News, views and commentary from the telecoms sector across emerging markets and developing countries worldwide

Sunday, 15 March 2009

Who provides telecoms services in states with limited recognition?

Late last year, I had more than one opportunity to chat with friends in the telecoms space who have worked for businesses with operations in Georgia - the transcaucasian country, not the US state. Inevitably, the subject of the August armed conflict with Russia and with separatist groups from South Ossetia and Abkhazia was discussed. I did not hear reports of very serious damage to telecoms infrastructure. This is confirmed by an extract from a statement by a shareholder in Magticom, one of the two mobile operators licensed by the Tbilisi Government:

"Magticom started the year with a strong performance compared to budget and last year. The conflict with Russia during August caused some damage both to the Georgian economy and to future economic prospects. The full effects of the conflict are yet to be determined. Magticom's physical infrastructure, however, was not badly damaged bythe conflict."

Magticom, which had a 42.28% share of Georgia's 3,352,100 mobile subscriptions by December(according to WCIS), launched a CDMA450 WLL network last summer. According to my fomer Informa Telecoms & Media colleague Gemma Bunting, writing for Mobile Communications Europe, Magti Fix is primarily aimed at people in rural areas with poor fixed-line access. As Gemma noted in her article, Magticom is also active 2G and 3G mobile services as well as Internet access via Wi-Fi and WiMAX.

The Magticom WiMAX offering caught the eye of Andrew Mitchell, writing for for Yankee Group's 4G Trends next generation wireless publication last month. Mitchell noticed Magticom's launch of a mobile WiMAX service offering on February 9, quoting the company's CEO David Lee: "The service we are launching is not only the country’s first WiMAX offering but also the fastest Internet connection available in Georgia to date." The carrier will deliver mobile WiMAX services to both consumer and business markets and plans to include VoIP as well, notes Andrew Mitchell, who also observes that offering wireless connectivity in a country like Georgia presents a number of unique challenges such as mountainous geography and the distribution of its population. Mitchell feels that WiMAX "has continually demonstrated an ability to rise to the engineering and business challenges that are unique to emerging markets."

As far as the Georgian Government is concerned, Magticom should be competing with only two other mobile operators. Of these, Geocell is the country's mobile market leader and is one of the CIS outposts of the Fintur Holdings/TeliaSonera Eurasia empire. The third officially licensed competitor is the Georgian subsidiary of Vimpelcom, which has managed to grab just a 6.78% share of the market since its launch in March 2007.

These are not, however, the only mobile operators active on land which the Georgian Government considers to be within its sovereign territory.

In the aftermath of the August conflict, Russia recognized the Georgian regions of South Ossetia and Abkhazia as independent states. Of UN member states, only Nicaragua has followed suit. Abkhazia, which lies at the eastern edge of the Black Sea, has been the scene of conflicts and tensions since the disintegration of the Soviet Union at the end of the 1980s, when ethnic tensions grew between the Abkhaz and Georgians over Georgia's desire for independence. The 13-month Abkhazian War began in August 1992, and hostilities flared up again in 1998 and 2001.

In the telecoms domain, Abkhazian desire for independence from Georgia is manifested in the form of two GSM operators which offer services in the disputed region.

One of these is A-Mobile, which started its operations on November 25, 2006. WCIS estimates that the operator now has just over 44,000 subscribers. The other, Aquafon, was established in March 2003, with its network becoming operational on July of the same year. WCIS market intelligence indicates that the operator now has around 82,000 subscribers. The population of Abkhazia is estimated to be be somewhere between 160,000 and 190,000. In September 2008, Aquafon officially launched its 3G network. 51% of Aquafon's shares are owned by Mondeo Holdings, an offshore company based in the British Virgin Islands, in turn owned Bermuda-registered ComTel Eastern, which also owns 31% of MegaFon, one of Russia's 'big three' cellcos.

On January 23rd, the UK's Guardian newspaper gave space to an article which was extremely critical of what its author percieves as the Russian Government's desire to "revive a lost empire, the Soviet Union." The writer of this piece, the lawyer Anthony Julius, alleges that "Russian businesses have... been encouraged to collude with state and state-security entities in order to expand Russian influence in the region," adding that "the Russian mobile telecoms company Megafon has operated in South Ossetia since 2004, and Aquafon (Megafon's subsidiary) has been in Abkhazia since 2003." Megafon, writes Julius "does not have a licence to operate in either region [but] on the day that fighting broke out in August last year, the company extended its coverage further into Georgian territory."

Not long before the conflict of last August, Georgia's telecoms regulatory agency had fined Megafon USD 3500 over what it alleged to be an illegal network, operated without a license, according to a Global Mobile Daily article at the time.

Although Russia and Nicaragua are the only UN member states to have recognised Abkhazia and South Ossetia, these two regions are also recognised by the de facto independent state of Transnistria, another disputed area within the former Soviet Union. Located mostly in a strip of land between the Dniester River and the Ukrainian border, Transnistria declared independence after the dissolution of the USSR. This led to a brief war with Moldova that started in March 1992 and was concluded by the ceasefire of July 1992. As with Abkhazkia, Transnistria is home to a telecoms operator of its own. Interdniestrcom, founded in 1998, offers Internet access and operates a CDMA2000 mobile network whose coverage area includes almost all of the Transnistria region.

Another de facto independent state on former Soviet territory is the Nagorno-Karabakh Republic, a predominantly Armenian-populated region which was the object of a dispute between Armenia and Azerbaijan as far back as 1918, when both countries gained independence from the Russian Empire. In the final years of the Soviet Union, the region re-emerged as a source of dispute between Armenia and Azerbaijan, culminating in the Nagorno-Karabakh War fought from 1988 to 1994. The country remains unrecognised by any international organization or country, including Armenia.

Again, this is a de facto state served by its own telecoms company. Karabakh Telecom offers GSM mobile services, PSTN services and Internet access, covering 75% of Nagorno-Karabakh and almost 100% of the capital Stepanakert and its suburbs.

In Africa, one state stands out for existing largely in a de jure capacity. Somalia has a weak but largely recognised central government authority, the Transitional Federal Government, but this is only the latest in a series of ineffectual, externally recognized governing authorities. De facto control of the north of the country resides in the regional authorities. Of these, Puntland, Northland State, Maakhir, Galmudug, acknowledge the authority of the TFG and maintain their declaration of autonomy within a federated Somalia, while Central, Southern Somalia and Kismayo are in the control of the Islamic Courts Union and Al-Shabab. Baidoa is currently the seat of the TFG, and Somalia's commercial centre. On the other hand, the Somaliland region in the north, with its capital in Hargeisa, has declared independence and does not recognise the TFG as governing authority. Its self-declared independence is unrecognised internationally due in part to opposition from the TFG and other countries, such as neighbouring Ethiopia, which fear ensuing secessionist movements.

Golis Telecom Somalia operates in North East Somalia, offering fixed and mobile services in both Puntland and the self-declared independent state of Somaliland.

I daresay this is not a truly exhaustive tour of telcos operating in states with varying degrees of limited diplomatic recognition. I just wanted to explore briefly the question of who extends communications services to people who live in the world's disputed territories. I enjoyed meandering around these curious places and if anyone reading this found it interesting that's even better.

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