Kazakhstan & Central Asia Telecommunications Report Q3 2011

Includes 3 FREE quarterly updates

BMI’s Q311 update on the telecoms markets of Kazakhstan and its four Central Asian neighbours is built on new mobile subscriber data for Q111, ending March 31 2011, regulatory data and local press reports. Using this data, we have revised our five-year growth forecasts for the development of the region’s five mobile markets. In addition, we have reviewed our five-year forecasts for the development of Central Asia’s fixed and mobile broadband subscriber markets this quarter. Therefore, we include customers who use devices such as netbooks and USB sticks to connect to the internet wirelessly through a high-speed (3G/HSPA) network; however, we do not include smartphone users, only dedicated mobile data subscriptions. In the past few months, operators in countries such as Uzbekistan and Tajikistan have been have been introducing various promotions, to encourage greater data customer growth and service usage.

In December 2010 Kyrgyzstan became the latest Central Asian republic to introduce third-generation (3G) mobile services, although LTE networks had already been launched in Uzbekistan and Kazakhstan in 2010 by Kazakh mobile market leader K-Cell, which is owned by the Nordic carrier TeliaSonera, and Uzdunrobita operating as MTS Uzbekistan. BMI forecasts that mobile broadband services based on UMTS/HSPA and LTE technology will make a strong contribution to the growth of internet services in Central Asia because of the limited scope of fixed broadband growth due to a lack of existing infrastructure, income-constrained demand and challenging geography. Our new broadband forecasts for Tajikistan, Uzbekistan and Kazakhstan envisage stronger growth as a result of the impact of mobile broadband services. In the long term, BMI believes the spread of mobile broadband services have the potential to stifle the success of competing wireless technologies such as WiMAX and satellite. Meanwhile, in November 2010 3G services were launched in Turkmenistan when MTS Turkmenistan launched a 3G network in the capital Ashgabat. However, the following month it was announced that MTS’ operating licence had been suspended by the Turkmen government. At the time of writing, MTS remained offline and was proceeding with its lawsuit against two state-owned operators Turkmentelecom and mobile subsidiary Altyn Asyr, regarding the termination of interconnection agreements. BMI believes the revocation of MTS’ licence will be to the detriment of the Turkmen market in terms of a loss of competition and international expertise.

The Russian foreign ministry announced on March 7 2011 that it will protect the interests of local telecoms operator Mobile TeleSystems (MTS) in its dispute with Turkmenistan. MTS has itself responded by writing to international firms with the aim of discouraging them from investing in Turkmenistan. Meanwhile, the Ministry of Foreign Affairs in Turkmenistan has expressed its interest in initiating negotiations with the Russian operator on the buyout of its assets in the country.

The situation became a political issue beyond telecoms after the military were called in to control crowds in early April 2011, after hundreds of customers stormed Altyn Asyr stores when it suspended the distribution of SIM cards due to network congestion problems. The operator began offering vouchers that could be used to acquire a SIM card from May 2011. Only public officials or foreign nationals are currently being issued SIM cards. One positive ramification from the SIM issuance suspension is the political pressure it applies to the Turkmen leadership. Earlier in April, the President of Turkmenistan, Gurbanguly Berdymukhamedov, was forced to respond to the political implications of the SIM shortage by criticising the operator's poor service. He argued poor work organisation is the cause of the low efficiency. He demanded measures be taken immediately to guarantee the high quality of mobile services across the country and obliged the government to establish private companies and joint ventures with foreign businesses. Huawei Technologies and Nokia Siemens Networks have since won contracts for an urgent upgrade of the Altyn Asyr network, according to local reports.