This report provides a comprehensive overview of the trends and developments in telecommunications and digital media markets in 11 countries in Central Asia.
Subjects covered include:
This annual publication looks at 11 of the developing telecom markets of Asia: Armenia, Azerbaijan, Bhutan, Georgia, Kazakhstan, Kyrgyzstan, Mongolia, Nepal, Tajikistan, Turkmenistan and Uzbekistan.
Armenia’s telecom sector is small but growing. With over 600,000 fixed-line subscribers for a population of around 3.5 million, the level of investment in infrastructure and new services has begun to increase. There are, however, major structural issues to be addressed in the sector. In 2004, amid growing dissatisfaction over the performance of the telecoms network, the government reached a compromise with national telecom provider, ArmenTel, ending its exclusive rights as a service provider in exchange for various other concessions, including that only one alternative mobile operator would be allowed to operate in Armenia until 2009. ArmenTel was allowed to retain sole rights to Internet telephony and the use of fibre optic cables. Previously, it had been granted exclusive rights to provide all telecom services in Armenia until 2013 (apart from data). The mobile market grew by around 75% in 2007, with K-Telecom, Armenia’s second mobile operator having a big impact on the market. Plans to award a third mobile operator licence were announced in late 2007.
Azerbaijan’s GDP growth was running at an estimated 30% coming into 2008, largely due to a rapid increase in capital investment. Much of this is foreign capital and has mainly been directed towards major oil and gas developments. On the telecommunications front, the country has been making steady progress in developing its telecom sector, but it still faces numerous problems, including poor quality infrastructure; still only around half the country’s telephone lines are digital. The monopoly held by the Ministry of Communications remains problematic. As well as being a commercial operator through its role in incumbent AzTelecom, the ministry is both policy-maker and regulator for the telecoms sector.
Bhutan, which for a long time preferred to remain isolated from the world, has very recently started to improve its telecoms capability. The tiny country proceeded to invest heavily - to the tune of around US$27 million - in telecom infrastructure between 1996 and 2002, providing a modern fixed-line network. To do so it has had to overcome its mountainous landscape. A mobile service launched in late 2003 by Bhutan Telecom had signed up more than 150,000 subscribers by end-2007, equivalent to about 7% penetration. A second national mobile licence was awarded in November 2006 to local industrial conglomerate, the Tashi Group. Tashi launched its mobile operations in April 2008. Accurate statistical information on Bhutan is especially difficult to obtain. In the meantime, Bhutan has moved towards adopting a democratic system of government, the King having been actively involved in this process.
There has been an upward trend in Georgia’s telecom market over the past few years, with rising revenues and increased investment in infrastructure. Although steadily improving, Georgia’s telecom infrastructure remains outmoded and inadequate as a result of gradual under-investment over decades. Mobile telephone systems have become increasingly important because the fixed-line infrastructure is outdated and a mobile phone represents the only effective means of communication. MagtiCom was awarded the country’s first 3G licence in 2005. Then, in a significant move in 2006, the regulator awarded another 3G licence. This was followed by a third licence going to Telecom Invest Georgia. In the four years to end-2007, mobile penetration increased fourfold to reach a remarkable 50% penetration in what was a truly booming market.
Kazakhstan’s telecoms market has been growing on a broad front. One of the few central Asian countries that has a substantial fixed-line network (almost 20% penetration), the dynamic nature of the market is seeing the rapid introduction of new infrastructure and the upgrade of old equipment. Legislation enacted in 2004 started the liberalisation process and ended Kazakhtelecom’s sector monopoly. By April 2005, four companies had been licensed to provide international and long-distance services and by year-end, over 1,000 licences had been issued to provide a range of telecom services. Rapid development in the mobile market has seen mobile penetration surge to over 75% in early 2008. By contrast, Internet penetration remains low, however. Supported by a strong economy and a GDP per capita estimated at nearly US$9,000 in 2008, further vigorous expansion of the telecom sector in Kazakhstan looks highly likely.
Kyrgyzstan has progressed further and faster than other Commonwealth of Independent States to liberalise its economy. It was the first Central Asian Republic to join the WTO, despite being one of the least developed countries in the region. Even though much has been done to modernise its telecom network, a number of key obstacles including geographical conditions, a high incidence of poverty and a still developing legal and regulatory framework limit Kyrgystan’s ability to expand its telecom operations. The telecom market has been opened up to both foreign and domestic investors; an independent regulator has been established to oversee the sector. Not surprisingly there is a high level of interest among foreign investors, as well as the offer of considerable economic and technical assistance of various types. Although progress has been slow, the national operator Kyrgyztelecom has been steadily working at upgrading its outdated and poorly distributed network. Following the launch of a second GSM network by MegaCom in 2006, KT Mobile, the non-operational mobile subsidiary of Kyrgyztelecom, was granted frequencies in December 2006 for GSM 900 and GSM 1800 mobile services. With a mobile penetration of around 35% in late 2007, the market still has plenty of room to grow.
