This market report covers eight countries in the Central Asia sub-region. It takes an overall look at the various telecoms markets, together with a particular look at the mobile market segments in each of the following countries: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.
The countries of Central Asia have typically been struggling with poor telecom infrastructure and correspondingly low telecom penetrations - both fixed and mobile - for many years now. With fixed penetrations all below 20% (and some considerably less than that), there has been an obvious opportunity for mobile services to fill the gap. It is over the last few years that this has finally started to happen and it is now taking place right across the sub-region. Mobile markets are, in fact, booming; Kazakhstan, the most highly penetrated (49%), has been through a growth surge and was continuing to grow at more than 30% per annum coming into 2007. While at the other end of the scale was the lowly penetrated Tajikistan (4%), whose subscriber numbers grew by almost 150% in 2006.
There is no doubt that the momentum built up in the various markets will see this growth continue for some time. Nevertheless, there are important issues needing to be addressed in the regulatory structure of the markets to ensure a strong and competitive business environment is in place. All the mobile markets have now been opened up to a level of competition, the last to do so being Armenia with the arrival of a second mobile operator in late 2005. The minnow of the markets, Tajikistan, now has six mobile operators! The benefits flowing from the adoption of more open markets have not been consistent across the sub-region, however. In some cases, this has been due to the presence of an overly strong incumbent combined with a weak regulatory regime. And in the case of Kyrgyzstan, general business governance standards were being called into question by the ‘transitioning’ of mobile operator Bitel into Sky Mobile in 2006 (legal challenges were pending).
Somewhat surprisingly, 3G networks are already starting to appear in Central Asia. Tajikistan was the first of to actually launch a 3G network, with four operators licensed to offer 3G services. Georgia awarded a 3G licence in April 2006, but the network had not been launched by early 2007.
Central Asia mobile markets - penetration and annual growth - 2006
Country Penetration Annual growth
Kazakhstan 49% 35%
Georgia 42% 38%
Azerbaijan 40% 50%
Armenia 27% 75%
Kyrgyzstan 18% 70%
Tajikistan 9% 77%
Uzbekistan 9% 137%
Turkmenistan 4% 147%
Armenia’s telecom sector has started on a positive development path. The mobile sector in particular has grown to serve over 800,000 subscribers, this for a population of just under four million people. However, major structural issues need to be addressed in the sector. In November 2004, amid growing dissatisfaction over the performance of the national network, the government reached an agreement with ArmenTel to end its exclusive rights to provide mobile, satellite, and mobile radio communications services in exchange for various other concessions, including the stipulation that only one alternative mobile operator would be allowed to operate in Armenia until 2009. A second mobile network launched in mid-2005 after the government awarded a licence to K-Telecom. The total mobile market grew by 75% in 2006. By early 2007, the country’s mobile penetration was 27%. For the country overview, see chapter 2, page 6.
Azerbaijan has been battling infrastructure and structural issues as its works to develop its telecom sector. The monopoly held by the Ministry of Communications, among other things, has been a major constraint to development. As well as being a commercial operator through its role in AzTelecom, the ministry is both policy-maker and regulator for the telecoms sector in Azerbaijan. The two mobile service providers in Azerbaijan are the dominant Azercell (a subsidiary of Aztelekom) and a much smaller player, Bakcell. Plans to license a third mobile operator in 2002 were deferred. Two new mobile licences were finally issued in December 2005, Azerfon and Catel being the successful contenders. Ahead of the two new operators launching their respective services, the Azerbaijan mobile market was growing at an annual rate of around 50%. In late 2006, the number of subscribers had passed the three million mark and penetration had almost reached a surprising 40%. For the country overview, see chapter 3, page 9.
Georgia: Although steadily improving, the telecommunications infrastructure in Georgia has remained outmoded due to decades of under-investment. However, the country’s telecom market has started to pick up, with rising revenues and increased investment in infrastructure. Mobile communications, in particular, have become increasingly important because the fixed-line facilities provided in many places (particularly in rural and remote areas) are inadequate. A mobile phone represents the only effective means of communication. In April 2006, the Georgian National Communications Commission awarded a 3G mobile licence to Argotex, a local textiles company. Further spectrum was auctioned in May 2006. The country’s mobile services continue to grow; in the three years to end-2006, the number of increased threefold to reach the two million milestone, representing a remarkable 42% penetration. Georgia has rapidly become a booming mobile market, with growth continuing at an annual rate of 40% into 2007. For the country overview, see chapter 4, page 13.
