platinum mega-uber value readers have pointed me towards recent developments in Germany and France which further make the case.
At the end of last year I advised and invested in Moscow's largest gigabit ethernet company (Russian only). Not big by anyone standards but it has a disproportionate amount of my personal savings. What is interesting is not the provision of big bandwidth Internet that will have Moscow outpacing the more leisurely speeds I am encountering in the UK right now, but the impact that this will have on Russia's entertainment market.

Broadcast television adopted a very US-centric model with some 4-5 major networks and another 3-4 scrabbling for the second tier scraps. There is no cable industry to speak of and I don't believe that one will ever truly emerge - at least not as it is known in the US. Russia will instead make a straight technology leap to entertainment on demand - pulled not pushed. With both STS/CTC and TV3 looking to IPO this year and new, more restrictive, advertising laws coming in to force it looks as though 2007 will be a year for some advertising fun. And VOD business models for emerging markets?

In the very high density urban areas in and around Moscow bandwidth has to be scalable - fiber is the answer and it is CHEAP.

The Roof Falls in - On Whose World?

As this article from the Independent points out the architect for this collapsed building was the same as for the Transvaal tragedy. Transvaal was a middle-class entertainment center; the market will haven been staffed by Azerbaijaniis, Georgians and Armenians. PGS in Militsia terminology (translations via email only please). The word on the street is that he is "in-house" for Luzhkov's wife, Yelena Baturina. So unless someone decides that something should be done the victims will remain just that.

In my decade of living in Russia I have witnessed some truly appalling building standards. And this in a city that is only just not a swamp; ground movement is common. There are a bunch more of these disasters to follow. Let's just hope that it is not a 50 story block of flats that falls down due to "cut" cement etc.

With thanks to Wikipedia for all the links.....

Technorati Tags: ,

Mac Rules

I am back in London for personal reasons over the extended holiday and working week. Escaping all the fun that it is possible to have in London I have dived in to Cafe Nero (admittedly on the Kigs Road) to fire out my backed-up email. Three people in here working on laptops - all macs.

Technorati Tags:

22 February 2006

Tax Incentives for the IT Industry

VVP's trip to Nizhny Novgorod has really enforced the fact that he is serious about doing something to support the IT industry. This should really be entered under the "competition for teacher's pet" category but it's potentially too serious for that.

From Vedomosti (Russian only) an article entitled "The Chinovniki Rethink." (A straw poll of native Russian speakers determined that Chinovniki (bureaucrats) was being used in a (mildly) derogatory way.) The full text in machine-translated English is below the commentary.

The long and short is that the Ministry of Finance has agreed under significant political pressure to review their previous position against using tax incentives to help the export (offshoring/outsourcing/product-related) section of the IT/technology industry. Principally these relate to a simplified taxation scheme which relates to profit tax and VAT/NDS. The article also makes reference to a reduction in social taxes (employee-related taxes paid by the company.) These are significant and remain the single largest reason why IT companies stay in the black economy.

Whilst I am delighted that something is being done research in to the effectiveness of British, Irish, Israeli and US venture capital and start-up industries has shown that tax incentives play little or no role in their successful development. If this is done in alliance with a well-constructed Government venture fund-of-funds then I can only be in favor. As the piece notes this is a policy that is being enacted to be shown to do something even if something is not always beneficial.

"ministries are easy to be understood: the assignment of the privileges to separate branches generates abuses and corruption, discusses deputy director Centre of political technologies Aleksey Makarkin. - but simultaneously for officials it is necessary to carry out the commission of the President and to diversify the economy, and support IT - one of a few methods to make this ".
Here is the translation in its entirety:

