Almost half of Central Asia’s population lives in rural and remote areas and does not have access to the Internet. What is the level of development of mobile communications and the Internet in the countries of the region? What is hindering the development of the telecommunications sector?
Mobile communications and the Internet have long been closely included in the daily life of Central Asians. Today, access to mobile communications and the Internet is no longer just a necessity, but a human right. The countries of the region in some parameters of the development of the telecommunications sector hold leading positions in the world. Nevertheless, almost half of the population of Central Asia, mainly living in rural and remote areas, does not have access to the Internet. During the coronavirus pandemic, the digital divide has become especially pronounced between the population living in different telecommunication infrastructure conditions, it has become more noticeable.
Central Asia still has a lot of work to do to improve the quality of mobile communications and the Internet so that the economies and people of the region’s countries can benefit from digital development. In this article, we will get acquainted with the current indicators of the level of development of the telecom sector in Central Asia, we will also consider individual cases of the formation of the telecommunication services market in each country, the difficulties and problems faced by the region.
Kazakhstan
If we compare the indicators of Kazakhstan with neighboring countries, then according to the latest report “Digital 2021”, Kazakhstan ranks second in Central Asia in terms of mobile penetration – 24.44 million SIM cards per 18.89 million population, which is 129.4 percent. The country is also the leader in the region in terms of Internet penetration – 81.9% of the population or 15.47 million people have access to the Internet. In terms of the speed of mobile Internet, Kazakhstan ranks 83rd (31.81 Mbps) in the world and 70th (61.05 Mbps) in terms of the speed of broadband Internet, which is also the best indicator among the countries of Central Asia.
The price for the provision of telecommunications services is a key indicator in assessing the availability of mobile services for the population. According to the British agency “Сable.co“, one gigabyte of mobile Internet in Kazakhstan costs 59 US cents on average. Thanks to this price, Kazakhstan is among the top 20 countries in the world with the cheapest mobile Internet. In terms of price availability of fixed broadband Internet, Kazakhstan ranks 7th in the world – US $ 9.76 per month.
In another similar rating, the Internet Accessibility Index, which compares ten different indicators, including the average speed of mobile and broadband Internet, the average cost of traffic, etc., in 2021 Kazakhstan was ranked 43rd out of 169 countries. All these data show that today Kazakhstan has the most developed and competitive telecommunication services market in Central Asia.
However, the formation of the mobile communications market in Kazakhstan in the 2000s, as in other countries of the region, was characterized by a strong monopoly and high prices for services. The situation changed after the country took steps to gradually liberalize the telecom services market; this includes the “Telecommunications Development Program for 2003-2005” to create conditions for the development of a competitive environment.
With the adoption of this program, several foreign companies appeared on the market one after another, which competed for the provision of cheaper mobile communications and the Internet. In 2004, the Russian company Kar-Tel entered the market of telecommunications services in Kazakhstan with the Beeline trademark. Three years later, in 2007, another new player appeared – the Swedish company Mobile Telecom Service with the NeoTelecom brand, which was later renamed Tele2. With the arrival of new telecom operators, prices for services have dropped significantly and have become more accessible to a wide segment of the population.
Over the next ten years, there were major mergers and acquisitions in the market. So Kazakhtelecom bought 75% of Kcell shares in 2018, and in 2019 also acquired a controlling stake in Tele2. Thus, two large companies are currently operating in Kazakhstan to provide mobile communication and Internet services: the Kazakhtelecom group of companies (Tele2, Altel and Kcell) and KaR-Tel (Beeline). Kazakhtelecom itself is owned by the state joint stock company Samruk-Kazyna, which makes Beeline the only private company providing mobile services in Kazakhstan.
To launch the fifth generation of 5G mobile communications, Kazakhstan is cooperating with the Chinese telecommunications company Huawei. In September 2021, the Tele2 operator launched the 5G communication standard in Almaty in test mode. At the moment, the coverage area covers only a few quarters of the central part of the city, but in the future it is planned to gradually increase the coverage area. Also, according to the authorities, by the end of this year 5G will be launched in the capital of the country, on the territory of the EXPO complex and at Nazarbayev University.
Analyzing the strengths and weaknesses of the country’s telecommunications market, it can be noted that Kazakhstan has the most acceptable comparison of the price and quality of Internet connections in the region. Despite the fact that mobile communications and the Internet in Kazakhstan are not the cheapest in Central Asia, with a relatively high level of GDP per capita, communication services still remain within the framework of affordability for most citizens. The positive aspects also include the high speed of both mobile and fixed broadband Internet.
Weaknesses include the uneven coverage of communications, which comes from the vastness of the country and the low population density. If in large cities a stable connection is the norm, then in remote corners of the country – in villages, on intercity highways and railway stations, the Internet and mobile communications may work slowly, or may be absent.
