EurasiaCom 2010: Innovative technologies and services to maximize profitability in a converging market


Cenk Yapýcý
Fotoðraflar: Baykan Çallý

Regional telco leaders discuss the changing shape of the ecosystem, new revenue sources and adapting strategies to maximize opportunities.
The annual Eurasia Com (www.comworldseries.com/eurasia) congress closed today in Ýstanbul after 2 days of debates, best practice sharing and networking among the leading telecommunications companies in Turkey, the CIS and neighboring markets.
Over 400 participants attended the event, representing the whole telecommunications ecosystem of the region and showcasing a great diversity of companies, business models and opportunities in the market. The shape of this ecosystem was a major discussion topic, due to the evolution of the relations between the various stakeholders (operators, vendors, regulators, brands etc.), and to the evolution of the market towards more convergence.
As competition is increasing and penetration rates are reaching higher levels, operators are looking at new revenue sources to continue their growth. That is why they are investing in new technologies and improving their networks in order to deliver broadband access and to enable new services and applications.
Leaders of the telecommunications sector in Turkey, Central Asia, the Black Sea countries and across Eurasia gathered today in Istanbul for the opening of Eurasia Com (www.comworldseries.com/eurasia), their annual congress.

Over 300 participants attended to the opening session to hear about investment strategies in a changing telecoms ecosystem. Leading investors, incumbents, competitive operators, new entrants, carriers and ministry representatives were represented in a session which gave an engaging overview of the market and its opportunities.
Gemma Bunting, Analyst at Informa Telecoms and Media, opened the day with a market overview. “Over the many years that the Eurasia Com has been held, she says, the region has experienced phenomenal growth; penetration stands at 70% (not including Turkey) but there is still room for organic growth”.
A Q&A session with Mustafa Kýral, VP at Altimo, gave an idea of what a major investor looks for in terms of opportunities. Russia-based Altimo is looking at Africa for new growth, but the CIS is still a key investment target.
A panel discussion with Ineke Botter (CEO of Azerbaijan's Bakcell), Mehman Hazanov (Deputy Director General of Aztelecom in Azerbaijan), Ike Kuka (Chairman of Dardafone in Kosovo) and Patrick George (VP of Belgacom), looked at how the telecoms ecosystem is evolving in the region, with new operator business models and changing relationships with vendors, investors and regulators.

Market overview: Trends and forecasts for Eurasia’a telecommunications market
Gemma Bunting, Analyst at Informa Telecoms and Media, had told about examining the key factors affecting the development of Eurasia’s telecoms market. She also answered this question: “What are the main markets in the regions, and which ones to watch for future opportunities?” She also appointed that subscription and revenue trends and forecasts for the mobile market in Eurasia.
Bunting has told these in her presentation: “When we looking at the global market overview expected 5 billion subscribers in 2010. Net adds of 651 million in 2009. Also Asia pacific is driving global growth. Telecom operator China Mobile has 56, 7 million proportionate subscriptions end of 4Q of 2009. Eurasian market is displaying strong subscription growth. Growth peak of 16 million net adds in 2008. Penetration has reached to 74%, and penetration will reach to 97% at the end of 2012. Uzbekistan is currently growth leader in the market. Kazakhstan, Kirghizstan, Tajikistan and Azerbaijan are following Uzbekistan. Uzbekistan’s population is 28.4 million and SIM penetration rate is 57%. ARPU has reached 6.40 USD. Subscriptions have been driven up by fierce competition in the market. Pricing competition has driven down ARPU levels. Penetration forecast will reach to 85% in 2014. In the region, mobile broadband has potential to surpass fixed broadband. What’s next for the Eurasia region? Continued with mobile subscription growth in low-penetration markets of Uzbekistan, Tajikistan, Turkmenistan and Kirgizstan.
Additional international investment in the region will boost competition and development. Stabilization of economy following economic downturn will help to strengthen ARPU and revenue growth. LTE trails – Russian investors carrying out LTE trails in their CIS subsidiaries in Armenia, Kazakhstan and Uzbekistan. Mobile broadband forecast to take off after 2010 once network coverage increases. Growth of fixed broadband remains relatively conservative, however the market is showing promising signs that growth could increase going forward.