Minfin - Ministry of Finance and Minekonomrazvitiya, until now, were against the tax preferences for IT- companies, are now ready to change their position. As it was stated yesterday by the Deputy Minister of finances Sergey Shatalov, the solution to transfer IT- sector to the special tax regime has more pluses, than minuses. Participants of the market are astonished by the change of officials mood, and experts explain it by the interest, which Vladimir Putin devotes to IT- sector. The Deputy Minister of finances Sergey Shatalov reported yesterday that in the next weeks Minfin - Ministry of Finance will study the possibility of the introduction of special tax regime for IT- companies. To make this department directed vice- premier Aleksandr Zhukov at the session of the commission for law making activity, explained Deputy Minister. "we see pluses and minuses of this solution, and now we are ready to say that there are more pluses, but also a lot of minuses", cites Shatalov the agency "of Prime- TASS". the Press- secretary of the minister of finances Gennadi Yezhov yesterday could not comment the attitude of Minfin toward idea in more details, and the official demand of "Vedomosti" to Shatalov remained without the answer.

The opinion of Minfin - Ministry of Finance is required in order to prepare conclusion to the bill, introduced to the government at the end of the past year by a number of parliamentarians, explained to "Vedomosti" the director of the department of strategy of the information society construction of mininformsvyazi Oleg Byakhov. The authors of bill propose to supplement tax code with the chapter, which leads special tax regime for IT- branch. "support must bear precisely branch nature", he emphasizes Byakhov, citing as an example of Russian Agricultural products producers, that are used special tax regime. "we helped deputies to prepare this bill and gave positive conclusion, he says. - it is now necessary that Minfin - Ministry of Finance and Minekonomrazvitiya to finish mechanism". At the end of 2004 the government supported the proposal o mininformsvyazi to grant the IT-companies tax and customs preferences - in particular, to simplify the procedure of the customs formulation of the programs, which go for the export, and to decrease the rate of unified social tax. But as a result these eased regime was decided to grant not to separate branch, but to special economic zones (SEZ), law about which developed Minekonomrazvitiya. At the end of 2005 this ministry totaled of competition to the title SEZ, and from numerous IT- projects it supported only four.

The project of the law, which promises to IT- association tax relaxations, appeared in the summer of 2005, but then it was rejected in Minekonomrazvitiya, resembles the President of holding IBS Anatoliy Karachinskiy. But now government decided to examine this idea anew. "We propose to support first of all companies, which work on the export", described to "Vedomosti" one of the authors of bill - chairman of the committee of the Dumas on credit organizations and financial markets Vladislav Reznik. According to him, the discussion deals with the introduction of the single tax, which will lower tax burden on IT- company from present 36% to 6-9% of their gain. Byakhov confirms that this support must obtain only companies, "the predominant portion of its revenue is connected with deliveries of IT- products and services for the global market", in this case not less than their 50% expenditures must be connected with the payment of wage to employees.
"Volume of the world market IT-autsorsinga - $60 billion, and in portion of Russian companies is only $1 billion", laments Karachinskiy. If government approves bill, then many small companies will leave the shadow and they can raise money from investors. "Law will contribute to development of IT- sector, although its present version still must be corrected - for example, tax preferences must not concern small enterprises, which fall under the simplified taxation", notes the President of the association of "russoft" Valentina Makarov.

Representative Minekonomrazvitiya promised that his department will examine the initiative of deputies, after recalling that earlier it spoke against the support of business according to the branch principle. Yes even in Minfin this idea half a year ago was criticized. "ministries are easy to be understood: the assignment of the privileges to separate branches generates abuses and corruption, discusses deputy director Centre of political technologies Aleksey Makarkin. - but simultaneously for officials it is necessary to carry out the commission of the President and to diversify the economy, and support IT - one of a few methods to make this ". Year ago in Novosibirsk Vladimir Putin issued a call government to support innovation projects, and he last week criticized by several officials for sluggishness. Now Minfin and Minekonomrazvitiya completely can support the idea to create tax preserve for IT, although this solution will be political, sums up Makarkin.

Russia’s IT market tops $35bn

The battle for teacher's pet is heating up. Following VVP's foray in to the VC market on Friday my favorite rent-seeker, Leonid Dodonivch, has some good news on the IT market. From the mostly defunct Russia Journal Blog Archive

Note that this includes PC's, mobile handsets (where Russia has the highest replacement rate in the world), servers, services and keep going on and on and down until you get to offshoring and outsourcing and export product sales. If I was to guess I would assume less than 1% of the total.