Kyrgyzstan
Kyrgyzstan ranks first in the region in terms of cellular penetration – 10.23 million SIM cards for 6.58 million people, which is 155.6 percent. In other words, half of the country’s population has more than one SIM card. In terms of Internet penetration, the country ranks third in the region – 3.32 million Internet users, or slightly more than half of the total population.
According to “Speedtest” data, Kyrgyzstan ranks 101st in the world in terms of mobile Internet speed (24.95 Mbps), and 85th in terms of fixed broadband Internet speed (47.91 Mbps).
Kyrgyzstan ranks second in the world in the “Worldwide mobile data pricing 2021” ranking for the cheapest mobile Internet, with an average price of 15 US cents per gigabyte. And in terms of the cost of fixed broadband access, Kyrgyzstan ranks 23rd among 211 countries of the world, with an average cost of broadband access of $ 15.47 per month.
Various methodologies can be used in the ratings on the affordability of the Internet. For example, in the rating “Internet Accessibility Index” in 2021, Kyrgyzstan is in 110th place among 169 countries of the world. The assessment is based on indicators of quality, accessibility and cost of Internet access. All these data indicate that a relatively free and developing mobile communications market has formed in Kyrgyzstan. Thus, the British agency Cable.co described the mobile sector of Kyrgyzstan as “healthy and open to foreign investment”.
According to the Kyrgyz State Communications Agency, the 5G communication standard will be launched in pilot mode by the end of 2021. The “Concept of the Digital Economy of Kyrgyzstan for 2021-2023” notes that 5G will be implemented by the end of 2023. The coronavirus pandemic has also contributed to the delay in the 5G launch date. Today, there are three large mobile operators in the country: Megacom, “O!” and Beeline. If we talk about the history of the formation of the mobile communications market in the country, the past political turmoil in Kyrgyzstan also influenced the companies providing mobile communications services.
In 2006, Alfa Telecom launched a telecom operator Megacom, which belonged to the close associates of Maxim Bakiyev, the son of the former president of the country, Kurmanbek Bakiyev. Following the April revolution in 2010, the state confiscated and nationalized the assets of Bakiyev and his associates. So it happened with Megacom, where 100% of the shares became the property of the state. Now it is the only operator in the country with state administration and is controlled by the State Property Management Fund. Megacom has more frequencies at its disposal than its competitors.
In 2006, the Russian company Sky Mobile bought out the already existing local cellular company Bitel and entered the market of mobile services in Kyrgyzstan. In 2009 the brand was renamed “Beeline”. Today Sky Mobile is part of the international group of companies VEON Ltd, headquartered in Amsterdam. “Beeline” is the largest player in the region and operates in three countries of the region: Kyrgyzstan, Kazakhstan and Uzbekistan.
Communication operator “O!” appeared on the market in 2009. Oshka, as subscribers call it, is a fairly progressive company and has a good position in the Kyrgyz market. The current owner is the Kazakh company Tengri Partners. In open sources there is no data on the connection of this organization with the operator “O!” or other telecommunication companies.
Based on the above, the advantages of the telecommunications services market in Kyrgyzstan include a fairly healthy and monopoly-free market that allows three large mobile operators to compete fairly and offer subscribers the most favorable tariffs. Thanks to this, Kyrgyzstan ranks second in the world in terms of the cheapest mobile Internet. In general, it should be noted that even with a relatively low GDP, Kyrgyzstan occupies a leading position in the region in terms of mobile communication and Internet penetration, offering a good value for money.
The disadvantages include high dependence on Kazakh and Russian satellites, less developed and widespread fixed broadband Internet, uneven network coverage, and lack of network and Internet in remote mountainous corners of the country.
Tajikistan
Tajikistan ranks third in the region, overtaking Uzbekistan in terms of mobile penetration – 10.14 million SIM cards per 9.64 million population, which is 105.2 percent. In other aspects of the telecommunications sector, Tajikistan, along with Turkmenistan, is often in the last positions in Central Asia and in the world. Only one third of the population has access to the Internet – 3.36 million people, or 34.9% of citizens.
The country still has an expensive and slow Internet connection. As of August 2021, Tajikistan is ranked 131st in the list of countries in terms of mobile Internet speed with a mark of 15.70 Mbps, and 106th in the rating of broadband Internet speed with an indicator of 33.85 Mbps.
According to the Cable.co rating, the average price per gigabyte of mobile internet is $ 2.16. The price for broadband internet access is also high at $ 19.76 per month. In this regard, the country is in the last part of the ranking in the Internet accessibility index. The Internet remains expensive for the majority of the population.
Nevertheless, Tajikistan was one of the first in Central Asia to launch a 5G network. In August 2020, the operator Tcell activated 5G base stations in Dushanbe. A year later, in May 2021, another operator “Zet-mobile” completed testing and today offers full 5G connection services at four points in the capital.
