2004 Central Asian Infrastructure, Fixed Voice and Data Market

Report Description
This annual report offers a wealth of information on the Infrastructure Fixed Voice and Data markets in Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Taijikistan, Turkmenistan, Uzbekistan. Subjects covered include:

Infrastructure Issues
Regulatory issues and government policies re infrastructure
Datacomms Infrastructure, Leased Lines, ISDN
Public and Value Added Data Services
Leased Lines, ISDN, Frame Relay, ATM
Brief overviews on all of the major telecommunications carriers and service providers in the region

Category
Telecoms & Computing Annual Research

Executive Summary

Key Highlights
Armenia’s telecommunications sector is small but growing. With just over half a million fixed-line subscribers for a population of nearly 4 million people, the level of investment in infrastructure has begun to increase. There are, however, major structural issues to be addressed in the sector. ArmenTel, the country’s national telecom provider, has exclusive rights to the provision of all telecommunications services, including public switched telephony services and mobile telephony, in Armenia until 2013.

Following the collapse of the former Soviet Union, the telecommunications sector in Armenia went into decline. There were almost 600,000 fixed-line subscribers by the end of 1994, but by the end of 2001 this figure had fallen to below 530,000. This decline can be partly explained by the prevailing socio-economic instability in the region triggered by the collapse of the Soviet Union. But more significant a factor is that the country has failed to embrace any vigorous reform in the telecom sector.

ArmenTel announced in 2002 that it was increasing its commitment to a US$24 million network upgrade plan. The amended program was expected to eventually provide network coverage to around 85% of Armenia’s population.

The one segment of the market exempt from the ArmenTel monopoly is Internet services. The country’s Internet market is small, but has been developing steadily. However, there are still several major obstacles in the way of improved Internet connectivity. These include poor telecom infrastructure; expensive telephone lines; the high cost of computer equipment relative to an average worker’s salary; political unrest in some regions of the country, which impedes infrastructure reform and intimidates potential sponsors and donors, and a heavy dependence on international funding, making long-range planning difficult.

The World Bank classifies Azerbaijan as a Low Income Economy. The country is starting to make steady progress in the development of its telecommunications sector, but still faces numerous problems. These include poor infrastructure and the high cost of satellite connections due to a monopoly held by the Ministry of Communications & Information (MCIT). The country’s significant dependence on international funding also makes it difficult for any long-range planning in the development of the sector.

The government-owned AzTelecom is the country’s main telecommunications service provider and is controlled by 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 MCIT and provide fax, voice, data, paging, switched network, GSM and analogue mobile services. The two mobile operators in Azerbaijan are the dominant Azercell (a subsidiary of AzTelecom) and a much smaller player, Bakcell (a joint venture with Motorola). The government has plans to introduce a new major player to the mobile market.

A permanent Internet link was established for Azerbaijan in 1995 through the country’s Academy of Science. The country has had dial-up Internet access since 1991.

Georgia continues to be held back in its development by poor telecommunications infrastructure. The network remains heavily analogue with only a minor proportion of digital lines and teledensity is particularly low in rural areas. The country’s telecommunications sector is in desperate need of significant capital investment, particularly in the local network. Despite some strong economic growth in the last decade, Georgia’s economy continues to struggle. A political crisis in late 2003 will add to the uncertainty in the country, at least in the short term.

Positive developments in Georgia that will help the expansion of its telecom infrastructure include the establishment of an independent regulator for the telecom sector in 2000 and the ongoing privatisation of the two largest fixed-line operators, Sakartvelos Telekomi and Sakartvelos Elektrokavshiri. Competition had arrived for all segments of the telecommunications market, including fixed-line services.

Following the launch of the country’s first mobile network in 1994, three more operators launched mobile services. As a result, the number of mobile subscribers has grown rapidly year on year. The annual growth rate in the mobile sector in 2003 was at about 50%. By end-2003, the mobile subscriber numbers had passed the fixed line subscriber base.
Georgia established a permanent Internet link in 1995, after having had non-permanent, dial-up Internet access since 1991. Internet use remains low, but has shown growth and strong competition between ISPs.