Technorati Tags: , ,

20 February 2006

Russian Government and Venture Funds

I posted, tongue-in-cheek, Friday about VVP's foray in to the VC market in Russia. I learnt at a late lunch Saturday from an interested Russian businessman that he had gone a step further and told Gref to get a move on and get a fund formed.

The dialogue in itself provides a certain insight in to the running of the government. Notwithstanding some very important questions remain to be answered. Will this be a fund-of-fund effort, using the lessons learnt from the successful Israeli model, or a direct fund emulating the failures of everywhere that tried direct funds (If you want to argue that 3i was a direct government fund I'll concede the point). The latter approach is being pushed by Reiman at the Ministry of Communications and self-enrichment. No further comment required.

The industry here needs to start. I am torn between wanting to see something done and seeing something done badly. I'm with Gref on this one.


Technorati Tags: , ,

Lies, Damned Lies and Russian Internet Statistics

Romir Monitoring Agency has published its review of Russian Internet usage in 2005 here. Apparently Internet usage dropped 2% in 4Q.

Stunned, shocked and blown away. 4Q is Internet boom time. Over a third of Internet connections are sold in 4Q; very few holidays and lots of dark and cold weather. The correlation between % of conceptions in 4Q and Internet connections sold is probably reasonably close to 1. It's also the BIGGEST month in PC sales (admittedly skewed by Government agencies in last minute panic buying) but the retail channel is also fantastic. So the numbers look very strange.

Weirdly, but good weirdly, Romir has a RSS feed to all the research they have. I say weirdly because none of my other Russia news sources have RSS etc feeds at all. I am now a subscriber.


Technorati Tags: , ,

17 February 2006

VVP Turns VC

Our favourite President has made his first VC investment - apparently he managed to get a 3x participating liquidation preference as well as some serious rights to replace management if they failed to meet certain pre-agreed milestones - yeah right.

If you drop to the bottom of this article from Tass you will see that the yet-to-be-formed with a yet-to-be-agreed investment policy with a yet-to-be-appointed (or competent) management team Russian government venture fund has agreed to invest in Cognitive Technologies. Whilst Cognitive is not a bad company it is precisely this type of meddling that makes the government venture initiative will not emulate Israel's successful model.

His attack on Russian business and government for not using local Russian IT is closer to the mark. Without a domestic market building IT companies becomes problematic.

Technorati Tags: ,

15 February 2006

U.S. Hit by Russian Pirate Sales

No there has not been a slow down in sales of Pirates. I posted yesterday on Putin's comments on piracy. Those comments don't mean that this bullshit from the International Intellectual Protection Association deserves any credence.

They claim that their members lost $1.756 billion through forgeries in Russia last year. NO NO NO.

The competition is not with pirate copies from kiosks and Gorbushka it is with no sales - that's nil, nada, nothing. If they stopped paying lawyers to defend their position and employed businessmen someone might explain the Big Mac Index and price their goods accordingly. Unless it passed them by people are generally willing to pay a fair price for goods and services - but it has to be priced correctly.

We are consumers treat us with respect.

Technorati Tags: , ,

14 February 2006

IBM targets Russian developers

My cynical devil says that this press release should be amended to say; IBM tries targets Russian developers for the 14th time since 1992.

But as it falls in to the all news is good news I won't. The trend is in the right direction; more Cisco, more IBM, more Google, more M$OFT, more Intel (though they have been doing good things for so long that they are no longer a precursor to a trend).

Bring it on. Anyone know where to find qualified entrepreneurs?

Technorati Tags: ,

Putin highlights piracy as grave problem

This was actually published a couple of weeks ago during Moscow's second cold snap of the year. Putin highlights piracy as grave problem.

On the very same day I headed to the local sports store to get my skiis serviced; outside on the pavement (it's a wide pavement) was a guy selling all sorts of software (all PC), films and other databases. The only films in English were "ikraniky" - videoed from the screen in a movie theatre. It was not as though he was trying to hide or would be able to pack up quickly if the militsia were to turn up.

