Telecom market in the region


Communication in Afghanistan

World Bank credit helps rebuild telecommunications, Internet and postal services throughout country.

With an average of only two telephones per 1,000 people, among the lowest coverage in the world, Afghanistan has taken a major step to increase access and improve telecommunications services with the support of a US$ 22 million credit approved today by the World Bank’s International Development Association.

The majority of Ministries in Kabul, along with most provincial capitals, have extremely limited access to telecommunications and the Internet. Postal services are also recovering from years of conflict. While there is a post office in every district, the majority is dilapidated and lacks even such basic equipment as scales and franking machines.

The World Bank financing will support an Emergency Telecommunications Project which will assist in developing a government communications network linking ministries in Kabul with the provinces. It will also encourage the growth of private competition among telecommunications networks and services.

“We need to modernize and quickly expand telecommunications networks and services throughout the country to reconnect people and develop our social and economic system.” said Eng. Mohammad Masoom Stanakzai, Afghanistan Telecommunications Minister. “To achieve this, we recognize the importance of creating the right conditions for open competition and private sector investment in delivering these services.”

The government network, combined with the growth of telecommunications access, is also expected to support the delivery of public services and improve governance through faster information flow regarding government activities at both the provincial and national level. The credit will also support capacity building and purchase of basic equipment for post offices.

“It is urgent for the government to be able to communicate both internally and with its many development partners. We believe this project will play a major role in building that capacity,” said Charles J. Kenny, a World Bank Telecommunications Specialist and Project Task Leader. “The government has also shown its commitment to building a vibrant, competitive telecommunications sector that provides widespread access to affordable services. The assistance provided by the World Bank under this project should help it to reach that goal.”

The new financing builds upon assistance the World Bank and other donors have already provided to the communications sector in Afghanistan. Existing World Bank grants have supported the licensing of two mobile telephone operators and movement toward the creation of a telecom law and regulatory institutions.

In May 2003, the Afghanistan Reconstruction Trust Fund (ARTF), administered by the World Bank, provided US$ 3 million in grants to support the rehabilitation of a satellite earth station in Kabul, repair of a microwave link to neighboring countries, as well as installation of a basic billing system. This project will allow for greatly improved international connectivity supporting the flow of voice and data traffic between Afghanistan and the rest of the world. The installation of a billing system will ensure sustainability of the services while raising much needed funds for further network expansion.

The Emergency Communications Project will provide investment and technical assistance resources to the Ministry of Telecommunications. It will help it address inter-government communications needs through developing a government intranet; supporting basic postal services; strengthening government institutions, and fostering the growth of private-sector led telecommunication services. The project will be implemented over a period of four years by the Ministry of Telecommunications.

ArmenTel

ArmenTel, being the national operator of the Republic of Armenia, with specific obligations and rights emanating from License N 60 and Share Purchase Agreement is developing and modernizing the telecommunication infrastructure of Armenia with the aim to create the possible best conditions in the field of telecommunication for the country and its customers.

Specifically:

To offer our customers the best quality of telecommunication services in almost competitive prices.

To promote a strong Armenian telecommunication sector for acceleration of the country’s economy development.

To secure the highest level of telecommunication systems for the future, which will guarantee a stable place for Armenia among the European and Northern American countries.

To offer stable work places for employees, thus providing their prosperous future.

To increase the value of the company in the benefit of its shareholders.

ArmenTel history at a glance

The telecommunication network of the Soviet Republic of Armenia was regulated by the Ministry of Communication and Post and was under the operations of Yerevan Telephone Network and Republican Telephone Network.

In 1995 the Ministry of Communications of Armenia decided to form an equity joint venture Armenia Telephone Company ("ArmenTel"), 49% of which was owned by a U.S. firm, Trans-World Telecom and 51% by the Government of Armenia. ArmenTel was operating as a regulated monopolist in international telecommunications market. Further, ArmenTel became the sole representative for Armenia in all corresponding relations, satellite organizations, such as Intelsat, and regulatory bodies such as the ITU.

In 1996 the "Yerevan Telephone Network" state enterprise was merged with ArmenTel aiming to create, develop and operate a new Armenian local and international fixed, mobile telecommunication networks.

In 1997 in order to keep balanced development of the telecommunication network and for achieving unified developed telecommunication systems in Armenia the "Armenia Telephone Network" state enterprise was merged with ArmenTel.

In 1998 a new stage of development started for ArmenTel. OTE (Hellenic Telecommunications Organizations SA) privatized 90 % of ArmenTel shares, whereas 10% is still owned by the Government of Republic of Armenia.

According to the terms of Share Purchase Agreement and granted License N 60 ArmenTel is obliged to:

Make concrete investments in established period reconstruct and develop the telecommunication infrastructure, provide the digitalization of the network, introduction and development of mobile telecommunication systems.

Whereas ArmenTel has right of:

15 year monopoly implementation of concrete approved initial tariffs RA Government’s protection of the operators (licensee) rights.

In the years 1998 – 2003 ArmenTel has made an investment of about 200 mln USD for reconstruction and development of telecommunication infrastructure of Armenia.

Telecommunications market in Azerbaijan

The volume of investments in Azerbaijan's telecommunications sector in 2002-2004 is expected to exceed $870 million dollars. The government of Azerbaijan is aiming to increase penetration and teledensity in Azerbaijan. There are currently 920 000 subscribers in Azerbaijan and the Government is aiming to increase this to 1 750 000 by 2005. The Government is also planning to upgrade its communications infrastructure and systems replacing analogue with digital systems.

Azerbaijan is a leader in CIS cellular markets with the highest penetration of mobile phones. There are currently 550,000 cell phone users in Azerbaijan, and the government is hoping to increase investment and usage in this sector. Other communication projects being developed include the Teleradio project aimed at modernizing the television and radio broadcasting network AzTV - 1 system. Over $183 million is required for the completion of the entire project, with $17 million dollars required for the first stage. Azerbaijan is also hoping to increase domestic and commercial Internet usage with further investments into Internet infrastructure and technology.

Aztelecom

As the single largest national operator for the country's telephone system, Aztelecom Industrial Union -- better known as Aztelecom -- has the crucial responsibility for delivering telecommunications services to most of the country. Though other companies serve the city of Baku and the Autonomous Republic of Nakhchevan, Aztelecom is the key to linking the
nation together and to the world at large.

