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Uzbekistan - Telecoms, Mobile, Broadband and Forecasts

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Cancellation of MTS mobile licence in Uzbekistan causes major dislocation in local market

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 being felt in 2013. 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 and there had been no final resolution of the complicated dispute between the government and MTS. In the meantime, the mobile market had been severely damaged by the dispute and especially the way it had been managed. 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 around 20 million by end 2012. Some uncertainty was continuing to weigh on the market coming into 2013.

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. The alternative fixed-line providers were Buzton and East Telecom, but they were servicing only a limited numbers of subscribers.

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 2013 it had reached a reported 37% user penetration. (It is noted that the various sources for statistics on internet subscribers in Uzbekistan provide limited or contradictory information.)

Major highlights:

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; in September MTS assets were seized effectively nationalising the company.
Although the seizure of assets was successfully challenged in court, the company was duly declared bankrupt.
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 caused turmoil in the market place and total subscriber numbers had fallen to 20 million by end-2012;
Coming into 2013, 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 slightly less than 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 had reportedly reached 37% coming into 2013;
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 2012;
By contrast mobile broadband, which had surged over the last four years, had reached a penetration of 21% by end-2012;
The government of Uzbekistan has continued to keep a tight control over some aspects of internet usage and has come under some international criticism for its repressive policies.

Uzbekistan - key telecom parameters 2011 - 2013
Category | 2011 | 2012 | 2013 (e)
Fixed-line services: | | |
Total No. of subscribers | 1.93 million | 1.96 million | 2.00 million
Internet services: | | |
Total No. of fixed internet subscribers | 300,000 | 350,000 | 420,000
Mobile services: | | |
Total No. of subscribers | 25.4 million | 20.3 million | 21.5 million
(Source: BuddeComm)

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;
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.

1. Executive summary
2. Key statistics
3. Country overview
3.1 Background
3.2 Economy
3.3 Corruption
4. Telecommunications market
4.1 Overview of Uzbekistan's telecom market
5. Regulatory environment
5.1 Overview
5.2 Regulatory developments
6. Fixed network operators in Uzbekistan
6.1 Uzbektelecom
6.1.1 Privatisation of Uzbektelecom
6.2 Buzton
6.3 East Telecom
7. Telecommunications infrastructure
7.1 National telecom network
7.2 Forecasts fixed-line market 2015; 2020
7.2.1 Fibre optic cables
7.3 Satellite communications
8. Internet market
8.1 Overview
8.2 Internet statistics
8.3 Forecasts internet services 2015; 2020
8.4 ISP market
8.4.1 Overview
8.4.2 Unitel
9. Broadband market
9.1 Overview
9.2 Broadband statistics
9.3 WiMAX
10. Mobile communications
10.1 Overview of Uzbekistan's mobile market
10.1.1 Mobile statistics
10.2 Forecasts mobile market 2015; 2020
10.3 Mobile data
10.3.1 Long Term Evolution (LTE) / Fourth Generation (4G)
10.4 Major mobile operators
10.4.1 MTS-Uzbekistan (formerly Uzdunrobita)
10.4.2 Beeline (Unitel)
10.4.3 UCell (Coscom)
10.4.4 Uzbektelecom Mobile (UzMobile)
10.4.5 Other mobile operators
11. Notes on forecasting
12. Related reports
Table 1 Country statistics Uzbekistan 2013
Table 2 Telephone network statistics 2012
Table 3 Internet user statistics 2012
Table 4 Mobile statistics June 2013
Table 5 National telecommunications authority
Table 6 Uzbekistan's GDP real growth rate 2006 - 2014
Table 7 Fixed lines in service, annual growth and teledensity 1991 - 2013
Table 8 Forecast fixed-line subscribers and penetration rates 2015; 2020
Table 9 Internet users and penetration 1999 - 2012
Table 10 Fixed internet subscribers 1999 - 2013
Table 11 International internet bandwidth 2001 - 2013
Table 12 Proportion of households with a computer 2002 - 2013
Table 13 Forecast fixed internet subscribers 2015; 2020
Table 14 Unitel fixed broadband subscribers 2011 2012
Table 15 Unitel's fixed broadband ARPU 2011 - 2012
Table 16 Fixed broadband subscribers 2003 - 2013
Table 17 Fixed broadband subscribers and household overview 2012
Table 18 DSL broadband subscribers 2003 - 2013
Table 19 Mobile broadband subscribers 2009 - 2013
Table 20 Mobile subscribers, annual change and penetration rate 1995 - 2013
Table 21 Mobile operators, subscribers and annual change June 2012
Table 22 Mobile operators by share of total mobile market June 2012
Table 23 Mobile operators by share of total mobile market 2012
Table 24 Mobile operators by share of total mobile market June 2013
Table 25 Forecast mobile subscribers and penetration rates 2015; 2020
Table 26 MTS (Uzdunrobita) mobile subscribers 1998 2012
Table 27 MTS (Uzdunrobita) mobile ARPU 2005; 2011 2012
Table 28 Unitel mobile subscribers 1998 - 2013
Table 29 Unitel's mobile ARPU 2006 2013
Table 30 UCell (Coscom) mobile subscribers 2006 2013
Chart 1 - Uzbekistans GDP real growth rate - 2006 2014
Chart 2 - Fixed lines in service, annual growth and teledensity 2001 - 2013
Chart 3 - Internet users and penetration - 2006 2012
Chart 4 - Fixed broadband subscribers and penetration - 2007 2013
Chart 5 - Mobile broadband subscribers and penetration - 2009 2013
Chart 6 Mobile subscribers and penetration rate 2005 - 2013
Chart 7 - Mobile operators by share of total mobile market - June 2012
Chart 8 - Mobile operators by share of total mobile market - June 2013

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