SORM Manufacturers Triple Profits Amid Yarovaya Law

By Riley ThompsonTechnology News

SORM Manufacturers See Sharp Profit Increase Due to Yarovaya Law

Companies producing SORM (System for Operative Investigative Activities) have significantly increased their revenues during the enforcement of the so-called Yarovaya Law, according to RBC citing SPARK data.

Market Consolidation and Growth

To provide law enforcement agencies with access to phone calls and internet traffic, SORM systems are used, produced by companies such as Norsi-Trans, Special Technologies, and those within the Citadel Group. This was previously reported by Alexander Ponkin, former director of the Department of Radio Frequency and Communication Network Regulation at the Ministry of Digital Development.

Citadel has captured between 60% and 80% of the wiretapping market by acquiring four competitors. The company is part of ICS Holding, owned by Anton Cherepennikov, a partner of billionaire Alisher Usmanov.

The group was formed between 2016 and 2018 through the acquisition of MFI Soft and three other SORM manufacturers: Malvin Systems, Tekhargos, and Signatek. Additionally, SORM manufacturer Osnova Lab, previously owned by Cherepennikov, was also integrated into the group.

Financial Results

  • MFI Soft, part of Citadel, tripled its revenue in 2018—from 3.5 to 10.3 billion rubles.
  • Malvin Systems’ revenue increased by 107% to 1.7 billion rubles.
  • Signatek’s revenue grew by 67% to 740.8 million rubles.
  • Osnova Lab’s revenue rose by 24% to 996.6 million rubles.
  • Financial results for Tekhargos in 2018 were not disclosed.

Citadel declined to comment. Attempts to contact Special Technologies were unsuccessful.

Impact of the Yarovaya Law

According to the law, companies with a telecommunications license are required to install SORM systems. MTS estimated its expenses for complying with the Yarovaya Law at 60 billion rubles by 2023, MegaFon at 40 billion rubles, and Beeline at 45 billion rubles.

Two sources at major telecom operators told RBC that companies are not yet fully meeting the law’s requirements. After the law took effect, all companies signed “action plans” with the FSB for installing the necessary equipment.

Beeline reported that it is in the “active phase” of implementing the Yarovaya Law project. Rostelecom, MegaFon, and MTS declined to comment.

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