“Ever since independence, the telecommunications industry has been the backbone of our development,” says Aztelecom’s General Director Nazim Djafarov. "The role of telecommunications in developing the country is very large."

With the job of extending telephone services to even the most remote parts of Azerbaijan now nearly completed, and having successfully connected Azerbaijan to the world through international telephone channels, Djafarov is currently preparing Aztelecom for privatization.

"Since independence, oil companies, banks, and other establishments have added their heavy communications needs. The old network simply couldn't carry the load," notes Aztelecom's second-ranking officer, Deputy Director Razi Tagiyev.

To handle these ever growing requirements, the company has completely replaced obsolete Soviet technology with modern equipment, cables, satellites and international radio relay systems. Thus far, some 35 percent of Aztelecom's equipment is digital, and Aztelecom continues to grow at a dizzying pace to meet Azerbaijan's demand for telephone service. The company’s staff has expanded to some 6,300 employees, who operate about 60 telecom centers throughout the nation, while maintaining 431,000 subscriber lines.

Last year, Aztelecom added some 350 miles of fiber optic cable, and established service to another 27 urban centers. The company also continues to upgrade original network equipment and digitalize the country's telephone network.

Overall, Aztelecom plans to bring service to about 750 urban settlements and build exchanges to support that service. To date, more than half of the exchanges have been established, and the company expects to complete the remaining 250 by early 2002.

The company has also expanded exponentially in providing international service. Under the Soviets, Azerbaijan's sole telephone link to the wider world consisted of just two lines, and all calls out of Azerbaijan had to be routed over these two lines.

"Our first move after independence was to establish international channels to Turkey," Djafarov recalls, "and the second was to establish them to the United States. Then we established channels to other countries."

By 1995 Aztelecom had installed 6,500 lines all over the country for domestic long distance, plus an additional 1,920 lines for international calls. The country marked that milestone as a great event. Yet consumer demand soon eclipsed even that capacity.

The completion of Alcatel-Teletash's ‘System 12’ in early 2001 now means that some 30,000 Azerbaijanis can place long distance or international calls at any one time.

Aztelecom now boasts a direct link to AT&T, with a capacity of 512 kilobytes per second, a line to WorldCom with 512 kilobytes per second capacity, and a line to MCI with 15 channels. In addition, Aztelecom now has 60 channels to Germany, 15 to Italy, 165 to Turkey, and 60 channels to Iran, as well as direct links to eight CIS countries.

Azerbaijan is now part of the TAE cable system (Trans-Asia-Europe Fiber Optic Line) extending from Shanghai to Germany, which includes 22 Asian and European countries.

"Aztelecom is '100 percent innovative' and offers all the start of the art telecommunication services," Tagiyev notes proudly. Data processing capabilities are being expanded as well, and other foreign companies have added new projects, such as Alcatel-Teletash's "System 12" and a new project code-named ‘The Released World’ is to be made ready for the 2002 market.

Seven cities throughout Azerbaijan have been selected as sites for data processing joint investment. Besides organizing these data processing centers, private companies will be asked to provide for ISDN and CATEL, and provide fixed telephone and wireless subscriber services.

Moreover, the company is testing circuits for broadband networking and Internet services in different sites, and exploring the introduction of ATM technology.

President Heydar Aliyev has decreed that Aztelecom is to be privatized soon, an historic transformation which company is now preparing to undertake.

Both Djafarov and Tagiyev continue to stress their keen interest in a suitable U.S. corporate participation in their company's privatization. "As the general director, I pay special attention to the United States," Djafarov says. "We need U.S. investment and technical support. We highly appreciate what has been done through our involvement with U.S. firms to date, and we look forward to more."

Tagiyev says that foreign investors looking at Azerbaijan’s data processing industry should aim at using 50 percent locally manufactured equipment and local staff. Prospective investors should provide technical credits and state the tender amount for a specific project. Winning companies will install their own equipment, to be initially used on a joint basis.

As a final important point, Aztelecom director Djafarov says that Section 907 of the U.S. ‘Freedom Support Act’ is truly hurting American-Azeri relations." To illustrate his point he explains how he had personally been affected by it.

"In 1996, the U.S. State Department organized and even paid attendees' costs to attend an economic seminar in Riga. I was proud to be chosen to participate in this, and represent Azerbaijan. Then the State Department said that because of 907, no one from Azerbaijan could participate! It was an obvious and visible affront!"

Beltelecom

The Republican Association Beltelecom was founded on July 3, 1995. Since then this is the largest telecommunications entity in the Republic of Belarus. This sets challenges on providing high quality and up-to-date telecommunication facilities in the republic and offering telecommunication services in response to demands of our customers.

In its activity Beltelecom focuses on the tasks set by the Telecommunications Development Program. The final objective is to provide everyone who needs telephone service and to meet the demands in data communications on the basis of new technologies complying with the worldwide standards.

To ensure high quality of telecommunication services to its partners and customers, Beltelecom proceeded with digitization of networks in Belarus. Beltelecom is currently having a single border-crossing center on each fiber optic cable link to Poland, Ukraine, Latvia, Lithuania and Russia.

Beltelecom, by working for the benefit of its country, is striving to uplift the level of telecommunication services in the republic to a worldwide level. It would be hardly possible to reach the aim without united, continuous, accurate and professional work of all the teams in the Association and each individual employee. Success of the Beltelecom activity depends to a large extent on reliable ties with its partners.

Bulgarian Telecommunications Company

Bulgarian Telecommunications Company (BTC) Plc is a state-owned public limited liability company set on 1st of January 1993, with its rights and obligations defined by a Decree of the Council of Ministers and a License issued by the Committee of Posts and Telecommunications. The managing body of BTC Plc is the Board of Directors. The major policy and purchase decisions are made by the Board of Directors. BTC Plc has exclusive rights for establishment, operation and maintenance of the National Public Telecommunications Networks on the territory of Republic of Bulgaria and provisioning of International and Domestic telecommunications services for 5 years term.

Telecommunication infrastructure

Bulgaria has one of the highest telephone penetration rates in the region and almost 40 per cent of telephone subscribers. Every 11th Bulgarian over 16 possesses a mobile phone. The government-owned Bulgarian Telecommunications Company (BTC) provides all local and long-distance telephone lines and ISP's offer their services over these lines. Progress has been made in the liberalisation of the telecommunications market by bringing the Internet Service Providers under a free regime since November 18, 1999.

