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 telecom statistics which describe the market in each of the following countries: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.
The nations of Central Asia, following the winning of independence following the collapse of the Soviet Union in the early 1990s, were characteristically suffering from poor and inadequate infrastructure. Their respective telecom networks were in particularly bad condition at the time, in some cases on the verge of total collapse. The process of building and rebuilding crumbling telecom infrastructures has been a long and difficult one. Fixed-line penetration remains low across the sub-region, with no country having more than 20% fixed teledensity. More critically, a large proportion of these networks are yet to be fully converted to or replaced by digital equipment. Of course, the ability to address the need for infrastructure is closely linked to the economic prosperity of a country; whilst none of these countries is classed as a Least Developed Country, the majority have had major economic challenges to address.
The state of the fixed-line networks made it inevitable that mobile services would be seen by the governments and operators alike as the way to provide much needed communications and essentially offer a quick solution to ‘filling the gap’. It still took time for the momentum to develop, but over the last few years it has finally started to happen. Right across the sub-region, mobile markets have been booming; Kazakhstan, the most highly penetrated mobile market in Central Asia (49%), has been through a major growth surge and was continuing to grow at more than 30% per annum coming into 2007. At the other end of the scale is the lowly penetrated Tajikistan (5%), whose subscriber numbers have jumped sharply, growing by almost 150% in 2006.
One of the major challenges for these markets has been to introduce the much-needed regulatory reforms and to generally open the respective markets up to competition. Considerable progress has been made right across the sub-region on the regulatory reform front, although inevitably some countries are dong better than others. Kyrgyzstan, for example, was one the fastest of the CIS to liberalise its economy and was the first Central Asian Republic to join the WTO in 1998. Turkmenistan, while steadily rebuilding its economy, has prompted questions to be raised about governance matters. Tajikistan, which has also finally made some economic progress, suffers from the illegal drug trade and the resulting corruption within government.
Central Asian countries fixed-line penetration, digital lines and GDP per capita - 2006
Country Fixed-line penetration Digital lines (percent) GDP per capita (US$)
Kazakhstan 19% 75% 4,700
Armenia 18% 45% 1,900
Azerbaijan 15% 50% 1,500
Georgia 13% 50% 900
Kyrgyzstan 9% 45% 500
Turkmenistan 9% 28% 1,400
Uzbekistan 7% 66% 500
Tajikistan 5% 90% 300
Armenia’s telecom sector has started to grow. There are over 600,000 fixed-line subscribers and more than 800,000 mobile subscribers for a population of almost 4 million people. 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. Amid growing dissatisfaction over the performance of the telecoms network, in November 2004 the government reached a compromise agreement with ArmenTel, the country’s national telecom provider, 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. ArmenTel was also allowed to retain sole rights to Internet telephony and the use of fibre optic cables. Previously, ArmenTel had been granted exclusive rights to the provision of all telecommunications services in Armenia until 2013 (apart from data services). For the country overview, see chapter 2, page 6.
Azerbaijan is continuing to make steady progress in developing its telecom sector, but still faces numerous problems. Poor quality infrastructure has been a major ongoing problem. Only around half the telephone lines in the country are digital. The monopoly held by Azerbaijan’s Ministry of Communications, among other things, results in the high cost of satellite connections. 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 country’s significant dependence on international funding has also made it difficult for any long-range planning in the development of the sector.
The good news: by 2006, GDP growth was running at an estimated 30%. A rapid increase in capital investment has been largely responsible for the country’s recent impressive growth record. Much of the capital investment has been from foreign sources and mainly directed towards major oil and gas field developments. Government-owned AzTelecom remains Azerbaijan’s main telecommunications service provider and operates under the umbrella of the Ministry of Communication and Information Technology (MCIT). A second operator, AzEuroTel, won a licence to provide international communication services in 1999. There are also four joint ventures offering telephone services, two mobile operators, and a number of ISPs operating in Azerbaijan. All these ventures have been established under the ministry. For the country overview, see chapter 3, page 10.
Georgia: Although steadily improving, Georgia’s telecommunications infrastructure remains outmoded and inadequate as a result of gradual under-investment over decades. However, there has been an upward trend in the country’s telecom market over the past few years, with rising revenues and increased investment in infrastructure. Mobile communication systems have become increasingly important because the fixed-line facilities provided in many places (particularly in rural and remote areas) are outdated and a mobile phone represents the only effective means of communication.
In an interesting move, in April 2006, the Georgian National Communications Commission awarded a 3G mobile licence to Argotex, a local textiles company. Positive developments in Georgia that will help the expansion of its telecom infrastructure include the establishment of an independent regulator for the telecom sector and the ongoing privatisation of the two largest fixed-line operators, Sakartvelos Telekomi and Sakartvelos Elektrokavshiri. Competition has become the norm for all segments of the telecom market, including fixed-line services. For the country overview, see chapter 4, page 14.