There are five operators on the Tajik mobile market: MegaFon Tajikistan, Tcell, Babilon-T, ZetMobile and O Mobile. Let’s consider the history of market formation in detail.
One of the first foreign first foreign investors to appear on the Tajik telecom market is the Russian company MegaFon, which launched the MegaFon Tajikistan brand in 2001 through the closed joint stock company TT-Mobile. MegaFon managed to remain the main shareholder with a 75% stake, and the remaining 25% belong to the national operator OJSC “Tojiktelecom”.
The largest mobile operator in the country “Tcell” was launched in 2001. In terms of geographical coverage, the company consisted of two operators: “Tcell North” and “Tcell South”. In 2003, the two companies merged under a single Indigo brand. In 2007, a controlling stake in both owners was sold to the largest Swedish-Finnish company TeliaSonera. In 2017, the shares of TeliaSonera were fully redeemed by the Aga Khan Economic Development Fund (AKFED) for $ 27.7 million. Today this fund is the sole owner of the company.
Russian VimpelCom launched the Beeline operator in 2006 through its subsidiary Takom LLC. VimpelCom itself is part of the VEON group of companies. In 2018, due to tax harassment, VEON sold 98% of the shares of Tacom to its local partner, ZET Mobile, which at that time had only 2% of the shares. So the Russian shareholders left the market, and the operator became fully owned by the local company. In 2019, a rebranding took place and the operator changed its name to ZET-Mobile.
Babilon-T is the first national operator, founded in 2000, owned by Babilon Mobile CJSC. In open sources, it was not possible to find additional information about the history of the formation of companies.
The youngest player “O Mobile” was launched in October 2020. Positions itself as a popular, accessible, virtual operator. There is no information about the owners of the company in open sources. It is only known that “O Mobile” leases the technical infrastructure from “Tcell” and that the general director is a former employee of “Tcell”.
In general, despite the fact that there are five mobile operators in the country, Tajikistan ranks last in world rankings by many criteria. All this points to an underdeveloped market, high monopoly and low competitiveness of local communication providers. This, in turn, leads to high prices and low quality, poorly developed infrastructure, and inaccessibility of the network in some villages and remote corners of the country.
Bold aspirations to launch 5G do not bode well, as new technologies are expensive and market purchasing power is low. Considering the average data transfer rate, it would be much advisable to invest these funds in the development of infrastructure for 4G and LTE.
In order to remove the country’s market from monopolies, structural reforms are needed, the creation of more favorable conditions for foreign or private investors, and the creation of an independent regulatory body. Perhaps, in this case, the market situation will really change in a positive direction.
Turkmenistan
The penetration rate of mobile communications in Turkmenistan is 4.89 million SIM cards for 6.07 million of the population. In other words, the population is provided with mobile communications by 80.4%. But for all other indicators, such as price, speed of mobile communication and Internet, the country is at the end of the world rankings.
The Internet penetration rate is the lowest in the region – 33.20%, and the price for one gigabyte of mobile Internet is one of the most expensive in the world – $ 21.41. In the 2021 Internet Accessibility Index, Turkmenistan ranked 161 out of 169 countries of the world. And some data, such as the average download speed of the mobile Internet, are completely absent in open sources.
The country plans to launch 5G using a loan from the Asian Development Bank (ADB), but there is no information in open sources on the approximate launch date.
At the moment, there is only one cellular communication company “Altyn Asyr” with the TM CELL trademark operating in the country. However, this was not always the case. The MTS brand was the very first operator in Turkmenistan, and began operations in 2005 by purchasing 100% of the shares of the local small company Barash Communication Technologies. Inc” (BCTI). Having bought this company, MTS changed the brand name in 2006 to MTS-Turkmenistan. In 2010, the state revoked the operator’s license. In this regard, the company applied to the International Arbitration Court at the International Chamber of Commerce. In 2012, the companies managed to reach an agreement and resume the operator’s work.
The problems began again in 2017, when the operator’s permission to use frequencies was not renewed, and at the same time Turkmentelecom cut off communication and Internet services. All this happened despite the fact that MTS-Turkmenistan had a valid license at that time. In 2018, the company again filed a lawsuit, but this time to the International Center for Settlement of Investment Disputes at the World Bank about the violation of its rights as a foreign investor. During the disconnection of the operator’s communications, the company suffered losses in the amount of $ 1.5 billion. In 2019, MTS-Turkmenistan began the process of dismantling its equipment and left the country’s mobile communications market.