“Mobile operators will fight over-the-top players threatening their core voice revenues”
When we looking at the global mobile operator predictions for 2010 could we say these: Operators will tentatively launch quality-of-service-based tiered pricing in order to intelligently segment mobile broadband users and address revenue and traffic dislocation. Even an improving economy will do nothing to stop operators’ ruthless drives for operational and capital efficiency. Cost-cutting initiatives were in place well before the downturn and will continue even in markets returning to growth. Mobile banking efforts will continue to proliferate in emerging markets, but in the short-term these will be more important as a customer acquisition and retention tool than as a genuine driver of significant new revenue streams. Fixed-mobile convergence at the organizational level is already a reality, whilst in 2010 data more than voice will drive convergent service and product offerings. So-called “emerging markets” will transition into a new phase of competition based on services and bring into question the validity of the term “emerging market” as its understood in the telecoms sector today.
The network is, always has been, and will grow to become an even more important differentiator for mobile network operators the world over. The actions of Telefonica and America Movil in Latin America will continue to frustrate the emergence of new large pan-regional rivals seeking to challenge their dominance. Mobile operators will make steps towards a de facto functional separation in order to position themselves to address third party demand for connected devices and services. The release of new spectrum at 2.5 GHz and the digital dividend will drain more cash, enable new technology deployments and bring truly pervasive (indoor and rural) mobile broadband services. Anybody expecting it to herald a plethora of disruptive new entrants will be disappointed.
Mobile operators will fight over-the-top players threatening their core voice revenues, but will actively strike more partnership to grow data access revenues.”

Ministerial Briefing: Strategic policy to encourage the growth of telecommunications in a market
In this session, Ministerial delegations from some of the region’s key countries has presented their policy strategies and objectives for the telecommunications sector. Ilgar Sadigov, Chief of Department, Ministry of Information, Nakhchivan Autonomous Republic Azerbaijan gave some information about his country and the activities: “Azerbaijan Republic Nakhchivan Autonomous Republic is bordered on Türkiye, Iran and Armenia. Territory is 5.500 square meters. The country population is 400.000 people. The number of residence 220 and the number of telephoned residences 220. There 58.000 active fixed line subscribers. The number of GSM subscribers is 295.000, and also penetration is 75%. There is a carrying telephone communication service for 58.000 subscribers by means of 17 central Hosts and 72 like RSM electron automatic telephone stations in Autonomous Republic. Central soft switch and 20.000 numbered NGN systems are working in the Nakhchivan City. All living settlements are telephoned. Both the transmission net and the automatic telephone stations are like type in figures. The connections between stations are organized over the optical joining are over radio relay. The interurban and international outlets, Internet, video conferences and different data joining are putting info practices over TAE in standard of STM 16 between Nakhchivan-Azerbaijan and in standard of STM 1 between Nakhchivan-Türkiye. There are alternative talking channels in Turksat satellite system. Every measure is taking for creation of Nakhchivan branch of TAE. We have also CDMA wireless communication service. There is a wireless communication system is surrounded by the Nakhchivan Autonomous Republic at the moment according to the contract signed with the company Huawei building wireless communications, which will net service the region centers and about 85% of the Autonomous Republic was completed. We’re growing also our Internet providing services. ‘Nakhinternet.az’ provider service is working in composition of the Ministry of Communication and Information Technologies of Nakhchivan Autonomous Republic since 2003. There are dial-up, ADSL and wireless services in whole area of Nakhchivan Autonomous Republic. There is a main portal ‘www.nakhchivan.az’ of Autonomous Republic in Azerbaijan, English and Russian languages which always becomes renewed.
Let’s take a look the insurance of schools providing general education in Azerbaijan Republic with information and communications technologies. Our state program was for between 2005-2007 years. There is 1 computer per 23 pupils. There are 61.000 students in Nakhchivan and 180 schools are joined in Internet.”