Another statement for other press consumption.

Technorati Tags: , ,

Russia IPO Watchlist

Comcor.

Some empirical evidence for my rant of last week.

Company stated PayTV subscribers at end 2005 - 10,000
Company stated PayTV subscribers (in base packet) to DRTV business seeking eyeballs - 6,500

Estimated number of active (as opposed to contracted) subscribers by leading competitors - 5,000

The truth is out there you just have to know where to look.

Technorati Tags: , , , ,

09 February 2006

Russia IPO Watchlist

Tuesday's IPO of Comstar UTS adds another stock to the list of recent Russian IPO's and to the more exclusive list of Russian companies listed on foreign markets which should be shorted (RBC and Rambler if you are interested are the others).

I have a copy of an analysts report on Comstar in my hands. It is specious nonsense. Other than a failure of editing the front page has me writing "rubbish" twice and placing a large line through an entire paragraph. No Mr. Spitzer in Russia.

I have been meaning to write a major piece on the Russian technology and telecom sector for a while - this has accelerated the requirement. If you wondered across this post by accident two lines of enlightenment. The analyst believes that Comstar's % penetration of broadband subs will soak up 50% of incremental subs and 49% of all Moscow broadband subscribers by end 2009. Today in no region of Moscow do they have more than 5% of broadband subs and they are the easiest competitor to steal subs from because their ADSL offer has about 60% reliability. An heroic assumption.

If you can bare with me let me have a quick go at the PayTV assumptions. These are not only heroic but have no basis in fact. As no one in Russia has yet worked how to sell premium PayTV assuming $18 of PayTV ARPU in 2006 is a little bit of a stretch. It's probably not wise to back a bunch of guys with 20 plus years in the Soviet telecom system to generate content that will drive meaningful premium PayTV uptake.

Oh and then I am asked to believe, and value, Comstar as the acquirer of Svyazinvest at privatization - get real.

Valued in the grey market at just over $3bn ($350mn more than the heroic analysts heroic assumptions) the GDR's dropped in when-issued trading. That's my trend line.



Technorati Tags: , , , , ,

28 February 2006

Do Not Condemn Putin Out of Hand

Anaotle Lieven writes a very very good op ed piece in today's FT urging the west to be a little more rationale in its assessment of VVP; Do not condemn Putin out of hand. (Subscription Only) Maybe the single best piece on Russia I have read for a while. Even Konstantin might approve!!

I pay for my subscription and whilst I don't feel that you should the FT has made a point of replacing print revenue with a great business portal so will not block copy and paste. A couple of quotations to give you a feel;

Unfortunately, this hostility can take on an irrational and hysterical tone absent from western attitudes to China, for example.
The new Russian elite of Mr Putin’s conception is supposed to be dynamic and capable of competing in the free market, but also to be deeply patriotic: it should be committed to the interests of the state and deferential to the wishes of the state, especially in foreign affairs....Its members will never lobby for foreign support against their own government.

But for every historical case where such attempts have worked, there have been two or three where this approach only leads to a new form of economically retrograde kleptocracy, in which the state elites, far from developing the economy, wreck it through a mixture of incompetence and looting.

Sistema Acquires United Cable Network ("UCN")

Morgan Stanley have had UCN on the block for a while. I had assumed that the game of prisoners dilemma had put the deal on hold but sources confirmed last week that Sistema/Comstar UTS had paid what is known as a full price (over 12x forward EBITDA - I hear).

Prime Tass (paid subscription) is the only link I can find confirming the deal.

UCN is a collection (motley?) of regional cable operators with 240Mhz cable all, or substantially all, of which needs to be upgraded to provide hi-speed Internet which is where the $$ are today, despite what the website says. They have some interesting cities; Ekaterinburg, Penza and Voronezh. In effect Sistema has paid big bucks for a footprint.

