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Uzbekistan - Telecoms, Mobile, Broadband and Forecasts

Uzbekistan - Telecoms,    Mobile,    Broadband and Forecasts

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Publisher: BuddeComm

Product Code: BC-111030

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Action by Uzbekistan against MTS subsidiary reinforces countrys reputation as being hostile to foreign investors

For a long time Uzbekistans telecom infrastructure remained outmoded and inadequate. The country has been struggling to bring its telecommunications system up to the standard found in developed markets. Nevertheless, over the last decade or so, the situation has been gradually improving. This has in part been due to the governments decision to give national priority to Information and Communications Technologies. Consequently there has been an upward trend in the countrys telecom market, with increased investment in infrastructure, expanding subscriber bases and rising revenues. The governments strategic policy was to privatise the incumbent operator Uzbektelecom and to open the market to competition in accordance with the countrys aim to join the World Trade Organization (WTO).

The telecom sector has been regulated by the Uzbek Agency for Communications and Information (UzACI) since the creation of the agency in 2002/2003. In 2005 the UzACI approved a telecommunications investment program for the period 2005-2010. Among other things, the program aimed to increase the total number of fixed lines to 2.2 million and achieve 100% digitalisation of the network by 2010. The fixed line subscriber target was not achieved with subscriber numbers still languishing below 1.9 million. And only about two-thirds of the network was digital by 2007, but by March 2009 this has been lifted sharply to 89%, according to the Uzbek Agency for Communications and Information, and effectively achieved the target by end-2010. In the meantime fixed teledensity was stuck on around 7%. The five year telecom investment program also aimed at accomplishing marked improvements in mobile telephone and internet penetration. By 2011 both these segments of the market had shown significantly gains, with the mobile market in particular having expanded rapidly over the five years. Subscriber numbers had jumped from around one million to 21 million over the plan period. Funding for the investment program was provided by loans and foreign investment, the internal resources of operators and providers, as well as from government funding.

The state-owned national telecom operator, Uzbektelecom, has been responsible for the fixed-line network and services throughout the country. It was originally granted a monopoly on international voice services and VoIP until 2007. In the meantime, it controlled around 98% of local fixed-line telephony services and 96% of international fixed-line services. Little progress had been made in the governments plans to privatise Uzbektelecom despite several attempts over the last decade to sell off a sizable stake to a foreign investor. The alternative fixed-line providers were Buzton and East Telecom, but they were servicing only a limited numbers of subscribers.

Mobile telephony first arrived in Uzbekistan in 1992; by 2003 there were seven mobile networks offering a range of technologies and standards. All of the mobile operators were majority owned by foreign investors. One operator, Uzmacom, ceased business in 2005. Some further consolidation in the mobile market took place in 2006 when Buztel was absorbed into the Vimpelcom-owned Unitel; it seemed highly likely that further consolidation would occur in the not too distant future.

While the countrys internet market had enjoyed considerable growth since 2002, actual internet subscriptions have remained limited for the majority of the countrys population. Fixed broadband subscriptions in particular were small in number. By 2005 internet user penetration stood at just over 4%; by early 2012 it had reportedly jumped to 30%. (It is noted that the various sources for statistics on internet subscribers in Uzbekistan provide limited or contradictory information.)

In 2012 a dramatic turn of events saw the government take strong action against mobile operator MTS Uzbekistan after alleging a range of violations, including tax evasion, failure to meet regulatory standards, and the use of unlicensed infrastructure. The conflict escalated dramatically in August 2012 with the cancellation of MTS Uzbekistans operating licence. Then, in September, the companys assets were seized. This effectively resulted in its nationalisation. Industry reaction to the series of events was one of serious concern and the process was certain to be viewed negatively by potential foreign investors.

Major highlights:
  • By early 2012 mobile penetration in Uzbekistan had moved past 90%, with mobile subscriber numbers having increased to over 25 million;
  • After the countrys mobile subscriber base grew by more than 100% in 2008, annual expansion has eased to around between 20%-30%;
  • Actual growth in 2011 was 22% and a similar figure was likely for 2012;
  • Fixed-line growth in Uzbekistan has been almost non-existent in recent times;
  • With slightly less than two million fixed subscribers, fixed penetration continued to sit at just 7%;
  • On the positive front, however, has been the accelerated conversion of the fixed network from analogue to digital with the 100% target having been effectively achieved;
  • On the basis of published statistics, recent growth in internet usage has been considerable and user penetration had reportedly reached 30% coming into 2012;
  • There was an ongoing surge in the growth of broadband internet subscriptions, but from a very small subscriber base;
  • Fixed broadband subscriber penetration was still below 1% in 2012;
  • The government of Uzbekistan has continued to keep a tight control over some aspects of internet usage and has come under some international criticism for its repressive policies in this regard;
  • The government both directly and through the telecom regulator commenced vigorous action against mobile operator MTS Uzbekistan in 2012 after alleging a range of violations, including tax evasion, failure to meet regulatory standards, and the use of unlicensed infrastructure;
  • The conflict escalated dramatically in August 2012 with the cancellation of MTS Uzbekistans operating licence; in September MTS assets were seized effectively nationalising the company.

This report provides an overview of the trends and developments in the telecommunications markets in Uzbekistan. Subjects covered include:
  • Key statistics;
  • Market and industry overviews;
  • Major operators (mobile and fixed);
  • Regulatory environment;
  • Infrastructure;
  • Mobile market voice and data;
  • Internet market, including broadband.
Other information

Published: September 2012
Number of Pages: 31 pages

Format: PDF/Hard Copy

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