?elecom.kz: Full Speed Ahead!
Alexander Vasilyev, editor-in-chief of the PROFIT website
Of the entire IT range, it is the telecommunications sector in Kazakhstan that falls in the 'most' category. It is most dynamic, most extensive, most profitable, yet most complex and most closed. In a word, it is a Janus of a sector.
According to the Kazakhstan Statistics Agency, in January to March 2006 alone, communication companies provided 59.4 billion tenge worth of services, which is 30% higher than during the same period in 2005. Mobile communications account for the largest share: 45.4%. It is followed by long-distance (19.8%) and local telephony (7.9%). The Internet accounts for 5.2%, TV and radio broadcasting for 3.5%, and the remaining 13.2% for other types of communication. (Please refer to Table 1).
Being the most dynamically developing segment, profits from mobile communications have increased by 72.1% since the first quarter of 2005. Proceeds from granting Internet access have risen by 54.9%, data transmission services by 61%, and leasing communication channels by 49%. Almaty (72.4%) and Astana (3.2%) account for the largest shares in total communication sales throughout the country.
The mobile market is flourishing despite the relatively small number of players. Today there are five mobile operators in Kazakhstan. Two of them work with the GSM standard: GSM Kazakhstan featuring the K'Cell and Active brands and KaR-Tel (Beeline and K-Mobile brands). Three operate in the CDMA standard: Altel (Dalacom and Pathword), Mobile Telecom Service (Zharshy) and Nursat (Excord). However, the market is in fact divided between the three key operators – GSM Kazakhstan (with 3.5 million subscribers), KaR-Tel (2.2 million) and Altel (over 100,000). Around 5.8 million mobile subscribers have been registered in the country at the present time, but Rizat Nurshabekov, Deputy Chairman of the Information and Communication Agency, says this indicator will rise to 7.5 million by 2008. Personally, I think this is a rather modest forecast.
The high growth rates (the subscriber database doubled in 2005) are mainly due to the low penetration of cellular communications. The average countrywide indicator is around 35%, whereas in Astana and Almaty the figure is some 80% and it seems that these two markets will soon be saturated. This is why mobile operators have set out to conquer the rest of Kazakhstan, as any further growth will only be possible thanks to regional subscribers.
It is interesting to note that mobile phones overtook 'home' telephones last spring. Since then, the number of mobile users has doubled, whilst the density of fixed telephones has grown merely from 16.2 to 17.7 sets per 100 residents. The total number of fixed telephones is 2.5 million.
However, Kazakhtelecom – the owner of almost all ground networks and the principal fixed telephony operator – maintains its leading position. The national operator plays one of the key roles in the mobile market, as well. Firstly, it is a major shareholder in several mobile operators, owning 49% in GSM Kazakhstan, 50% in Altel and 41.25% in Nursat. Secondly, on 31 January 2006 the company's shareholders gave the green light to purchasing a 100% stake in Mobile Telecom Service, buying up the remaining 50% in Altel and 54% in Nursat. The total value of these transactions is under $220m. Therefore, after these deals are completed Kazakhtelecom will become the sole owner of all CDMA operators.
The Magic Wire Business
Although the sector has undergone some reform, the national operator remains the centerpiece. According to Kazakhtelecom's representatives, the company currently owns 48% of the entire telecom market. The cellular operators account for 40% and the rest is divided between other participants. The only 'achievement' of market liberalization is that Kazakhtelecom has lost its monopoly over intercity and long distance services. Now another six companies are licensed to provide these: Astel, Arna, KazTransCom, Nursat, TNS Plus and Transtelecom.
It is planned to introduce a new mode of selecting long distance operators. Every company licensed to provide such services has been assigned an individual code or prefix (for instance, Kazakhtelecom has 31, and Astel 36). A subscriber will have to dial the prefix between the intercity code ('8' will be replaced by '0') or long distance code ('8-10' will be replaced by '00') and the recipient's telephone number. This will ensure subscribers' rights to freely choose an intercity or long-distance call operator. The charge will be unified: a subscriber will receive a single invoice and the service will be provided based on mutual settlement between operators. This means that people won't have to go to the offices of the companies operating the calls. Signing additional agreements with operators will not be needed. As simple as that: you will just have to dial the prefix of the required operator.