Valuations are out of whack with reality. They assume that the Russian consumer will bail them out of expensive purchases and that management will execute. The first is a safe (ish) bet. The second is a triumph of hope over reality.

The other saving grace is the ludicrous valuations that western money are providing such that $150mn is barely a hole in Comstar's over-stuffed balance sheet.

Update - Here is a link in english.


Technorati Tags: ,

27 February 2006

Scotland the Brave

I refer to myself as British rather than Scottish; believing that nationalism is only marginally worse than religion at killing people.

However, when Scotland play England at Rugby any form of rational debate is useless.

Saturday had me sitting in an English sitting room yelling at the television (it helps really) as Scotland pulled off a truly memorable victory. 18-12 in case you were vacationing on Mars over the weekend.

My man of the match; Ali Hogg - open side flanker (my old position) who gave the whole English back row a lesson in daylight burglary.

It's pretty difficult to explain to Muscovites what its like to be from a divided nation (North versus South; East versus West) of 6 million people in a country of 60 million people. Especially as Scotland is fairly unlikely to be able to manage its own economy but instead blow the lot on one huge piss up.

Anyway once a decade will do.

Technorati Tags:

Looking For Russian Tech Bloggers

I'm on the hunt for either Russian or English language bloggers who post (primarily) on technology in and from Russia.

Does anyone know any bloggers from inside Yandex? I am not interested in Yandex per se but Russian language morphological search (Yugro-Finnish is OK as well).

Traditional blog search engines are useless.

Thanks. If you find me in the real world (assuming I exist) I'll buy you a beer for a good link and a keg for a great link.

Technorati Tags: ,

24 February 2006

You light up my life Like I said, I sense that th...

James Enck continues his theme on FTTH, he is worth a read..

Like I said, I sense that the buzz we got from VoIP three years ago (just for the record, I didn't inhale) is being revived on fiber this year. A couple of Double Platinum mega-uber value readers have pointed me towards recent developments in Germany and France which further make the case.
At the end of last year I advised and invested in Moscow's largest gigabit ethernet company (Russian only). Not big by anyone standards but it has a disproportionate amount of my personal savings. What is interesting is not the provision of big bandwidth Internet that will have Moscow outpacing the more leisurely speeds I am encountering in the UK right now, but the impact that this will have on Russia's entertainment market.

Broadcast television adopted a very US-centric model with some 4-5 major networks and another 3-4 scrabbling for the second tier scraps. There is no cable industry to speak of and I don't believe that one will ever truly emerge - at least not as it is known in the US. Russia will instead make a straight technology leap to entertainment on demand - pulled not pushed. With both STS/CTC and TV3 looking to IPO this year and new, more restrictive, advertising laws coming in to force it looks as though 2007 will be a year for some advertising fun. And VOD business models for emerging markets?

In the very high density urban areas in and around Moscow bandwidth has to be scalable - fiber is the answer and it is CHEAP.

The Roof Falls in - On Whose World?

As this article from the Independent points out the architect for this collapsed building was the same as for the Transvaal tragedy. Transvaal was a middle-class entertainment center; the market will haven been staffed by Azerbaijaniis, Georgians and Armenians. PGS in Militsia terminology (translations via email only please). The word on the street is that he is "in-house" for Luzhkov's wife, Yelena Baturina. So unless someone decides that something should be done the victims will remain just that.

In my decade of living in Russia I have witnessed some truly appalling building standards. And this in a city that is only just not a swamp; ground movement is common. There are a bunch more of these disasters to follow. Let's just hope that it is not a 50 story block of flats that falls down due to "cut" cement etc.

With thanks to Wikipedia for all the links.....

Technorati Tags: ,

Mac Rules

I am back in London for personal reasons over the extended holiday and working week. Escaping all the fun that it is possible to have in London I have dived in to Cafe Nero (admittedly on the Kigs Road) to fire out my backed-up email. Three people in here working on laptops - all macs.

Technorati Tags:

22 February 2006

Tax Incentives for the IT Industry

VVP's trip to Nizhny Novgorod has really enforced the fact that he is serious about doing something to support the IT industry. This should really be entered under the "competition for teacher's pet" category but it's potentially too serious for that.