Progress in the past 12 months has been affected by the attention paid to the attempt to privatise BTC and to select a second GSM operator. On July 31, 2000 the government ended the negotiations for the sale of BTC with the most serious potential buyer OTE/KPN Consortium without a deal. A new strategy for the sale of BTC is under development, which will include a condition for the simultaneous acquisition of a license for a third GSM operator. On December 21, 2000 OTE Greece won the auction for a second GSM operator in Bulgaria with an offer of $135 million.

The accession talks with the EU on the Telecommunications chapter began in October 2000. The changes made recently to the Telecommunications Law in order to strengthen BTC's monopoly will meet the resistance of Brussels.

In 1999 BTC made major investments for digitising the national telecommunication network and increasing the number of the offered services. For digitising the telephone network $ 5,900,000 were spent which brought the country's network digitalisation to 15.5%. MobilTel is the only GSM operator in Bulgaria. In 1994 it received a 12-year license. The growth of subscribers for 1999 was 257% compared to 1998. At the end of December 2000 it had more than 550,000 customers; the actual coverage was 89% of the population and 76% of the landmass. MobilTel is the only operator that offers mobile access to the Internet in Bulgaria.

The Radio Telecommunications Company - RTC Mobikom is a joint venture of Cable & Wireless (49%), the Bulgarian Telecommunications Company (39%) and Radio Electronic Systems (12%). The system is analogue, offering various services like mobile phone communication (with over 180 000 subscribers and coverage of almost 95% the population); and mobile paging network (with more than 33,000 subscribers).

Internet telephony is a new service in the Bulgarian market, providing a good alternative to the high cost of international calls offered by the BTC. Currently, BOL Ltd. is offering this service in Bulgaria. [6] There are also other ways of avoiding the BTC international calls services like Call-back and Internet conversations.

The role of BTC in the Bulgarian economy

Throughout the years the share of the Sector of Services in GDP has increased.

The Share of the Sector of Services in GDP

Telecom Georgia

For over five years Telecom Georgia (TG) has been a leader in providing international and long-distance telecommunication. Telecom Georgia is a National Operator. Company was established as a Limited liability Company in 1994 with participation of foreign partners, where major shares belong to the Georgian State. Telecom Georgia provides telecommunication on the territory of Georgia among the cities and regions as well as CIS and foreign countries.

Due to its strategic location, Georgia is in process of integration to world economy development and rising as a transportation and telecommunication hub.

Having outlet to Black Sea, border with Turkey, Russia, Azerbaijan, Armenia making Georgia the most important part in realization of TRACECA project as in general the global Silk Way project and in construction of Trans-Caucasian and Trans-Caspian energy corridor from the East and West.

Implementation of global BTC (Baku-Tbilisi-Ceyhan) pipeline and South Caucasus pipeline projects will catalyze and speed up processes integration of info-communication sphere of the region to world development of ICT industry.

More than 400 million US $ will be invested in projects of ICT sphere in Georgia

About 450 000 US $ will be invested in technical re-equipment and automation of the Georgian Post

Following projects of construction of fiber-optic cable trunks will be realized in Georgia for the next three years - Poti-Constantsa submarine fiber-optic cable trunk (70 Million US $), Poti-BSFOCS Submarine Fiber-optic Cable Trunk (25 Million US$), Poti-Rize submarine fiber-optic cable trunk (6 Million US$)

225 Million US$ will be invested for re-equipment and development of public-use communication networks in Georgia for the nest few years.

The project of construction of data transmission and Internet network in regional centers, towns, and on holiday resorts is to be implemented up to 2005 (44,9 Million US$)

Project of development of state television’s first channel broadcast distribution facilities and state TV first programs broadcasting by satellite transmission are planned to realize in 2004. (projects’ costs are 2,6 Million US$ and 1,03 Million US$ respectively). Also about 3,7 Million US$ will be allotted for technical and material support of Georgian TV and radio broadcasting network development.

Telecom Georgia on telecommunications market

During 1994-1997 Telecom Georgia actually was the only international and long-distance operator in Georgia that rendered its service to the entire telecommunications market in the country.

During past years the telecommunications field has been significantly changed. New, basically private companies have appeared; majority of them has been created on the basis of foreign investments that promoted the creation of a specific environment. Though there are many telephone providers on Georgian market, Telecom Georgia preserves the leading position covering 60% of the market and annually contributing 5-7mil GEL to the Budget of Georgia.

Mobile companies implement their international and long-distance communication, as well as communication to fixed phones through Telecom Georgia.

Telecom Georgia establishes new forms and technologies of service (Internet, IP-telephony).

Telecom Georgia has connections with 225 countries of the world and direct digital-satellite channels with large international carriers.

Telecom Georgia already uses signalling 7 instead of signalling 5 with British Telecom, Mci, At&T, Turk Telecom And Rostelecom. The question of using signalling 7 with Sprint is on agenda and will be realized in the near future. It is important that signalling 7 gives the possibility to observe connections organized by Telecom Georgia, to plan and manage channels and traffics optimally.

Telecommunication in Iran

The Telecommunications sector in Iran is a monopoly owned and controlled by the Iranian Government. The responsibility of this sector is with the Ministry of Post Telegraph and Telephone (MPT&T). In 1972 and in accordance with The Telecommunication Company Act of 1971 the Joint stock Telephone Company of Iran was dissolved and its assets, capital and personnel were transferred to the newly formed Telecommunication Company of Iran (TCI) under the supervision of MPT&T.

TCI is now responsible for development, maintenance and utilisation of all signals, written material, pictures, sounds and all transmitted information within the country. The activities and achievements of TCI during the first two years of the Third Five Year Development Plan (March 2000 to October 2002) can be summarised as follows:

Total number of Fixed Telephone Lines increased from 9,486,260 to 11,832,461 lines nation-wide.

Total number of Cellular mobile telephone lines increased from 962,595 to 2,167,856 nationwide.

Total number of cities connected to Cellular mobile lines increased from 337 to 548.

Increasing Telephone Penetration Ratio from 14.9% to 18.15%.

Expansion of microwave circuits from 144,097 to a total of 336,53.

Expansion of long distance trunks from 227,601 to 422,209

Rural communication has been increased from 22,615 villages to 34,651 or over 95% of rural population.