Investing in Eurasia’s telecommunications markets to maximize growth
In this session, Mustafa Kýral, Vice President of Altimo Russia has made presentation. Kýral gave some information about his company: “Altimo is a leading investment company in Russia, the CIS, Turkey and Cambodia, operating in the field of mobile and fixed-line communications. Altimo was launched in London on 1 December 2005. Before then, and since 2004, Altimo was known as Alfa Telecom. The Altimo name reflects the company’s newly stated international focus: Altimo stands for Alfa Telecom International Mobile. The total market capitalization of Altimo’s assets is currently over $16 billion. Together, Altimo’s investee companies have more than 150 million mobile phone subscribers. Altimo is an example of the emergence of Russia’s “new multinationals”: More Western-focused, open and transparent, with sound corporate governance and effective corporate management. Little wonder then, that VimpelCom, was the first Russian company to be listed on the New York Stock Exchange. Today, Altimo plays a key role in the telecom markets of Eurasia, with its investee companies operating in Russia, Ukraine, Kazakhstan, Uzbekistan, Kyrgyzstan, Tadjikistan, Georgia and Türkiye. Recently, Altimo pronounced new priorities of its activity to invest in South-East Asian markets, especially in Vietnam and Indonesia. This vision was proven by the Altimo Index research which clearly showed these markets as one of most potential in the world in terms of developing telecommunications. In August 2007, the company has already launched its activity in this region by buying Sotelco Company holding the full range wireless connection licenses valid all over the country. In spring 2009, Vimpelcom which had purchased this company launched its network which already has attracted more than 50.000 subscribers. Another priority of Altimo remains to participate in globalization and consolidation of telecom business getting a firm partnership with one of major Western telecom operators.
While targeting the East for investment, Altimo is also considering opportunities in the West in its business strategy. Recognizing that the global telecoms industry is in the process of consolidation, we are looking to establish a strategic partnership with a top tier European GSM operator. This will create a leading alliance in mobile telephony, benefiting from the operational experience of the European partner and the emerging market investment expertise of Altimo.
We will continue to invest and drive growth in telecommunications companies that have the potential to become one of the top three providers in their home market. We bring our regional pool of expertise to our partnerships. We will continue to leverage our experience, understanding and insight in the sector to grow value for ourselves and our partners.”

Strategic Debate: Adapting to a changing telecoms ecosystem
A panel discussion with Ineke Botter (CEO of Azerbaijan's Bakcell), Mehman Hazanov (Deputy Director General of Aztelecom in Azerbaijan), Ike Kuka (Chairman of Dardafone in Kosovo) and Patrick George (VP of Belgacom), looked at how the telecoms ecosystem is evolving in the region, with new operator business models and changing relationships with vendors, investors and regulators.

“The first and still the most innovative, Azeri mobile network”
Ineke Botter, CEO of Azerbaijan's Bakcell, appointed her speech: “Bakcell is growing up rapidly. We started as one of the first major investors in the modern Azerbaijan. Today, we continue that investment to develop superior communication services for our customers, throughout the country. Our goal is to be the leading mobile phone network in Azerbaijan. Everything we do is about giving you: Real value for money. Easy to understand products and help whenever you need it. We present innovative services that benefit your work and social life. We set up a network that always listens to you and treats you fairly. A company you can be proud of and which helps Azerbaijan develop on the world stage. We continuously invest in leading technologies to provide our customers with the very best network experience possible. With significant development in 2008 and 2009, we now cover and 82% of the land area of the country, inhabited by 90% of the population. The whole network has been upgraded to EDGE technology to provide you with high speed Internet. Network investment will continue to deliver increasing coverage, even better customer support and the very latest new mobile data services. Bakcell customers can use our Roaming Service in Europe, Asia, North and South America, Australia and Africa. Bakcell now has roaming agreements with 242 operators in 149 countries globally.”

“Azerbaijan is walking through the modern telecommunications technology”
The second important speaker was Mehman Hazanov, Deputy General Director of Aztelecom. He dedicated that the fixed lines in Azerbaijan are developed rapidly. International telephony, Internet services, 3G, wireless and similar services are become the country an important market. These all services present a lot of opportunities for investors. In Azerbaijan 85% of the population are wired. They are connected to Azeri network, but they still using analog network. In two years time, we have to change through the digital system.”

