After adip in growth in mobile phone shipmentslast year, Russia mobile phone market grew 7% YoY driven by strong demand for affordable smartphones in Q2 2016. During Q2 2016, Russia saw healthy uptick in smartphones sequentially (+22% QoQ) thanks to the falling retail ASPs of smartphones (-19% QoQ). This growth still is better compared to thegrowth in Western Europewhich is starting to see a huge wave of 4G upgrades and sales.

One in three phones sold was a smartphone in Q2 2016.Samsungwas the leading smartphone brand followed by Fly, Alcatel, Micromax.The competition and domination across various price bands is quite different and thus has accordingly contributed to the growth rates of different brands. Following is in-depth analysis of different smartphone price segments with some highlights of each price segment:

Sub-US$100 smartphone price band growing

• Almost40% ofsmartphones sold in Russia were under US$100. The total volumes in this segment grew 35% sequentially
• While highly affordable entry-level sub-US$50 is dominated by Tele2, Alcatel and Fly
• LTE penetration is slowly increasing in this segment but still four in five smartphones shipped were only 3G capable
• 44% of smartphones shipped were powered by MediaTek and closely followed by Spreadtrum in this high volume segment
• Samsung’s Galaxy J1 miniandMicromax’s Canvas Pace Q415were the best-selling models in sub $100 category

Exhibit 1: Price Band Sub $100

Conclusion:

After a slow period in the first quarter of 2016, the demand for smartphones picked up in Q2 2016. This was stimulated by proliferation of cheaper affordable smartphones and falling retail prices (-19% YoY). The affordable smartphone segment is driving a major growth which saw volumes grow 35% QoQ.

Chinese-brand smartphones are increasingly becoming popular Q-o-Q. To add this, with upcoming entry and expansion ofChinese brands如LeEco、华为和小米应当进一步drive intense competition and stimulate the Russian smartphone market.

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