Reduction of personnel from 5.82 person to 4.9 per 1000 telephone lines. Transmission Circuits (Microwave) has been increased from 405,997 to 512,166.

For the fiscal year ending 20 March 2001, TCI total revenue reached 6,887,319 million Rials, which roughly translates into about $861 million at the open market rate ($ 1= 8000 Rials).

Characteristics of market

Highlights of the third five year plan

On December 22 1999, The Majlis or Parliament approved Article 122 of The Third Five Year Economic Plan, giving wider powers to The MPT&T.

In accordance with Article 122, MPT&T has been permitted to grant authority to private sector to set up and put into operation non- fundamental telecommunication networks as well as independent and parallel postal and communication networks, including mobile telephone network, low capacity telephone exchange (up to 5000 numbers), data transfer networks, value added service networks, rural communication networks, postal networks and postal transport networks.

The Article 122 also authorises government telecommunication companies to assign to co-operatives and private sector, part of their activities including maintenance, utilisation, design, installation, putting into operation and testing of network and equipment.

The Article 122 has further allowed the MPT&T to grant authority, in a competitive manner to private and co-operative telecommunication companies to set up telecommunication networks in areas in which no such networks are to be set up by government telecommunication companies in the course of the Third Five Year Development Plan

In addition to Article 122, the following points are also included in the telecommunication sector of the Third Five Year Plan:

Decentralization: Removal of government control over management of telecommunication companies.

Creation of an Independent Regulatory Body.

Creation of a complete Information Technology system by the private sector.

Removal of Government monopoly in telecommunication industries.

To increase public participation by providing encouragement in the form of incentives, competition and investment.

Attract foreign investment in the manufacturing and R&D.

Attract foreign investment in service sector to provide regional services to neighboring countries.

Attract investment to develop human resources.

Attract private capital to expand the fixed lines by one million lines, and mobile by one million lines, in addition to Pager and other services.

To create 40000 jobs in the private sector related to telecommunication.

To create direct job opportunities for 30000 university graduates, and 67300 employment indirectly.

The average Foreign currency requirement for each telephone line in the First Five Year Plan was $ 850, The Second Five Year Plan was $ 425, and in The Third Five year Plan to be $ 250.

Kazakhtelecom

Open Joint Stock Company "Kazakhtelecom" is a national communication operator of Kazakhstan, one of the most dynamic telcos in post-soviet territory providing the full range of telecommunication services. Headquarter of the Company is located in the capital of Kazakhstan - the City of Astana.

Kazakhstan is an employer for more than 30 thousand employees.

Kazakhtelecom has its regional divisions in each oblast of the country ensuring provision of communication services for every citizen throughout the Republic of Kazakhstan.

After Kazakhstan became an independent state and started transition to market-based economy, on the basis of telecommunication enterprises and organisations of the Ministry of Communication of the Republic of Kazakhstan the National Joint Stock Company Kazakhtelecom was established in 1994. On February 20, 1997 the Company was reregistered as Open Joint Stock Company Kazakhtelecom.

The Company holds the General License No.1 in the field of telecommunications of the Republic of Kazakhstan. The License grants Kazakhtelecom the exclusive right to create, construct, install, operate and maintain the Public Telecommunications Network of the Republic of Kazakhstan

Kazakhtelecom is the sole operator of the Republic providing rural communication services. The Company has the exclusive right for provision of international and long-distance communication services.

The Company serves more than 1.6 million urban telephone subscribers and 329 thous. Rural subscribers of telephone communication services. The telephone density per 100 urban inhabitants is 19 and in rural areas this index comes to 5.

As an international operator Kazakhtelecom established close co-operation with 154 foreign telecommunications companies and 17 operators in the CIS and Baltic States providing communication with more than 230 countries of the world.

The Company' shares are included into the Official List of the Kazakhstan Stock Exchange and the Program of Sale of the government "blue chips" stocks.

International rating agencies Standard & Poor's and Fitch assigned OJSC Kazakhtelecom its double-'B'-minus long-term local and foreign currency corporate credit ratings, rating outlook of the Company is evaluated as stable. These ratings are in the same as an independent rating of the republic.

Kazakhtelecom is successfully implementing the large-scale Program of Telecommunication Network Modernisation and Development focusing on service quality and general availability.

Modernisation program implies creation of the National Intelligence Superhighway by 2005 and completion of construction of the National Data Network. The Company will also proceed with modernisation and development of local telephone network for satisfaction of population and business customers' needs in communications services. Creation of the National Satellite Network will allow providing population of difficult of access and sparsely populated regions of Kazakhstan with the most advanced telecommunication services.

Modernisation of the national information infrastructure ensures introduction of new technologies and formation of the regional information and telecommunication services market, creates uniform information environment and strengthens Kazakhstan positions in the international telecommunication market as a major transit centre of Central Asia region.

Business connections

OOJSC Kazakhtelecom established broad business collaboration in the field of international telecommunication services provision. Today Kazakhtelecom cooperates with 154 foreign operators and 17 operators from the CIS and Baltic States. Such major global telecommunication service providers as MCI/ USA, Deutsche Telekom/ Germany, British Telecom/ UK, AT&T/ USA, France Telecom/ France, KDD/ Japan, China Telecom/ China, ROSTELECOM/ Russia are partners of the Company. Kazakhtelecom provides direct access to networks of all world countries thus providing round-the-clock connectivity for international calls and transfer of telex and telegraph messages.

By commissioning of TAE digital cable system that connects Shanghai (China) and Frankfurt-am-Main (Germany) Kazakhtelecom arranged direct routes via high-quality links with such countries as Uzbekistan, China, Turkmenistan, Iran and Turkey.

Completion of construction of the National Information Superhighway' Western branch is a significant stage for formation of new telecommunication infrastructure of the Republic of Kazakhstan. As a result the shortest telecommunication link from Europe to China, Japan and Southeast Asia was established.

Interconnection of digital telecommunication network of Kazakhstan with digital network of Russia is an important step towards development of international relations. It makes possible to improve the quality and extend the range of services provided between Russia and Kazakhstan.

Close cooperation of OJSC Kazakhtelecom with international telecommunication corporations and development of own infrastructure resulted in gaining strong positions in the global telecommunication market.