From Vedomosti (Russian only) an article entitled "The Chinovniki Rethink." (A straw poll of native Russian speakers determined that Chinovniki (bureaucrats) was being used in a (mildly) derogatory way.) The full text in machine-translated English is below the commentary.

The long and short is that the Ministry of Finance has agreed under significant political pressure to review their previous position against using tax incentives to help the export (offshoring/outsourcing/product-related) section of the IT/technology industry. Principally these relate to a simplified taxation scheme which relates to profit tax and VAT/NDS. The article also makes reference to a reduction in social taxes (employee-related taxes paid by the company.) These are significant and remain the single largest reason why IT companies stay in the black economy.

Whilst I am delighted that something is being done research in to the effectiveness of British, Irish, Israeli and US venture capital and start-up industries has shown that tax incentives play little or no role in their successful development. If this is done in alliance with a well-constructed Government venture fund-of-funds then I can only be in favor. As the piece notes this is a policy that is being enacted to be shown to do something even if something is not always beneficial.

"ministries are easy to be understood: the assignment of the privileges to separate branches generates abuses and corruption, discusses deputy director Centre of political technologies Aleksey Makarkin. - but simultaneously for officials it is necessary to carry out the commission of the President and to diversify the economy, and support IT - one of a few methods to make this ".
Here is the translation in its entirety:

Minfin - Ministry of Finance and Minekonomrazvitiya, until now, were against the tax preferences for IT- companies, are now ready to change their position. As it was stated yesterday by the Deputy Minister of finances Sergey Shatalov, the solution to transfer IT- sector to the special tax regime has more pluses, than minuses. Participants of the market are astonished by the change of officials mood, and experts explain it by the interest, which Vladimir Putin devotes to IT- sector. The Deputy Minister of finances Sergey Shatalov reported yesterday that in the next weeks Minfin - Ministry of Finance will study the possibility of the introduction of special tax regime for IT- companies. To make this department directed vice- premier Aleksandr Zhukov at the session of the commission for law making activity, explained Deputy Minister. "we see pluses and minuses of this solution, and now we are ready to say that there are more pluses, but also a lot of minuses", cites Shatalov the agency "of Prime- TASS". the Press- secretary of the minister of finances Gennadi Yezhov yesterday could not comment the attitude of Minfin toward idea in more details, and the official demand of "Vedomosti" to Shatalov remained without the answer.

The opinion of Minfin - Ministry of Finance is required in order to prepare conclusion to the bill, introduced to the government at the end of the past year by a number of parliamentarians, explained to "Vedomosti" the director of the department of strategy of the information society construction of mininformsvyazi Oleg Byakhov. The authors of bill propose to supplement tax code with the chapter, which leads special tax regime for IT- branch. "support must bear precisely branch nature", he emphasizes Byakhov, citing as an example of Russian Agricultural products producers, that are used special tax regime. "we helped deputies to prepare this bill and gave positive conclusion, he says. - it is now necessary that Minfin - Ministry of Finance and Minekonomrazvitiya to finish mechanism". At the end of 2004 the government supported the proposal o mininformsvyazi to grant the IT-companies tax and customs preferences - in particular, to simplify the procedure of the customs formulation of the programs, which go for the export, and to decrease the rate of unified social tax. But as a result these eased regime was decided to grant not to separate branch, but to special economic zones (SEZ), law about which developed Minekonomrazvitiya. At the end of 2005 this ministry totaled of competition to the title SEZ, and from numerous IT- projects it supported only four.