Since the government’s telecom reform program in the mid-1990s, there has been effective liberalisation of all market segments, partial privatisation of the fixed-line incumbent operator, Mongolia Telecom, and establishment of an independent regulator. Competition is in place for both fixed and mobile telephony, including local, long-distance, and international, Internet, VoIP, and VSATs. While the fixed-line network has been expanding slowly, the mobile phone market has undergone a remarkable boom, with the number of subscribers growing at an average rate of close to 50% year-on-year for a number of years. Two additional mobile licences were awarded in 2005/06 to Unitel (GSM) and rural mobile operator G-Mobile (CDMA), with both networks well founded for growth going into 2008. Although GDP has grown substantially, 36% of the population still lives below the international poverty line of US$0.75c per day, while the average monthly wage is US$70. Despite this, mobile penetration of less than 40% indicates that there is still room to grow, particularly in the rural areas.
Nepal is among the poorest and least developed countries in the world. Amid what has been an unsettled political climate, the country has surprisingly been able to move towards a more liberalised telecom market. Positive regulatory changes have been implemented, including the incumbent telco losing its monopoly status. By 2006, over 170 operators had been authorised to provide a wide range of telecom services, including two for basic telephony and two for mobile telephony. The expansion of telephone services has not been able to keep up with the growing demand; the biggest challenge has been to provide rural services. Over 60% of telephone services are concentrated in the capital Kathmandu. Nepal Telecom has been heading up an ambitious plan to increase total telephone penetration to 20% by 2010. Nepal’s target of 15 total phone lines per 100 people by 2014 already looked set to be achieved well ahead of schedule. On the back of the combined effort by Nepal Telecom and the private operators, a figure of 25 lines per 100 people by 2014 was being considered feasible - significantly higher than the 11% penetration (3% fixed; 8% mobile) at end-2007; in comparison, by end-2005 the combined penetration figure was just 1%.
With a telecom network that was near total collapse when the Soviet Union fell, Tajikistan’s government started on the daunting task of bringing it up to modern standards. The telecom network was arguably the least developed of all the countries that emerged from the former Soviet Union. The basic fixed network remains tiny, providing service to barely 5% of the population coming into 2008; and a large proportion of the network has not yet been converted to digital. A gradual process of liberalisation is under way and over the last decade a significant number of private operators have been allowed to enter the telecom market, notably in the mobile and Internet sectors. Privatisation of state-owned Tajiktelecom was expected to be achieved by end-2007. The highly competitive mobile sector experienced a major growth surge in 2006 and 2007, the subscriber base jumping by around 200% over this two year period; this expansion looks set to continue. Interestingly, Tajikistan was the first of the CIS countries to launch a 3G network.
Turkmenistan is another nation that emerged from the former Soviet Union with a relatively underdeveloped telecom sector. Poor growth in telecoms services, slow progress in developing the private sector and continuing state control over most economic activities have not helped to support growth in the telecom market. Combined fixed-line and mobile teledensity was estimated at around 16% by end-2007. For almost a decade fixed-line growth has been virtually stagnant. And oddly, Turkmenistan’s mobile market, served by one private and one state-owned operator, has not taken off like its neighbours but is only growing slowly (7% mobile penetration by end-2007). The Internet has been an interesting sector to watch; government has been exercising tight control, with online activity and access severely restricted. Reports have been emerging, however, that suggest Turkmenistan is moderating its restrictions on the Internet, though it is difficult to assess the trend.
Although steadily improving, much of Uzbekistan’s telecom infrastructure remains outmoded and inadequate. The country has been struggling to bring its telecom system up to the standard found in developed countries. No doubt the government’s decision to give priority to the telecom sector has seen the situation steadily improving. Back in 1996, in what was a significant move at the time, the government was encouraging foreign telecom companies to invest in Uzbekistan. This was followed by the creation of Uzbektelekom, a holding company charged with operating the national telecom network. An upward trend in the country’s telecom market over recent years has seen rising revenues and increased investment in infrastructure. The next step is to privatise Uzbektelecom and to open the market to competition consistent with the country’s objective of joining the WTO. Combined fixed and mobile teledensity was estimated at over 23% by end-2007, the mobile sector having just surged by more than 200% in a two year period.