However, network availability is the problem. None of the above companies has a developed ground infrastructure, like Kazakhtelecom's. All of them face the choice: building their own networks (which is not feasible taking account of insurmountable costs) or leasing them from Kazakhtelecom. And you can be certain the latter will do whatever is possible to retain its long-distance traffic. There is another way: to stay away from the mass retail market. That is why the corporate clientele remains the key audience for Kazakhtelecom's competitors.
In this situation, a proposal by the Kazakh Information and Communication Agency (ICA) seems to offer a remedy (ICA is the central executive body authorized to pursue public information and communication policy; it is not part of the government). ICA proposed to further restructure Kazakhtelecom, dividing it into separate companies with separate functions. As a result, the state will become the owner of local telecom networks. Hopefully, it will be consistent in its sector liberalization policy and ensure equal conditions to all operators.
Hail to the Internet!
At the same time, we should keep in mind that local networks are not a spotless heritage. Despite quite a high level of digitalization (the countrywide figure is 73.6% and the indicator for rural networks is 52.64%), the networks are obsolete and upgrading them will cost a great deal of money. They can cope with voice transmission, but are no good with services such as high-speed access to the Internet. My attempt to sign up for Kazakhtelecom's Megaline Hit service providing limitless access to the Internet using ADSL technology at the rate of 128 Kbps (the monthly fee is 6,000 tenge) has recently failed. Having checked my line, technicians delivered their verdict: "The signal strength is substandard. Unfortunately, connection is impossible." Some of my friends and acquaintances who live in different districts of Almaty faced the same problem. The only thing we can do is use dial-up access. Underdeveloped Internet infrastructure has not only price implications (by the way, the promise was that the charge will halve by the end of the year), but technical ones, too.
Unfortunately, so far the battlefield is limited to cutting the fees. Of course, high Internet access fees are the limiting factor. But I don't think this is the priority problem. Fees impact on the frequency and duration of Internet sessions, not the audience size. Here, we have to look at the general computerization and welfare of society. Though the majority of Kazakh people have more important spending priorities, the demand for Internet services has been steadily growing. This has been proved by Kazakhtelecom's project to broaden the bandwidth of external Internet access channels and commission the fifth, 155Mbps channel Almaty-Moscow. Thus, the total bandwidth of Kazakhtelecom has totaled 665 Mbps since April this year. The total bandwidth of all Kazakh providers is around 800 Mbps.
The quantity characteristics of the Internet market are quite complicated. Statistics are unclear about the precise number of users and traffic. Different research produces varying results: from 200,000 to 1 million users. I view the figure of 300-400,000 as the most plausible. My assumption is indirectly supported by Yandex statistics (Yandex is the most popular resource in the Russian-language Internet). According to Yandex, the portal receives 33,603 unique users per day and 123,705 per week. That is, approximately half of these visits throughout a week are follow-up visits by the core audience, the active Internet users. There will be even more follow-up visits over a month: around 70%. We can assume that 30% of the total monthly visits from Kazakhstan (33,600 visitors * 30 days = 1,008,000 visitors) or 302,400 are the monthly audience from Kazakhstan. Assuming that not all users visit Yandex, we can add another 50-60,000 to this number. The result is an audience of 360,000.
Here are some official statistics, though a little outdated. In 2004 Kazakh users stayed connected to the Internet for 2.543,5 billion minutes, which is 3.7 times higher than the indicator of 2003 (694.4 million minutes).
One Step Up
The key event this year was the interconnectivity of operators' networks allowing them to work directly with each other, bypassing Kazakhtelecom. GSM operators' customers were the first to appreciate this step. On 1 April 2006 the long-standing SMS-blockade was broken: now subscribers to competing operators can send short messages to each other. Thanks to interconnectivity, choosing an operator by prefix, which I have mentioned above, will be possible. Another crucial result was the transfer of all cellular operator calls to a 10-second charging period. Previously, this was carried out by Kazakhtelecom for intercity and intrazone calls. The work is under way to cut fees for all types of calls.
Also important are the new developments awaiting Almaty residents. ICA will be accepting requests for seven-digit telephone numbers in Almaty from 1 July 2006. The transition is planned as early as the third quarter of 2006. At first, the operators will be expected to ensure simultaneous operation of new seven-digit and old six-digit numbers.