The project of the law, which promises to IT- association tax relaxations, appeared in the summer of 2005, but then it was rejected in Minekonomrazvitiya, resembles the President of holding IBS Anatoliy Karachinskiy. But now government decided to examine this idea anew. "We propose to support first of all companies, which work on the export", described to "Vedomosti" one of the authors of bill - chairman of the committee of the Dumas on credit organizations and financial markets Vladislav Reznik. According to him, the discussion deals with the introduction of the single tax, which will lower tax burden on IT- company from present 36% to 6-9% of their gain. Byakhov confirms that this support must obtain only companies, "the predominant portion of its revenue is connected with deliveries of IT- products and services for the global market", in this case not less than their 50% expenditures must be connected with the payment of wage to employees.
"Volume of the world market IT-autsorsinga - $60 billion, and in portion of Russian companies is only $1 billion", laments Karachinskiy. If government approves bill, then many small companies will leave the shadow and they can raise money from investors. "Law will contribute to development of IT- sector, although its present version still must be corrected - for example, tax preferences must not concern small enterprises, which fall under the simplified taxation", notes the President of the association of "russoft" Valentina Makarov.

Representative Minekonomrazvitiya promised that his department will examine the initiative of deputies, after recalling that earlier it spoke against the support of business according to the branch principle. Yes even in Minfin this idea half a year ago was criticized. "ministries are easy to be understood: the assignment of the privileges to separate branches generates abuses and corruption, discusses deputy director Centre of political technologies Aleksey Makarkin. - but simultaneously for officials it is necessary to carry out the commission of the President and to diversify the economy, and support IT - one of a few methods to make this ". Year ago in Novosibirsk Vladimir Putin issued a call government to support innovation projects, and he last week criticized by several officials for sluggishness. Now Minfin and Minekonomrazvitiya completely can support the idea to create tax preserve for IT, although this solution will be political, sums up Makarkin.

Russia’s IT market tops $35bn

The battle for teacher's pet is heating up. Following VVP's foray in to the VC market on Friday my favorite rent-seeker, Leonid Dodonivch, has some good news on the IT market. From the mostly defunct Russia Journal Blog Archive

Note that this includes PC's, mobile handsets (where Russia has the highest replacement rate in the world), servers, services and keep going on and on and down until you get to offshoring and outsourcing and export product sales. If I was to guess I would assume less than 1% of the total.

Technorati Tags: , ,

20 February 2006

Russian Government and Venture Funds

I posted, tongue-in-cheek, Friday about VVP's foray in to the VC market in Russia. I learnt at a late lunch Saturday from an interested Russian businessman that he had gone a step further and told Gref to get a move on and get a fund formed.

The dialogue in itself provides a certain insight in to the running of the government. Notwithstanding some very important questions remain to be answered. Will this be a fund-of-fund effort, using the lessons learnt from the successful Israeli model, or a direct fund emulating the failures of everywhere that tried direct funds (If you want to argue that 3i was a direct government fund I'll concede the point). The latter approach is being pushed by Reiman at the Ministry of Communications and self-enrichment. No further comment required.

The industry here needs to start. I am torn between wanting to see something done and seeing something done badly. I'm with Gref on this one.


Technorati Tags: , ,

Lies, Damned Lies and Russian Internet Statistics

Romir Monitoring Agency has published its review of Russian Internet usage in 2005 here. Apparently Internet usage dropped 2% in 4Q.

Stunned, shocked and blown away. 4Q is Internet boom time. Over a third of Internet connections are sold in 4Q; very few holidays and lots of dark and cold weather. The correlation between % of conceptions in 4Q and Internet connections sold is probably reasonably close to 1. It's also the BIGGEST month in PC sales (admittedly skewed by Government agencies in last minute panic buying) but the retail channel is also fantastic. So the numbers look very strange.

Weirdly, but good weirdly, Romir has a RSS feed to all the research they have. I say weirdly because none of my other Russia news sources have RSS etc feeds at all. I am now a subscriber.


Technorati Tags: , ,

17 February 2006

VVP Turns VC

Our favourite President has made his first VC investment - apparently he managed to get a 3x participating liquidation preference as well as some serious rights to replace management if they failed to meet certain pre-agreed milestones - yeah right.

If you drop to the bottom of this article from Tass you will see that the yet-to-be-formed with a yet-to-be-agreed investment policy with a yet-to-be-appointed (or competent) management team Russian government venture fund has agreed to invest in Cognitive Technologies. Whilst Cognitive is not a bad company it is precisely this type of meddling that makes the government venture initiative will not emulate Israel's successful model.