“Basic services bring money”
Patrick George (VP of Belgacom) talked about Belgacom’s and strategies: “Bolstered by its long-standing experience as Belgium's incumbent operator and its capacity for innovation, the Belgacom Group, thanks to its subsidiaries, is able to provide all its customers, regardless of their profile - whether private or professional, company or institution - with a comprehensive range of offers and solutions in fixed and mobile networks. The Belgacom Group offers a complete quadruple-play solution that integrates fixed and mobile telephony, Internet and television. It is committed to meeting the expectations of its professional and residential customers, and innovates in order to anticipate their future needs, drawing on the latest technological developments. With a view to closing the digital gap, the Group is also committed to promoting electronic services and providing a wide range of innovative applications.
Everyone has a role to play. But we have to go further. Before, innovation was mainly managed by specialized units, spread across the various Group entities. These different teams have now been merged into a single Innovation unit within the Strategy department. Its mission is to develop the products and services of tomorrow, as defined in the framework of our 2009-2013 strategic plans, and to promote an entrepreneurial spirit within the Group. After all, being innovative is not the prerogative of one department, but of all employees. I believe that, innovation about the basic services bring the money.”

Devices and applications to encourage growth in Eurasia
Robert Waaler, Product Management Business Unit Device Management from Smarttrust answered the critical questions and gave important numbers for telecommunications sector in his presentation: “SmartTrust is a global leader in SIM and Mobile Device Management software designed to provide mobile network operators improved understanding of their subscribers and efficient management of the SIM cards and devices on their network.
With our innovative technologies, mobile operators can implement new services quickly and efficiently, and gain knowledge about the needs of subscribers. Over 200 mobile network operators rely on us for SIM device and value added service management as well as dynamic roaming steering. Our customers range in size from new start-ups with fewer than 100,000 subscribers to well-established operators with more than 75 million subscribers. Our technology touches more than 1.5 billion people every day and has been implemented by all major SIM vendors. SmartTrust's origins go back to 1974. We have been delivering solutions for SIM management since 1991 and device management since 2002, building on our success by pioneering Over-the-Air (OTA) technology for managing SIM cards, handsets and mobile value added services. By delivering the software tools to manage all of the equipment - SIM and device - in the hands of the subscriber, our systems enable service providers to realize the full potential of their businesses.
When we look at the device developments we could say multiple operating systems lead to increased dependency upon browsers. But is this easier? Over 20 browsers are in use by the major mobile phone vendors. According to Canalys’ research about Global Smartphone Sales in Q2 2009; Symbian has rate 50.3%, RIM Blackberry 20.9%, Apple iPhone 13.7%, Windows Mobile 9%, Google Android 2.8% the others (Palm/Linux) 3.3%. Application directions say that a growing market dominated by Apple with Adroid a distant second. There is a big application world and who controls the payment system? A mobile phone is my potential. It reflects who I want to be, and defines my mobile capabilities and the services open to me. SIM Card is my identity. It tells you who I am, and is the key to the mobile services I want to use. The money is your opportunity. The capability of my phone coupled with my ability to pay is your potential.
You do not need to become a dumb pipe. You simply have too much information to share.
Camera and MMS are the most important integrated technologies in social networking applications. Use GPS to tag photos is the increasing trend in mobile. Provide an open API that third parties can use to access the Smart Pipe.”

Simulating the economic growth with 3G broadband applications and services
Mohammad Raheel Kamal, Senior Director, Business Development for Central Asia from Qualcomm International has talked about data connectivity and its impact on a country’s economic growth; best suited technologies to deliver connectivity and enabling value added services and applications in urban and rural environments in his speech. Kamal shared important information in the presentation: “A 1 percentage point increase in mobile penetration in developing countries is correlated with an increase of 4.7% of average per capita income. A 1 percentage point increase in Internet penetration in developing countries is correlated with an increase of 10.5% of average per capita income; says Wireless Reach. The report outlines the order of magnitude of the likely benefits to major emerging economies (China & India) from the timely adoption of 3G mobile technologies. By assessing the significance of the potential benefits to societies from timely and intensive adoption of 3G mobile technologies (in particular, the rapid diffusion of mobile broadband), we argue that government policies that lead to delays in the investment process can cause substantial economic loss, exceeding several billion dollars for delays of two to three years. Consumer Welfare effect will reach $32 Billion for China and $8 Billion for India. GDP benefit from 3G network investment (NPV) will reach $211 Billion for China and $95 Billion for India. There are 780 million 3G subscribers today. According to analyses, 3G subscribers will grow to 2.4 Billion by 2013. 3G will enable 85% of mobile broadband subscription in 2013. For this reason mobile services are becoming the center of life. Mobile communication has opened new doors; mobile entertainment, mobile education, mobile social networking, mobile healthcare, mobile enterprise, mobile location based technologies, mobile machine to machine and mobile commerce. Mobile advertisement provides new channels to reach consumers.”