The launch of the first national communication satellite KazSat was long awaited. The investment in the project stood at around $100 million. Kazkosmos company (with the government's controlling interest in it) was set up for this purpose. The objectives of the new company are space activity, expansion of communication services and increasing the IT presence in the country through satellite telecom services. Despite the huge spending, the project is commercially promising. The planned active operation of KazSat is 12-15 years. Currently, Kazakh operators pay $30-35 million per year for leasing satellite channels. All telecom companies are expected to use the domestic satellite's channels. However, until recently, there has been no clear information regarding the fees and whether such a transition would be voluntary. Whatever the case, it is planned that leasing the national satellite's resources will be cheaper than its foreign counterparts, which may lead to lower end-user fees.
KazSat comprises 12 re-transmitters with a capacity of around 864 MHz. It is designed for TV broadcasting (four re-transmitters) and fixed satellite communication and data transmission (eight re-transmitters). The national satellite will cover the entire territory of Kazakhstan, Central Asia and several regions of Central Russia. Turkish telecom companies have also taken a keen interest in using the Kazakh satellite. In addition, in 2.5 years it is planned to launch the second one – KazSat-2. ICA forecasts that by that time Kazakh operators will show additional demand and so will their Central Asia-based counterparts. KazSat-2 will also cover some Arab countries and parts of middle Russia.
Ready for E-Life
The project for creating an e-government in Kazakhstan lies in a longer-term perspective, but can serve as a turning point for Kazakh telecom's development. Even if it's never viable, the very fact that such a project exists should give a huge impetus to the local IT industry, comparable to the construction boom which resulted from transferring the capital to Astana. The e-government project is in the pipeline: many ministries have established routine electronic workflow, and local executive bodies at all levels have built their own sites (it is a rare week that passes without a new government site being announced). The site of the Almaty city administration – www.almaty.kz – is a vivid example of this process.
The introduction of the Kazakh e-government is due to comprise three stages. The first is the information stage. Its objective is to make government information available to people through websites. The second is the interactive stage related to the activities of public certificatory authorities and the public bodies providing popular services to individuals and businesses. These are electronic public procurement, licenses and permits, electronic customs declarations, distance learning, electronic services provided by executive bodies at all levels, and e-training. The basis for such services is creating and developing departmental and agency information systems. The third step – scheduled for 2008 – is effecting e-transactions by public bodies. The tasks targeted are as follows: standard and legal framework for e-payments, creating a payment gateway (a system of payment transactions that is integrated with second-tier banks), and developing the payment infrastructure (credit cards and card readers).
The statement by ICA of 15 February 2006 reads: "The first stage of e-government can be considered almost complete." The standard and legal framework has been developed and 95% of central and local executive bodies are making information available to people through websites. In addition, basic e-government components have been launched: public databases such as 'Individuals', 'Legal Entities', 'Address Register', 'Real Estate Register', a common transport environment and an electronic workflow system. The certificatory body for public agencies has been set up and work has begun on introducing electronic digital signatures.
On 12 April an important event took place: the web portal of the e-government – www.e.gov.kz – was launched. Today the site comprises more than 300 items of information in the four basic sections: 'Authorities', 'Nationals', 'Business' and 'Foreign Nationals'. The information covers almost all aspects of living in Kazakhstan, from welfare for Kazakh nationals to labour migration laws.
According to ICA, receiving certificates and licenses will be possible through the portal by the end of the year. Presently only the filing of an employment request is available. The request goes directly to the database of the Ministry of Labour and Social Security. All job proposals will be sent to the applicant's e-mail address, which can be registered on the site for official communication with public officers. By the end of this year, it is planned to make all information services of all public bodies available via the portal, thus completing the information stage of shaping the e-government.
Information services have been classified by the main periods of human life – childhood, study, young adults, family, work, retirement – and a company's business cycles such as planning, setting up and liquidation. This architecture of the site facilitates search and retrieval of information, because a person can find a relevant section meeting his or her current needs.
From 2008, users will be able to pay for public services through the Internet. To promote this type of payment, public Internet access points are to be opened throughout the country.
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