Clare Nuttall in Almaty -
With its scattered population and low fixed-line penetration, Kazakhstan is a natural territory for wireless communications. Mobile penetration is now expected around the 100% mark, meaning there will soon be more mobile phones than people in the country. What next for operators in this increasingly competitive market?
For now, the race is on to cover as much of the country as intensively as possible. KCell, the largest GSM operator with a market share of just under 50%, invested a total of $250m in expanding its infrastructure last year. "We don't intend to cover the country completely, as it would be almost impossible to do so. However, [in 2007] we started to cover settlements with a population of more than 5,000. Then we aimed for all settlements with more than 2,000 inhabitants, and starting from last year it will be those with 1,000 people and above," says Veysel Aral, CEO of KCell.
Indicating the large-scale map of Kazakhstan on the wall of his office, Aral says that, "Population-wise we are quite good, we are approaching to 80%. The main populated areas are already covered, as are the main roads and popular resorts."
What remains are the many small rural settlements across Kazakhstan's 2.7m-square-kilometre territory. Being a first mover in these areas is everything. "If you are the first in these rural areas, you can grab almost the whole market share. If you are the second, you might have some little chance... maybe," says Aral. KCell and its competitors are also increasing the number of base stations in already covered areas in order to increase the capacity and quality of their service.
Rapid growth in telecommunications and internet services followed new legislation in 2004 that opened the way for liberalization of the sector and ended Kazakhtelecom's monopoly. Mobile subscribers have soared from 260,000 in 2000 to around 12m early this year.
KCell's main competitor is the number-two GSM operator, Kar-Tel, which operates under the Beeline and K-mobile brand names. A competitive tender launched two years ago resulted in the entry of a third GSM operator to the market. Mobile Telecom-Service, which operates under the NEO brand (and is not to be confused with Russia's MTS), was formally launched in February 2007. The country's main CDMA operator is Altel.
"Of course, the competition is getting more fierce now that mobile telephony penetration is approaching saturation," says Aral." There are several players in mobile segment, out of which three are competing in the widely used technology of GSM. With the introduction of third mobile operator in 2007, market shares of the first two have been shrunk down little."
KCell and its competitors are also looking to grow revenues from value-added services. KCell works with numerous third-party content providers; relatively low-tech products, in particular ringtone downloads, remain the most popular, though services for business users - such as push email - are gradually becoming more widely used in Kazakhstan. Given the lack of fixed-line coverage in many remote areas, there is also high potential for mobile internet access. "Since infrastructure is not yet sufficient and the access is relatively expensive, internet penetration does not match demand, which we believe is very high," says Aral. The company plans to launch mobile broadband data services based on WiMAX technologies in the first quarter of 2009.
While Kazakhstan is in general the most mature telecom market in Central Asia, Uzbekistan has recently stolen a march in the 3G stakes. The Uzbek subsidiaries of Russian operators Vimpelcom and MTS simultaneously announced the launch of commercial 3G on December 3.
In Kazakhstan, the issue is complicated by the fact that the relevant frequencies are currently under the control of the Ministry of Defence. "The Ministry of Defence may free up some space for 3G. It's possible they have their own technologies operating on these frequencies, but as far as we understand in most of these countries the frequencies are technically available," explains Aral.
He describes the Agency of Information and Communications (AIC), which is working with the Ministry of Defence on this issue, as "very constructive." The AIC had even allowed KCell to test 3G communications provided this is done indoors. It is believed that a study on 3G will be commissioned in 2009.
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