WiMAX in a box
The last speaker of the day was Kenan Þinasi, Turkey Country Manager & Business Development Director from wi-tribe Group. Mr. Þinasi has given detailed information about wi-tribe to delegates: “wi-tribe isn’t just dedicated to its customers – it’s obsessed with exceeding our customers’ expectations. That’s why we intend to bring together the brightest, most independently-minded employees within one tribe and create the most thrilling broadband experience for wi-tribers in every market. wi-tribe is a high performance wireless internet experience that offers independence and freedom to its customers.
Emerging market mobile penetration is catching up with developed markets, but broad penetration is still significantly behind, thereby creating a digital divide. On the demand side, broadband adoption in emerging markets is primarily hampered by high cost of service compared to income levels. Mobile penetration is less sensitive to income levels as the cellular prices have declined to match national income levels. Broadband penetration is still extremely sensitive to income levels as prices are high compared to national income levels.
Wireless broadband access is the best option available to overcome the technical and economical hurdles to broadband deployment and adoption in emerging markets. It’s fast and easy to deploy. Operators can launch between 12 months – 24 months of acquiring a broadband wireless license. Operators can pick and choose target areas, focusing on high demand; high income customer segments first and then expands coverage to other segments.
Wireless networks come with the benefit of offering mobile or nomadic connectivity to customers. Subscribers can utilize the service at multiple locations (e.g. home and school, or home and business) using a single subscription. It’s cost effective. It’s easy to cover areas difficult to access by wired infrastructure (urban cores, rural areas).
Wi-tribe is technology agnostic, but has chosen WiMAX as it is a global standard, commercially available and has a number of advantages over competing broadband access options. In the future, wi-tribe may pursue other access technologies such as LTE, if it makes economic and strategic sense; wi-tribe is tracking progress of other emerging broadband wireless technologies and trialing them where feasible.”

Türkiye: Market leader in Eurasia
The day started with presentations from incumbent fixed operator Turk Telekom, leading mobile operator Turkcell, and competitive mobile operator Avea, followed by a panel discussion with alternative fixed service providers Superonline, Borusan and Doðan. The Turkey focus continued with a session on MVNOs led by Avea and brand partner Trabzonspor, and a presentation/discussion on mobile marketing with Turkcell.

The rise of Broadband
Mehmet Toros, Senior Vice President of Türk Telekom talked about assessing the incumbent’s position and strategy in Türkiye’s dynamic telecommunications market. “Voice revenues and subscriber numbers of all European benchmarks show a decreasing trend. When we looked at the number of subscribers BT from UK had 22 million, Telecom Italia had 21 million, France Orange had 28 million, Deutsche Telekom had 30 million and Türk Telekom had 18 million subscribers according to 2008 1H results. Change in number of subscribers was in 2009 1H really interesting. BT has lost 10% of fixed subscribers, Telecom Italia and Deutsche Telekom had scored each -9% and Türk Telekom had lost 4% of subscribers. While the Internet usage has been growing significantly, the average revenue per GB has been decreasing. While the usage on broadband, in general, has been growing substantially, the fixed growth has shown more aggressive trend. This is due to P2P/Multimedia applications mostly used by fixed BB subscribers and bandwidth requiring VAS offers of fixed operators.
At the same time, the revenue per GB is decreasing much aggressively on the mobile broadband. The price of mobile broadband has still some room to squeeze and efficiencies on the network will be reflected on prices.
In the upcoming years, mobile broadband is expected grow faster compared to fixed broadband. The impact of the mobile broadband growth is not expected to result in a terminal decline for fixed-line services as most subscribers are likely to employ mobile broadband as a complement to fixed services. Mobile broadband market is expected to be dominated by casual subscribers – specifically consumer users with low monthly ARPU and with a preference for prepaid services rather than postpaid. Although mature broadband markets are starting to see a degree of market saturation, fixed broadband is still expected to experience a steady subscriber growth globally with a CAGR of 9% (between 2008-2014).
The total broadband revenues in Western Europe estimated to reach $94 billion (59 billion fixed and 35 billion mobile) as the global revenues expected to reach $280 billion. Broadband VAS share is expected to reach 33% of total broadband ARPU in 2012.”