The list of major business partners of OJSC Kazakhtelecom

Siemens

Siemens-Elaza

Alcatel

Gilat Satellite Network Ltd

Sumitomo corporations

Turkcell

Netas

Nec

Vesnet

Daewoo Telecom

Ericsson

ECI Telecom Ltd.

Lucent Technologies

Schlumberger

Kcell

Huawei Technologies Telenor AS

NERA Network AS

Cables & Wireless

EC Datacom

Comverse Infosys Ltd

QUNTE AG

Teleglobe

Telia

Wandel & Golterman

SAP

Cisco

Sun Microsystems

Oracle

Motorola

Mercury Corporation

Major projects

Kazakhtelecom proceeds with active modernization and development of telecommunications network of the Republic of Kazakhstan. Such modernization evolves all levels and components of the national telecommunication network.

National Information Superhighway

From December 1997 the Southern segment of TAE Kazakhstan section (Khorgos-Almaty-Shymkent-Tashkent) was commissioned. In 1998 construction of the Northern fibre optic line was finished in the section of Petropavlovsk-Kormilovka (Russia). Digital microwave line Almaty-Karaganda with 1,140 km length has been constructed thus creating digital gateway to Russia by radial branch Almaty-Astana-Petropavlovsk-Russia which allows transit of channels from Central Asia to Russia at new quality level.

Commissioning of the Western branch of the National Information Superhighway (NIS) in 2001 became a significant event within the program of telecommunications network modernization and development. Total length of FOCL, routing via Shymkent-Kzyl Orda-Aktobe-Atyrau-Russia' border, is 2,473 km. Bandwidth is 16 STM-1 transit circuits, capacity - 30,240 channels. Completion of construction of the Western branch of the national highway is recognized as an important stage for formation of the advanced telecommunication infrastructure of the Republic of Kazakhstan. It resulted in establishment of the shortest telecommunication link from Europe to China, Japan and Southeast Asia.

For the purpose of further realisation of the National Information Superhighway project the Company will construct the Eastern branch (Taldykorgan-Ust Kamenogorsk-Semipalatinsk-Pavlodar-Astana), Radial branch (Almaty-Karaganda-Astana), FOCL Aktobe-Uralsk-Atyrau and FOCL Astana-Kostanai-Aktobe that ensures establishment of Kazakhstan as a major transit centre in Central Asia region.

Construction of the National Information Superhighway will stimulate development of telecommunication market in the Republic of Kazakhstan based on provision of high-quality digital communication channels and transport media via highways, to operators of all levels. It will also contribute to technological acceleration and creation of technical foundation for realization of long-term competitive advantages of the country for international transit of information.

Digitalization of long-distance, international switching network and local networks

Length of telephone channels of international, long-distance and zone networks is 244.4 mln. km. of which 82% are comprised of digital transmission systems.

By now all 18 Automatic Toll Exchanges are digital ones. In the network two International Switching Centers are installed. SDH rings are constructed for intracity transport media in 11 oblast centers of Kazakhstan that increased the quality of interstation links in urban telephone network and allowed to arrange transmission of all types of information including data and video and provide other multimedia services.

2,858 exchanges are operated in the local network with their total installed capacity of 2.4 mln. Numbers of which 38% are digital ones. All previously deactivated rural exchanges are reconstructed. Telephone density comes to13.3.

Works for arrangement of multiservice subscriber access are commenced, and 4 boxes with capacity of 1,536 numbers are installed in the city of Almaty.

The Company carries out active expansion of smart-cards universal payphones network. As of the beginning of 2002 universal payphones network was comprised of 4,650 units.

National satellite network

National Satellite Network is being developed to ensure provision of telecommunication services to remote and difficult of access regions of the Republic. This network is designed for exchange by voice signals at channel rate of 8 kbps. Today 229 DAMA stations are operated in the network, of which 194 in remote areas.

National Data Network "Kazakhstan _n-line Construction of the national data network is completed in all oblast centers and major cities of Kazakhstan. Total capacity of channels is 70 Mbps. National Data Network allows using the Internet-services and is a basis for convergence of telecommunication and information services.

To satisfy growing needs of population in access to global information resources the Internet Data Centers (IDCs) for 10 thous. Users, the first ones in the Central Asia, have been commissioned in Astana and Pavlodar. IDC is a complex of computer and network equipment and software, and allows one-stop shopping of all the Internet-related services.

The Company is focusing on extension of the range of services provided and customer servicing at appropriate level. For full satisfaction of needs of businesses Jrun digital telephone network is being developed specializing at provision of services of local, long-distance and international digital telephone communication. Kulan satellite business network is a satellite telecommunication network designed for provision of telephony and data services for corporate clients.

This year a new project "Intelligent network" was launched. The project allows offering value-added telecommunication services. Within the frameworks of the project the service of Tarlan prepaid telephone card is provided to customers.

Successful realisation of that and many other projects, as well as innovation activity, will allow OJSC Kazakhtelecom to effectively develop info and telecommunication infrastructure of the state to accelerate integration of the Republic of Kazakhstan into the global information society.

Kyrgyztelecom JSC

As part of the ongoing reforms in the telecommunications sector, the government of Kyrgyz Republic has decided to privatize Kyrgyztelecom JSC, the national telecommunications operator through the sale of 51 percent of shares and a mobile license to a strategic investor. The Government has retained CAIE, a regional investment firm, as principal advisor for the privatization of Kyrgyztelecom.

Kyrgyztelecom Joint-Stock Company (KT) is the national telecommunications operator of the Kyrgyz Republic.

KT was established in May 1997 through commercialization of the former public telegraph and telephone utility. It is an open joint-stock company.

Current ownership structure

Government - 77%

Social Fund - 13%

Other - 10%

Social Fund holding is a result of a free transfer of government's shares to this entity, managing public social safety net finances.

10% of shares is held by some 4,000 investors who bought their shares through mass-privatization program and employees.

Privatization of KT is set to continue with a sale of 51 percent of shares and a mobile license to a strategic investor.

Telecommunications sector institutional and regulatory framework

The telecommunications sector is governed by the Law on Electric and Postal Communication of April 2, 1998.

The law sets out the following central principles for the telecommunications sector:

Provision of telecommunications services based on competition and private enterprise

Division of the regulatory functions of the Government from the functions of telecommunications operators

Promotion of a favorable environment for foreign investment

Equal access of all individuals and businesses to the telecommunications network and services.

The principal mainstay for the new telecommunications sector is the State Telecommunications Agency (STA).