His attack on Russian business and government for not using local Russian IT is closer to the mark. Without a domestic market building IT companies becomes problematic.

Technorati Tags: ,

15 February 2006

U.S. Hit by Russian Pirate Sales

No there has not been a slow down in sales of Pirates. I posted yesterday on Putin's comments on piracy. Those comments don't mean that this bullshit from the International Intellectual Protection Association deserves any credence.

They claim that their members lost $1.756 billion through forgeries in Russia last year. NO NO NO.

The competition is not with pirate copies from kiosks and Gorbushka it is with no sales - that's nil, nada, nothing. If they stopped paying lawyers to defend their position and employed businessmen someone might explain the Big Mac Index and price their goods accordingly. Unless it passed them by people are generally willing to pay a fair price for goods and services - but it has to be priced correctly.

We are consumers treat us with respect.

Technorati Tags: , ,

14 February 2006

IBM targets Russian developers

My cynical devil says that this press release should be amended to say; IBM tries targets Russian developers for the 14th time since 1992.

But as it falls in to the all news is good news I won't. The trend is in the right direction; more Cisco, more IBM, more Google, more M$OFT, more Intel (though they have been doing good things for so long that they are no longer a precursor to a trend).

Bring it on. Anyone know where to find qualified entrepreneurs?

Technorati Tags: ,

Putin highlights piracy as grave problem

This was actually published a couple of weeks ago during Moscow's second cold snap of the year. Putin highlights piracy as grave problem.

On the very same day I headed to the local sports store to get my skiis serviced; outside on the pavement (it's a wide pavement) was a guy selling all sorts of software (all PC), films and other databases. The only films in English were "ikraniky" - videoed from the screen in a movie theatre. It was not as though he was trying to hide or would be able to pack up quickly if the militsia were to turn up.

Another statement for other press consumption.

Technorati Tags: , ,

Russia IPO Watchlist

Comcor.

Some empirical evidence for my rant of last week.

Company stated PayTV subscribers at end 2005 - 10,000
Company stated PayTV subscribers (in base packet) to DRTV business seeking eyeballs - 6,500

Estimated number of active (as opposed to contracted) subscribers by leading competitors - 5,000

The truth is out there you just have to know where to look.

Technorati Tags: , , , ,

09 February 2006

Russia IPO Watchlist

Tuesday's IPO of Comstar UTS adds another stock to the list of recent Russian IPO's and to the more exclusive list of Russian companies listed on foreign markets which should be shorted (RBC and Rambler if you are interested are the others).

I have a copy of an analysts report on Comstar in my hands. It is specious nonsense. Other than a failure of editing the front page has me writing "rubbish" twice and placing a large line through an entire paragraph. No Mr. Spitzer in Russia.

I have been meaning to write a major piece on the Russian technology and telecom sector for a while - this has accelerated the requirement. If you wondered across this post by accident two lines of enlightenment. The analyst believes that Comstar's % penetration of broadband subs will soak up 50% of incremental subs and 49% of all Moscow broadband subscribers by end 2009. Today in no region of Moscow do they have more than 5% of broadband subs and they are the easiest competitor to steal subs from because their ADSL offer has about 60% reliability. An heroic assumption.

If you can bare with me let me have a quick go at the PayTV assumptions. These are not only heroic but have no basis in fact. As no one in Russia has yet worked how to sell premium PayTV assuming $18 of PayTV ARPU in 2006 is a little bit of a stretch. It's probably not wise to back a bunch of guys with 20 plus years in the Soviet telecom system to generate content that will drive meaningful premium PayTV uptake.

Oh and then I am asked to believe, and value, Comstar as the acquirer of Svyazinvest at privatization - get real.

Valued in the grey market at just over $3bn ($350mn more than the heroic analysts heroic assumptions) the GDR's dropped in when-issued trading. That's my trend line.



Technorati Tags: , , , , ,