Best coverage, good quality
Tayfun Çataltepe, Chief Corporate Strategy and Regulations Officer from Turkcell had presented Turkcell’s vision to the delegates. “Our strategy is differentiation. We present highest quality in 2G and 3G networks and new mobile services. Turkcell quality is now available at lower than ever prices. Turkcell has best customer experience in each touch point. We are leading in 3G, leading in subscriber number (2.5 million 3G subscribers with enabled devices: 300K VINN netbook and netbook users). 72% of population has been covered in 5 months. Turkcell is among the first operators in the world to reach a speed of 42.2 Mbps with its 3G technology. Additionally, certified by independent ranking and audit company P3 Solutions to have 3G network as good as other 3G networks operating in Europe for years. We could also tell about the other group company Superonline. Superonline has solid revenue growth (58% in 2009). The company recorded full year positive EBITDA for the first time. They were winner of the BOTAS tender, this means expanding fiber-optic network by 2.5 times. Superonline expect to reach 38 new cities and 74 cities in total.”

Adapting an operator’s strategy to an expanding market and increasingly competitive environment
Tolga Kýlýç, Strategy and Relations Director from Avea have made a presentation. He gave some information about the Infrastructure Sharing for effective use for resources. “Ensuring effective use of resources is a critical object. Decreasing investment and service costs, as well as environmental and visual position and supporting infrastructure investments aimed at a sustainable competitive environment. Creating capacity for next generation technology must be homework. From now on, the competition has to be focused on services to sustainability of investment opportunities.

Convergence roundtable
Superonline’s Board Member Savaþ Ünsal, Managing Director of Borusan Telekom Mehmet Baþer and Doðan Telekom Managing Director Fazýl Esen talked about new business model appearing in Türkiye’s converging market like triple play, quadplay, fixed-wireless convergence.

Marketing opportunities in Türkiye
Sinem Soydar from Turkcell Mobile Marketing and Advertising had indicated to new marketing opportunities and strategies in Türkiye. She also gave some information about Turkcell, than she asked ‘What about Türkiye?’. She explained: “ADSL is the most prevalent Internet connection method by 85%. Mobil penetration reached to 87.6%. Türkiye is the third country in the world with 19 million Facebook users. Augmented reality, mobile payment, mobile codes (integrating physical products and mobile), social media and brands (brands@Facebook, Twitter, YouTube…), mobile contactless payment (RFID and NFC technologies), Mobile application world (more than 3 billion downloads) are the 2010 trends.
There were some concepts in old marketing as spray & pray, large audience, low relevance and low return. New marketing concepts transformed as attract & engage, smaller audience, high relevance and high return. Phone became your personal portal. Your mobile is at furthest 1 meter range. There are 485 million 3G subscribers globally and 5 million in Turkcell. Mobile Internet penetration is 11%, this will reach 45% by 2013. Smart phone market is dramatically increasing. Android and iPhone are the fastest ones. More than 140K applications downloaded for 3 billion times in AppStore. Why mobile advertising? You can profile consumers. It’s also measurable, cost effective and has high return rates.
In 2005 mobile media advertising market has only 1% share, in 2009 mobile reached to 6.5%.
According to MM 2009 numbers more than 20 million subscribers have participated MM campaigns. There were 1200 projects, 548 brands and 37 industries. New services are TonlaKazan, Targeted IVR, mobile ticketing, ad-funded info packages. Permission database has reached 9 million, more than 500 campaigns. More than 300 campaigns with Text&Win, Credits&Airtimes and daily packages products. ‘If you respect my preferences, I’ll give you more & more permission to enter my life… but the minute you blow it, the minute you take advantage or invade my privacy rather than delivering on your promises you’re history’ says Laurie Coots (CMO, TBWA Worldwide). Permission marketing is an increasing wealth for mobile marketing.

Major trends in Eurasia’s market for H2 2010 and beyond
The event provided a great insight into how the stakeholders in the region's telecommunications market adapt their strategies to make the most out of changing opportunities. The event closed with a roundtable of analysts and market specialists, providing a recap of the major trends to look out for in the year to come. Key words are broadband, convergence, value-added services, and of course profitability, and ensuring return on investment.