STA is responsible for the design and implementation of telecommunications policies as an independent regulatory body.

It issues licenses, approves regulated tariffs, designs and enforces standards for quality of services. STA is also mandated to implement spectrum management.

Competitive Environment

Telecommunications sector of Kyrgyz Republic enjoys dynamic development of new private companies. There are two mobile operators, Katel and Bitel, which offer services of D-AMPS and GSM TDMA networks respectively. Although these operators demonstrate strong growth, currently the mobile penetration rate remains low. As of 2001 (EOY) there were 37,062 mobile subscribers, which corresponds to a penetration level under 1 percent.

Apart from KT local telephone services are offered by four new operators. Combined they had 6,371 subscribers as of 2001 (EOY), concentrated in Bishkek and its suburbs. Also new companies in the telecommunications sector include five paging and four trunking operators, and 16 ISPs.

Privatization of KT is set to continue with the sale of 51 percent of shares of the Government and a mobile license to a strategic investor.

Network

KT operates an extensive up-to-date network covering the whole country. The network is a hierarchical three-level telecommunication network. The national primary network includes the basic telecommunication infrastructure of satellite, radio-relay, cable, optic fiber and microwave links.

The second-level network consists of trunk networks connecting long-distance telephone exchanges and automatic telephone exchanges (ATX) with final subscribers.

Local telephone networks include smaller urban and rural exchanges based on a radial-node architecture.

KT owns an A-standard satellite earth station (COMSAT RSI, USA) operated via INTELSAT 63 satellite and providing direct connection to seven countries in Europe and Asia, and to UNISOURCE group.

There are two integrated fiber optic trunks to Trans-Asia0-Europe (TAE) optic-fiber line, connecting Western Europe to China. The trunks, connected to Kazakhstani part of TAE, consist of 20-fiber optic cable.

The digital radio-relay network is based on synchronous digital hierarchy (SDH). 16 radio-relay stations comprise the main SDH loop. 7 other radio-relay stations, not included in the ring, use PDH platform.

Speed of digital flow in the ring is 155 Mbit/s (STM-1) equivalent to 1890-circuit capacity. The digital microwave PDY equipment provides a 34 Mbit/s speed (480-circuit).

In Bishkek there is a local digital optic fiber loop (24 fibers) based on SDH STM-4 with 622 Mbit/s speed of transfer (9,000-circuit). Its overall length is about 45km. The loop provides standard 2Mbit/s input-output at each switching station and a significant reserve for future network development.

As of the end of 2001 the total number of intercity circuits reached 17,092, up to 12,740 in 2000, of which 10,891 were digital.

As of 01.01.2002 there were 476,424 installed lines in KT network, of which 146,596 digital. This corresponds to a 30-percent digitalization of the network.

Lines is operation at the beginning of 2001 added up to 376,155, of which 98,895 were digital. This corresponds to a 8-percent penetration rate.

There were 460 telephone exchanges in Kyrgyz Republic (01.01.02), including 71 in urban areas and 427 in smaller towns and rural settlements.

In addition to the telephone network KT operates the national TV and radio broadcasting network (RPO RMTR).

Transmission

KT owns an A-standard satellite earth station (Comsat RSI, USA) operated via Intelsat-902 62° satellite and providing direct connection to seven countries in Europe and Asia, and to Unisource group. In addition there are satellite links to Turksat 42° (Turkey) and Express-80A (Byelorussia) satellite systems.

There are two integrated fiber optic trunks to Trans-Asia-Europe (TAE) optic-fiber line, connecting Eurasia from Western Europe to China. The trunks, connected to Kazakhstani part of TAE, consist of 20-fiber optic cable.

The digital radio-relay network is based on synchronous digital hierarchy (SDH). 16 radio-relay stations comprise the main SDH loop. 7 other radio-relay stations, not included in the ring, use PDH platform.

Speed of digital flow in the ring is 155Mbit/s (STM-1) equivalent to 1890- circuit capacity. The digital microwave PDH equipment provides a 34MBit/s speed (480 - curcuit).

In Bishkek there is a local digital optic fiber loop (24 fibers) based on SDH STM-4 with 622Mbit/s speed of transfer (9,000-circuit).

Its overall length is about 45km. The loop provides standard 2Mbit/s input-output at each switching station and a significant reserve for future network development. As of the end of 2001 the total number of intercity circuits reached 17,092, up from 12,740 in 2000, of which 10,891 were digital.

Turkmenistan

Turkmenistan Ryy; the young state, whose star vividly became shiny on the world horizon from the day of the proclamation of the independence
on 27 October, 1991 , today confidently looks in the future. Offensive of 2001 in the country is declared by the beginning of the "Golden Age" of Turkmen people. Bright confirmation of this the immense, radical reconstruction of all spheres of human vital activity, directed toward development and strengthening of the welfare of people.

The first elements of the infrastructure of connection in Turkmenistan began to appear after entry into the composition of Russia. To 1900 in the territory of modern Turkmenistan there were 26 Post offices also of telephone enterprises. There was trunk communication in Turkmenistan not to the entry in the USSR, and already in the first years of the Soviet regime began to be built cable and radio relay lines. The total capacity of urban exchanges for 1965 — 1980 grew 3,6 and to 1981 composed 113 thousand numbers. At good tempo in these years was developed rural communication, which was dictated by an increase in the quantity of kolkhozes and state farms in the territory of the country. The total capacity of rural exchanges to 1981 composed 23,6 thousand numbers. To 1981 considerably increased the network of the telegraph exchange, after composing 391 installations (installation in the organizations and the establishments). In 1981 from Turkmenistan were sent 3,18 million telegrams for other cities OF THE USSR. For example, in 1940 only of 1,2 million telegrams. In 1993 a quantity of people of those operated by one Post office composed 6690 people, and in yr already of 7026 people.