Kazakhstan’s telecoms market is growing on a wide front. The dynamic nature of the market will ensure the rapid introduction of new infrastructure and the upgrade of old equipment (Just over 70% of the national network was digital in 2006). Legislation adopted in 2004 started the liberalisation of the telecom sector and ended Kazakhtelecom’s monopoly. By April 2005, four companies had been licensed to provide international and long-distance services in competition with Kazakhtelecom and by the end of the year, over 1,000 licences had been issued for the provision of a range of telecom services.
Rapid development in the country’s mobile market has been a feature of the sector. Although Internet penetration remains low for the moment, there is increasing interest in going online. The scene is set for further growth in the telecoms sector. Economic activity had 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. National operator, Kazakhtelecom has launched a program to modernise the country’s telecommunications system. The plan includes modernising the company’s rural telecommunications network using digital telephone exchanges. The company has also been installing satellite facilities in Kazakhstan’s rural and remote areas. For the country overview, see chapter 5, page 18.
Kyrgyzstan, despite being one of the least developed countries in the region, has progressed further and faster than other CIS to liberalise its economy; it was in fact the first Central Asian Republic to join the WTO. While much has been done to modernise Kyrgyzstan’s telecom network, geographical conditions, a high incidence of poverty and a still developing legal and regulatory framework remain key obstacles to expanding telecom operations. The good news is that the telecom market has been opened to both foreign and domestic investors and an independent regulator has been established to oversee the sector. Full liberalisation of the market was set for end-2006. As a consequence of this, the sector has been attracting strong foreign investment interest as well as considerable economic and technical assistance of various types. Since the start of market reforms in 1991, the national operator Kyrgyztelecom has been expanding and upgrading its outdated and poorly distributed network.
In January 2006, the government approved a decision to put 77.8% of Kyrgyztelecom up for sale. The country’s second GSM network was also launched in April 2006. Much has been done in recent years to modernise the Kyrgyzstan’s telecom network. Telecommunication projects worth more than US$50 million have been implemented to develop the national infrastructure and upgrade systems. These projects have been financed with the help of US$27 million in loans from the World Bank and the EBRD. The national infrastructure program included creating a digital network, digital radio-relay stations and a fibre optic links. For the country overview, see chapter 6, page 25.
Tajikistan: Of all the countries that emerged from the former Soviet Union, Tajikistan arguably had the least developed telecommunications network. With a network that was near total collapse at the time, the government has started the daunting task of bringing it up to modern standards. The network is tiny, providing service to a subscriber base that represents a fixed-line teledensity of less than 5% coming into 2007, and, significant proportion of the Tajikistan 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 fixed-line operator, Tajiktelecom was expected to be achieved by end-2007. The mobile sector experienced a major growth surge in 2006, the subscriber base jumping by almost 80%. Despite the healthy growth in the mobile sector, combined fixed-line and mobile teledensity was estimated at less than 15% in early 2007. For the country overview, see chapter 7, page 30.
Turkmenistan is yet another of the nations that emerged from the former Soviet Union with an underdeveloped telecommunications sector. In fact, it is claimed that telecommunications services in Turkmenistan were the least developed of all the CIS countries. Poor growth in telecoms services, the slow progress in the development of the private sector and continuing state control over most economic activities have not been helpful in attempts to grow the country’s telecommunications market. Combined fixed-line and mobile teledensity was estimated at close to 13% by end-2006. Fixed-line growth has been virtually stagnant for almost a decade. For the country overview, see chapter 8, page 34.
Uzbekistan has been struggling to bring its telecom system up to the standard found in developed countries. Although steadily improving, some of the telecommunications infrastructure remains outmoded and inadequate. With slightly less than 2 million fixed line telephone services at the end of 2006 for a population of almost 27 million, the national network still has 35% of equipment yet to be replaced or converted to digital. Certainly, however, the situation has been steadily improving, due largely to the government’s decision to give priority to the telecom sector. In 1996, in what was a significant move, the government started inviting foreign telecom companies to invest in Uzbekistan in their own right. This was followed by the creation in 2000 of Uzbektelecom, a holding company charged with operating the national telecommunications network.
There has been an upward trend in the country’s telecom market over recent years, with rising revenues and increased investment in infrastructure. In January 2007, the country’s telecom regulator reported that investment in the telecommunications sector in Uzbekistan had risen 69% year on year to UZS179.6 billion (US$145 million) in 2006. It was also reported that foreign investment in the Uzbek telecom sector rose 39% year on year to US$133 million; telecom operators’ revenues rose 55.6% year on year in 2006 to UZS622.6 billion (US$500 million). The next step in the government’s strategic program is to privatise the incumbent operator Uzbektelecom and to open the market to competition consistent with the country’s aim to join the WTO. For the country overview, see chapter 9, page 37.
Data in this report is the latest available at the time of preparation and may not be for the current year.