Kazakhstan’s telecoms market is growing on a wide front. This includes rapid development in the mobile market where subscribers have surged from 260,000 in 2000 to 7.5 million (a penetration of almost 50%) in early 2007. The annual growth rate was running at almost 90%. The scene is set for further growth across the telecoms sector. Competition in the mobile market was given a significant boost, when Altel, the country’s original mobile operator, was joined in 1999 by two other operators offering GSM services. The arrival of the competing operators quickly resulted in lower prices and broadening of services, totally changing the nature of the market. Overall economic activity has remained very strong in Kazakhstan, with 2006 marking the seventh consecutive year of real GDP growth in excess of 8%. With a GDP of more than US$70 billion in 2006 and a GDP per capita approaching US$5,000 (compared with Russia’s GDP per capita of US$6,800), it is not surprising to find significant growth in the country’s telecom sector. For the country overview, see chapter 5, page 16.
Kyrgyzstan, despite being one of the least developed countries in the region, has progressed further and faster than other Commonwealth of Independent States to liberalise its economy. This has meant that the telecom market has been opened to both foreign and domestic investors and at the same time an independent regulator has been established to oversee the sector. Full liberalisation of the market was close at hand. As a consequence of this structural reform, the sector has been attracting strong foreign investment interest as well as considerable economic and technical assistance of various types. The government is also moving towards substantially privatising Kyrgyztelecom. Mobile services have been provided by two operators - Katel (D-AMPS) and Bitel (GSM). A second GSM operator, MegaCom, was also launched in April 2006. The mobile market is still in the early stages of development. Having seen the total mobile subscriber base grow by 70% in 2006, penetration had reached 18% by year-end. Clearly there was room for further growth as the market becomes increasingly competitive. For the country overview, see chapter 6, page 21.
Tajikistan: With a telecom network that was arguably the least developed of all the countries that emerged from the former Soviet Union, a gradual process of liberalisation was 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. The mobile sector experienced a major growth surge in 2006, the subscriber base jumping by almost 80%. This followed on from 120% growth in 2005. With what has become a highly competitive mobile market, this rate of expansion appears set to continue. By 2006, Tajikistan had five GSM networks and one CDMA2000 1x network in operation. Tajikistan was the first of the CIS to launch a 3G network. Four operators have been licensed to offer 3G services. Mobile penetration had reached 10% in early 2007. For the country overview, see chapter 7, page 24.
Turkmenistan: Unlike most of its neighbouring countries, Turkmenistan’s mobile market has been slow to grow. This can be partly attributed to the high cost of mobile services in relation to local incomes. The country’s first mobile operator, US-based Barash Communications Technologies Inc was granted a 10-year exclusive licence in February 1996 to provide mobile services. In 2004, a second licence was awarded to the government-controlled operator, Altyn Asyr. Combined fixed-line and mobile teledensity was estimated at almost 13% by end-2006. Fixed-line growth has been virtually stagnant for almost a decade. Unlike most of its neighbours, Turkmenistan’s mobile market, served by one private and one state-owned operator, has been slow to grow. The year 2005 provided the first signs of a more energetic mobile market. In April 2006, the president of Turkmenistan proposed lowering the tariffs of Altyn Asyr to less than US$50 per annum in a bid to boost penetration by making services affordable for all. By end-2006, mobile subscriber numbers had jumped by an impressive 150% in the year. Mobile penetration, however, remained a lowly 4%. For the country overview, see chapter 8, page 28.
Uzbekistan: Competition is the driving strong growth in Uzbekistan’s mobile subscriber base, as companies introduce different technologies, expand coverage and lower prices to attract customers. By end-2005, total mobile penetration in Uzbekistan was 4%, while in Tashkent penetration stood at around 20%. The number of mobile subscribers more than doubled in 2006 to reach 2.7 million by year-end. Mobile penetration had reached 9%. Six operators provide mobile service in Uzbekistan, the largest of which are Uzdunrobita JV and Unitel. In 2006, Russian mobile operator VimpelCom acquired full ownership of Unitel the second largest operator and Buztel, the smallest operator. It plans to merge Buztel into Unitel to create a single company operating in the Uzbekistan market under the Beeline brand. VimpelCom intends to find an Uzbek partner as a minority shareholder in the planned combined company. For the country overview, see chapter 9, page 30.
Data in this report is the latest available at the time of preparation and may not be for the current year.