Until today the only provider of international communication service and access into the Internet is GKE "Turkmentelekom" of the ministry of connection of Turkmenistan. It ensures the channels of satellite communication in The USA (MccIWorldCom), Italy (Palermo), Russia. The city telephone service (total number of telephone sets to 2000 it was 363 thousand) in essence was provide ford with the digital exchanges of production Siemens and Alcatel, and rural communication — by the systems of even Soviet period (ten-step and coordinate ATS). Today in Turkmenistan there is only one operator of peydzhingovoy — mobile connection. It appeared on the market to 1994, in the person of American company the "altocumulus Of kommyunikeyshen Of teknolodzhis by ltd., Incas" (VKTI, BSTI), that received exclusive rights to the assignment of services to honeycomb and peydzhingovoy connection in Turkmenistan with period to ten years. After eight years the company has about 3000-4000 subscribers, and the geography of access covers only large cities. Services to connection with the use of trankingovykh systems on the base of protocol MPT 1327 in Ashkhabad, Turkmenbashi (Krasnovodsk) and To balkanabade (Nebit Dag), also render since 1997 TOO Of "prana".

Ukrtelecom

After the declaration of independence of Ukraine in August 1991, the telecommunication network of the former USSR in the territory of Ukraine completely passed to the jurisdiction of the Ministry of
Communications of Ukraine.

Telecommunication sub-field in Ukraine like in all former USSR was far behind the highly developed countries, both by technical level and by the level of meeting demands for telecommunication services.

Nearly all telecommunication trunk lines were analogue and used exclusively metallic cables.

Telecommunication equipment was out-of-date and behind the actual state of technical development for dozens of years. Ukraine took the sixth place among the republics of the former USSR by the main communication development indicators.

Ukrainian subscribers could connect with other countries only through the Moscow switchboards and telegraph offices.

In 1991 the total quantity of phone numbers constituted 7 630 000 that implied 14.6 phone numbers per 100 inhabitants (nowadays, this quantity

constitutes 19.8 numbers per 100 inhabitants).

In 1993 the Conception for the development of Ukrainian telecommunications that became the basis for the Government to adopt Complex Program on creation of the Unified national communication system of Ukraine was worked out.

Reorganization of the communication field took place to make its managing more effective. The Ministry of Communication of Ukraine made a revolutionary decision to divide communication system into two sub-industries - post and telecommunication - and to create two corporations on the basis of state communication enterprises: Ukrainian Post Corporation "Ukrposhta" and Ukrainian Telecommunications Corporation "Ukrtelecom" (till 1994 - "Urkelectrozviazok"), that was entrusted with the functions and powers of telecommunication operator in Ukraine.

As of the moment of its creation, the Corporation "Ukrtelecom" included only seven enterprises and organizations, namely:

Ukrainian Enterprise of International and Long-Distance Communication and Television Broadcasting "Ukrtek";

Enterprise "Kyiv Telegraph";

Kyiv City Radio Broadcasting Network;

Center of Information Technologies (Infotel);

State Institute of Searching and Designing Communication Objects "Ukrsviazokproekt";

State Institute of Designing Communication Means and Facilities "Dniprozviazok";

TransCarpathian Regional Telecommunication Enterprise "Zakarpattiatelecom".

The incorporation of 22 local regional telecommunication enterprises and the enterprises of the Republic of Crimea and Sevastopol with Ukrtelecom in January 1995 became the next significant step.

At the end of 1995, Ukrainian State Enterprise of satellite communication "Ukrzuyazoksuputnyk" was created and included into the Corporation. "Dniprotelecom" was the last that joined Ukrtelecom in January 1996.

For the period of 1994-97, Ukrtelecom became a well-recognized state telecommunication operator at the national and international levels. However, later on some problems arose that started hampering development of the Corporation, which included 35 state communication enterprises and organizations as legal entities with 732 affiliates. This caused the irregularity of communication development in separate regions within a single (from the technological point of view) company. Imperfection of Ukrtelecom organizational structure and inadequacy thereof to the market economy also acted as a breaking factor.

In this connection, the decision on reorganization of "Ukrtelecom" Corporation into the single state enterprise was taken.

At the beginning of 1998 the Cabinet of Ministers of Ukraine approved the Program of restructuring Ukrtelecom that provided taking a complex of economic-organizational, financial, legal and technical measures. Restructuring was planned to be made in two stages: the first stage consisted of the reorganization of the Corporation of State Telecommunication Enterprises "Ukrtelecom" into the single state enterprise (1998); the second stage consisted of the sale of shares (corporatization) of the State Telecommunication Enterprise "Ukrtelecom" (1999 - 2000).

In April 1998 the Corporation "Ukrtelecom" was reorganized into the single enterprise with the vertical two-level management structure. State telecommunication enterprises that were included in the Corporation received the status of affiliates of Ukrainian State Telecommunication Enterprise "Ukrtelecom".

By the general scheme of transforming state enterprises into joint-stock companies Ukrtelecom 's corporatization began on June 10, 1999.

This process was completed on December 27, 1999, by signing the Act on evaluation of integrated property complex of Ukrainian State Telecommunication Enterprise "Ukrtelecom" and by issuing the Order of the State Committee on Telecommunications and Informatics of Ukraine on transformation of the State Enterprise "Ukrtelecom" into a joint-stock company.

Ukrtelecom as the Joint-Stock Company was registered on January 5, 2000. On July 13, 2000, the Ukrainian Parliament (Verkhovna Rada) of Ukraine adopted the Law of Ukraine "On Particularities of Privatization of the Joint-Stock Company "Ukrtelecom" and on November 16, 2000, the Cabinet of Ministers of Ukraine approved the decision on the beginning of Ukrtelecom privatization.

The Commission on Privatization of Ukrtelecom was created on January 18, 2001. Preferential sale of Ukrtelecom shares started since October 1, 2001. Nowadays, the Enterprise incorporates 30 affiliates (including 27 regional departments) with 373 separated organization subdivisions.

Telecommunications sector in Uzbekistan

This Industry Sector Analysis Report provides detailed information on the telecommunications industry in Uzbekistan.

Summary

The telecommunications industry plays a critical role in Uzbekistan, a double land-locked country in the heart of Central Asia with a current population of 24.5 million. Uzbekistan inherited the bulk of its fixed telephony network facilities from the former Soviet Union. The country, since independence, has made progress in upgrading its fixed telephony system and building new wireless communication networks.

Uzbekistan currently has 2,000 exchanges (more than 32.1 percent are digital) with a total capacity of 1.8 million telephone numbers available. The country has 7 private mobile communication operators (2 operate in DAMPS standard, 4 in GSM standard and 1 in CDMA). Total coverage of the country with mobile communication is about 75 percent.