Kazakhstan has a relatively strong fixed-line penetration of around 13%. However, the country’s infrastructure is generally in a poor state, only a small proportion of the switching system being electronic and much of this is old. There is high unsatisfied demand with a 2-3 year waiting list. 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 areas. By end-2003, the proportion of digital lines had been lifted significantly and was approaching 50%.

In the meantime, a healthy boom in mobile services has occurred, annual growth running at 30%. The market started to take off in 2000 and has experienced phenomenal growth since then. By the end of 2003, after a year of 40% growth, the mobile subscriber base was around 1.5 million and approaching 10% penetration. Altel, the country’s original mobile operator, was joined by two new operators offering GSM services. The launch of two competing operators resulted in lower prices and broadening of services.

Commercial Internet services first became available in Kazakhstan in April 1996. Internet user penetration is less than 2%.

Kyrgyzstan Having followed a disciplined program of economic reform and steadily moved into a market economy, Kyrgyzstan has been achieving strong economic growth. As a consequence, the country has been able to attract foreign investment and assistance of various types. The consequential benefits have flowed to the telecommunications sector, which is being restructured in the final phase of Kyrgyzstan’s extensive privatisation program. Although the country has been expanding and upgrading its telecommunications network since 1991, much work remains to be done.

Much has been done in recent years to modernise the Kyrgyzstan’s telecom network. Telecommunication projects worth nearly US$50 million have been implemented to develop the national infrastructure and upgrade systems. This has been financed with the help of US$27 million in loans from the World Bank and the European Bank for Reconstruction & Development (EBRD). The program included creating a digital network, digital radio-relay stations and a fibre optic links.

Mobile services are provided in Kyrgyzstan by two operators - Katel (D-AMPS) and Bitel (GSM). The mobile market is still in its infancy, with services covering less than 3% of the population at end-2003. Annual growth, however, is running at in excess of 100%.

Kyrgyzstan has the largest number of Internet users per capita of any country in Central Asia. This sector of the market has been helped to some extent by an Asian Development Bank (ADB) loan for education and computers. Access to Internet in Kyrgyzstan, as with other telecom services, has a strong bias towards the urban customer.

Tajikistan's telecommunications network is arguably the least developed of all the countries that emerged from the former Soviet Union. With a telecommunications network that was near total collapse, the government has started the task of bringing the infrastructure up to modern standards. Less than 10% of the network is digital. Not surprisingly, the poor state of telecommunications services has had a negative impact on business and government.

The existing fixed-line network is in poor condition, being unable to provide the required services to the government and the population. One third of the local exchanges installed in the 1960s and 1970s are in poor condition and require urgent replacement. The Ministry of Communications has been implementing a plan to progressively replace old equipment. The local telephone network serves about 250,000 subscribers, with total teledensity in the country standing at less than 4%.

The country has two operators providing mobile service. The mobile subscriber numbers remained relatively flat for some years, but the market has started to grow rapidly over the last year or two. By end-2003, the total subscriber base had jumped to almost 50,000 according to the ITU. But this represented a penetration of less than 1%.

Internet services in Tajikistan began in 1998 with TajikTel serving as the national Internet Service Provider (ISP). A number of other ISPs have since started offering access to the Internet. There were less than 5,000 Internet users in Tajikistan by end-2003. Usage growth has been hindered by a number of factors including inadequate telecom infrastructure, the absence of appropriate regulation, no high-speed international communication channels and the very limited availability of personal computers.

Turkmenistan, once a republic within the former Soviet Union, has a relatively underdeveloped telecommunications sector. Over the last decade or so, the sector has been stagnant. Poor growth in telecommunications services, the slow progress in the development of the private sector and continuing state control over most economic activities have not been helpful in growing the country’s telecommunication services.

The government has introduced a number of laws designed to attract badly needed foreign investment to help build infrastructure.

The state-owned Turkmen Telecom is the primar