In 2017, when MTS was turned off, the state operator Altyn Asyr with the TM Cell brand was launched. After the departure of MTS in 2019, there was no other provider in the country except Altyn Asyr. The monopoly of TM Cell was reflected primarily on subscribers who had no other choice and were forced to pay high costs for a slow connection. Turkmenistan remains the country with the least developed telecommunications sector in the entire post-Soviet space. First of all, this is facilitated by the high monopoly of the state, the closedness of the market from investors, and the vulnerability of investors from the claims of state bodies. Since the country’s internal reserves are insufficient to build a full-fledged infrastructure for mobile communications and the Internet, the country needs foreign investment more than ever. However, Turkmenistan needs to do an enormous amount of work to create a legal framework within which investors will be protected at the legislative level from illegal interference and from artificially created obstacles to doing business.
Uzbekistan
Uzbekistan ranks last in the region in terms of mobile penetration. Only 69.2% of citizens have access to mobile communications, which is 23.34 million SIM cards for 33.70 million people. About 18.60 million citizens or 55.2% of the total population have access to the Internet. In terms of Internet penetration, the country ranks second in the region after Kazakhstan.
The country ranks 122nd in the world (18.92 Mbps) in terms of mobile Internet speed and 94th in terms of fixed broadband Internet speed (40.64 Mbps).
In the latest rating “Internet Accessibility Index“, which displays the final ratio of the price and quality of the Internet, Uzbekistan is in 112th place out of 169 countries in terms of the price and availability of the Internet. This means that the country has an expensive and slow Internet. The average price of one gigabyte of mobile Internet is 60 US cents, and the average cost of broadband Internet access is $ 16.50 per month. Given the country’s GDP, stable internet access remains an expensive pleasure for the majority of the population.
Despite the fact that Uzbekistan is not the leader in the region in terms of Internet speed, the country was the first in Central Asia to deploy the latest generation of 5G Internet connection. The largest state mobile operator Ucell launched 15 5G base stations in test mode in April 2021 in the central part of the capital, and 5G testing began back in 2019 by Uzmobile and Ucell operators. To launch 5G, Uzbekistan, like its neighbors, relies on the technical base of the Chinese company Huawei.
The mobile communications market of Uzbekistan is unique, out of five mobile operators that operate, three are fully state-owned and occupy the largest market share. These include: Ucell, Uzmobile and Mobiuz (formerly UMS). Private operators are: Beeline and Perfectum Mobile.
A large Russian network provider MTS was the first to enter the mobile communications market of Uzbekistan in 1991 through its subsidiary Uzdunrobita. The company was successfully operating and was one of the largest mobile operators in the country. But after a corruption scandal in 2012 involving the ex-president’s daughter Gulnara Karimova, the government revoked the license and seized the assets of the companies. The company was finally disbanded in 2013.
The second attempt of MTS to enter the Uzbek market is the launch of the operator “UMS” together with the government fund for the development of the digital economy “Digital Trust” in 2014. The new operator was launched on the infrastructure base that belonged to the former Uzdunrobita. In 2016, the state bought a 50.01% stake in MTS for a symbolic one dollar, since then UMS is fully owned by the state. In 2019, the operator changed its name to “Mobiuz”.
In 1996, the Swedish-Finnish company TeliaSonera began its activities in Uzbekistan through its subsidiary COSCOM, half of whose assets belonged to the state. In 2008 the company was renamed to “Ucell”. In 2018, Uzbekistan acquired TeliaSonera’s share in Ucell for $ 215 million. Thus, “Ucell” was sold to the state, and foreign investors left the market.
Russian VimpelCom entered the Uzbek market by purchasing Unitel and Buztel in 2006, and launched the Beeline operator. In 2012, a corruption scandal erupted with the daughter of the former president, Gulnara Karimova. This is the second Russian company that was involved in a corruption scheme with the ex-president’s entourage. In connection with the scandal, the company suffered losses in the amount of one billion dollars, but unlike MTS, it managed to stay on the market. Despite the corruption scandal, the company today is very successful in its business and is one of the largest players in the market. The Unitel company representing the Beeline brand in Uzbekistan is part of the VEON group of companies.
Rubicon Wireless Communication launched the Perfectum Mobile operator in 2001. Positions itself as a socially oriented operator that offers tariffs at discounted prices. In October 2020, there were reports on the network that the company was being prepared for sale to private investors.
Analyzing all the processes in the mobile communications sector, one can conclude that the Uzbek market is very active, where many processes are taking place. On the positive side, foreign investors, in particular Russian ones, are very interested in the market, since it has a huge potential with a constantly growing number of subscribers and a low level of saturation.
The weak side is that foreign business partners face conditions imposed by the government and eventually leave the country’s market. In this situation, the prices for mobile communications and the Internet run the risk of remaining high, and the quality of the connection is low. But hope appeared after the arrival of the new leadership of the country. The strong interest of the state in the launch of 5G is already a good sign, and the investment may change for the better in the future.