Uzbekistan - Telecoms, Mobile, Broadband and Forecasts
To a background of corrupt business allegations Uzbekistan's telecom sector moves forward
For many years Uzbekistan's telecom infrastructure remained outmoded and inadequate. The country has been struggling to bring its telecommunications system up to the standard found in developed markets. Over the last decade or so, the situation has been steadily improving. This has in part been due to the government's decision to give national priority to the telecom sector. The result has been a definite upward trend in the country's telecom market, with increased investment in infrastructure, expanding subscriber bases and rising revenues. The government's strategic policy was to privatise the incumbent operator Uzbektelecom and to open the market to competition.
The telecom market in Uzbekistan ran into a period of considerable difficulty in 2012 and the aftermath was felt through 2013 and into 2014. In a dramatic turn of events the government took strong action against mobile operator MTS Uzbekistan after alleging a range of violations, including tax evasion, failure to meet regulatory standards, and the use of unlicensed infrastructure. The conflict escalated dramatically in August 2012 with the cancellation of MTS Uzbekistan's operating licence. MTS held 40% of the mobile subscriber base at the time; the government's action saw the 9.5 million subscribers to MTS suddenly without mobile service. These disconnected subscribers were forced to find service elsewhere. By mid-2013 MTS had been declared bankrupt. The government effectively took control of the former operator's assets and by early 2014 was preparing to launch a new GSM operator using the recovered MTS frequency spectrum. In the meantime, the mobile market had been severely damaged by the dispute and especially the way it had been managed. Among a number of bad outcomes, the disastrous process was certain to be viewed negatively by potential foreign investors.
Uzbekistan's telecom sector has been regulated by the Uzbek Agency for Communications and Information (UzACI) since the creation of the agency in 2002/2003. In 2005 the UzACI approved a telecommunications investment program for the period 2005-2010. Among other things, the program aimed to increase the total number of fixed lines to 2.2 million and achieve 100% digitalisation of the network by 2010. The fixed line subscriber target was not achieved with subscriber numbers still sitting below 2 million by 2012. Only about two-thirds of the network was digital by 2007, but by 2009 this has been lifted sharply to 90% moving closer to achieving the target. The five year telecom investment program also aimed at accomplishing marked improvements in mobile telephone and internet penetration. By 2011 both these segments of the market had shown significantly gains, with the mobile market in particular having expanded rapidly over the previous five years. Subscriber numbers had jumped from around one million to 21 million over the plan period. Funding for the investment program was provided by loans and foreign investment, the internal resources of operators and providers, as well as from government funding. However, as already noted, the mobile market was badly hit by the MTS licence cancellation and after peaking at around 25 million subscribers the mobile market fell to below 20 million by end 2013. Some considerable uncertainty was weighing on the market coming into 2014, despite the efforts of the government to normalise' the situation.
The state-owned national telecom operator, Uzbektelecom, has been responsible for the fixed-line network and services throughout the country. It was originally granted a monopoly on international voice services and VoIP until 2007. In the meantime, it controlled around 98% of local fixed-line telephony services and 96% of international fixed-line services. Little progress had been made in the government's plans to privatise Uzbektelecom despite several attempts over the last decade to sell off a sizable stake to a foreign investor. Again, with the events of 2012/2013 causing a major setback for both the mobile market in particular and the telecom sector as a whole, it was unlikely that a good opportunity to sell a stake in Uzbektelecom would present any time soon.
While the country's internet market had enjoyed considerable growth since 2002, actual internet subscriptions have remained limited for the majority of the country's population. Fixed broadband subscriptions in particular were small in number. By 2005 internet user penetration stood at just over 4%; by early 2014 it had reached an estimated 42% user penetration. (It is noted that the various sources for statistics on internet subscribers in Uzbekistan provide limited or contradictory information.)
By mid-2012 mobile penetration in Uzbekistan had reached 91%, with mobile subscriber numbers having increased to over 25 million; However, the impact of the MTS licence cancellation (see below) caused turmoil in the market place and total subscriber numbers had fallen to below 20 million by end-2013; Coming into 2014, it was clear that the mobile market would take some time to recover; Fixed-line growth in Uzbekistan although positive has been very modest over recent years; With around two million fixed-line subscribers, fixed penetration continued to sit at around 7%; On the positive front, however, has been the accelerated conversion of the fixed network from analogue to digital with the 100% target having been effectively achieved; On the basis of published statistics, recent growth in internet usage has been considerable and user penetration was estimated to have reached 42% coming into 2014; There was an ongoing surge in the growth of fixed broadband internet subscriptions, but from a very small subscriber base; Fixed broadband subscriber penetration was still below 1% in 2013; By contrast mobile broadband had reached an estimated penetration of 24% by end-2013; Uzbektelecom was continuing to roll out fibre-based internet access in 2014; The government of Uzbekistan has continued to keep a tight control over some aspects of internet usage and has come under international criticism for its repressive policies; The Uzbekistan government took vigorous action against mobile operator MTS Uzbekistan in 2012 after alleging a range of violations, including tax evasion, failure to meet regulatory standards, and the use of unlicensed infrastructure; The government action saw the cancellation of MTS Uzbekistan's operating licence in August 2012 and in September MTS assets were seized effectively nationalising the company; the company was duly declared bankrupt; UCell's parent, TeliaSonera, was accused in 2012 of paying bribes in acquiring its Uzbek business (Coscom); The consequences of these allegations were still playing out in 2014 with various authorities conducting investigations not only into TeliaSonera's actions but the Uzbekistan market; In March 2014 the government enacted new legislation designed to set out conditions to hasten the development of mobile networks in the country.
This report provides an overview of the trends and developments in the telecommunications markets in Uzbekistan.
Subjects covered include:
Key statistics; Market and industry overviews; Major operators (mobile and fixed); Regulatory environment; Infrastructure; Mobile market voice and data; Internet market; Broadband internet (fixed and mobile); Telecom market scenario forecasts for subscribers (mobile, internet, fixed) for 2015 and 2020.