Currently, all regions of the country are linked with Tashkent via high-speed communication lines. These lines include fiber-optic and radio-relay. Total length of fiber-optic lines is 890 km. and total length of telephone channels is 11,000,000 channel-km. Sixty percent of these lines are digital.

Telecommunications has been one of the leading sectors for foreign direct investment over the previous decade. Continued state ownership of the telecommunications industry, a stagnating economy, and restrictions on the convertibility of hard currency has hampered market expansion in this sector. Telecommunications like other leading sectors of the Uzbekistan economy is in a period of stagnation.

Uzbekistan has yet to move to significant economic reform following the collapse of the Soviet Union. President Islam Karimov has taken a slow or so called step-by-step approach to economic and political reforms in an effort to ease the country’s transition from a centralized command economy. The Government of Uzbekistan understands that it needs to reform the telecommunications sector and to improve market confidence and infuse foreign investment in the sector, but at the same time, the government does not want to relinquish strict control of this important element closely tied to national security.

Uzbekistan has partnered with the United

States and other nations in the global war against terrorism. This has established a sense of closer cooperation between the United States and Uzbekistan and offers an excellent opportunity for Uzbekistan to introduce much needed political and economic reform. In this regard, the Government of Uzbekistan (GOU) announced its plan to sell 70 percent of Uzbektelecom, the major state-owned operator of telecommunications services in Uzbekistan. The sale would allow up to 51 percent foreign ownership. An International consortium headed by German Commerzbank is currently evaluating Uzbektelecom assets.

The Government of Uzbekistan welcomes foreign contractors, but also wishes to attract new investors to its telecom industry. Many international companies participated in reconstruction and development of state-owned telecommunication networks of the country. Korea’s Daewoo; Indonesia’s BKK; Croatia’s Ericsson; Italy’s Italtel; Germany’s Alcatel, Siemens, De TeLine, Detecon; Japan’s Mitsui, NTTI, NEC; and China’s Huawei are among those forms that have invested in Uzbekistan’s telecommunications infrastructure.

Despite the significant challenges facing both national and private telecom operators, the market demand for telecommunication services is slowly but steadily growing. This equates to a growing demand for imported equipment and technology. This report provides an overview of the sector and describes business opportunities for U.S. companies.

Background information

Uzbekistan is one of the New Independent States, which was founded after the collapse of the Soviet Union in 1991. Accordingly, the county inherited most of its existing telecommunication networks and infrastructure from the former Soviet Ministry of Communications.

After independence in 1991 the leader of the country President Karimov declared a slow and socially oriented policy of economic reform without “shock-therapy” measures. The government has defined telecommunications as a strategic sector and introduced severe controls on tariffs. Following independence, Uzbekistan had a serious shortage of hard currency to fund maintenance and much-needed overhaul of the telecommunications network.

The government understands, that telecommunication

sector needs significant reforming, including privatization, to make it more commercially effective and attractive for private investors. Beginning from 1992, the number of private telecom companies with foreign investments has grown. There are a growing number of procurement projects sponsored by Uzbek Government and international financial institutions.

The Government of Uzbekistan has also signaled that it is not yet willing to give away control of the telecom sector and has, therefore, sent mixed signals which have led to several failed attempts to reform and privatize the telecommunications industry.

Market highlights and prospects

The following section will describe the general situation of the Uzbekistan telecommunications market, its structure, the government policy and its influence on prospective equipment purchases, procurement regulations and statistical data.

Market overview

The public telephone networks of Uzbekistan have 1.68 million subscribers for fixed services and 163.5 thousand for cellular mobile services in 2002. Uzbektelecom, the national carrier, and Buzton, the digital network operator, provide fixed telephone services. Six operators provide cellular mobile services and three provide paging services in Uzbekistan. Conventional and trunk systems are also becoming a popular form of wireless communications. Motorola, Kenwood, Icom, Codan, Uniden, Thompson and other telecommunications giants sell their equipment to the GOU and corporate clients through established distributors.

Telecommunications networks

All regions of the country are linked with Tashkent through high-speed communication lines. Telecommunication lines are both fiber-optic and radio-relay. Total length of fiber-optic lines is 890 km. Total length of telephone channels is 11,000,000 channel-km., of which 60 percent are digital. There are 11 digital and 2 quasi-electronic international telephone stations. Capacity of digital trunk road channels is employed at 70 percent.

Major inter-city channels

The country’s telecommunication network is based on fiber-optic and radio-relay communication lines. It allows having data communication channels (64Kbps _V 2048Kbps) between Tashkent and main regional centers within the country. But communication lines between regional centers and rural areas are insufficient and needs to be significantly upgraded.

Some network modernization has been done in the northern regions of the country. Less than 40 percent of districts in the Republic of Karakalpakistan, Bukhara, Navoi, Khorezm and Sirdarya regions now have digital channels. Analog channels connecting regional centers with the rural districts prevail in the rest of the country.

Local telecommunications network

Inter zone telecommunication network consists of fiber optic communication lines (FOCL) and radio-relay lines (RRL). The lines have a length of more than 1,400 km.

There are 2,000 exchanges (more than 32,1 percent are digital) with the total capacity of 1.8 million numbers in Uzbekistan. The highest percentage of digital exchanges is on the networks of Bukhara Telecom (71 percent), Navoi Telecom (76 percent), Khorezm Telecom (60 percent) and Chircom joint venture Company (66 percent). Inter-exchange communications can provide the speed of data transfer up to 155/622 Mbps.

Average share of digital telephone facilities in Uzbek cities is 40.5 percent, in the main district 30.5 percent and in villages 5.2 percent.

National data transfer network consists of the State Data Transfer Network Company UzPAK and Uznet networks. The UzPAK network includes the dedicated phone network Iskra-2 and data transfer network based on DPN-100 equipment. Capacity of UzPAK is 385 ports. Inter-network connection with other operators is set up through X.75 protocol. Users can access the DPN-100 network via leased lines or dial-up.

Government information computer network Uznet ensures information exchange and access to the Internet for government ministries and a number of international organizations in the Republic of Uzbekistan. Uznet has 60 digital ports (64 Kbps-2048 Kbps). Access to the international network, in particular to the Internet, is provided through international channels of UzPAK.

International telephone access is a monopoly of Uzbektelecom. International telephone access is provided via satellite, microwave fiber optic and copper cables. Total satellite capacity is close to approximately 25 Els (50Mbps), and is provided via Intelsat and Horizon space system.