Eurasia Com: doing the business in Turkey and the CIS

Back in January, I wrote about the Eurasia Com conference which the good folks at Informa Telecoms & Media host annually in Istanbul, taking place in either March or April. At the time, I thought it was unlikely that I would be able to attend. Happily, it did turn out to be possible after all,  meaning that I am able to report some of what was discussed at the Conrad Hotel on 23rd and 24th March.

For those not familiar with the event or with the wider series of related conference-plus-exhibition events of which it is a part, a few words of explanation:

• Informa's Com World Series evolved from what was once known as the GSM (and later GSM>3G) World Series of events. The GSM series was itself a spin-off of the GSM World Congress (now Mobile World Congress), of which Informa was the original founder.
• The GSM World Series brought scaled-down versions of the main event to a selection of locations ranged around the world's emerging markets. In each location, the aim was to gather large numbers of decision-makers from the mobile operators of the region around the host city. These locations included cities in Africa, Asia, Latin America and Central and Eastern Europe.
• The Com World Series brand was introduced a few years ago to reflect a perceived need to offer meeting points for a broader community than just GSM mobile operators. The organisers were mindful of the idea that the previously quite sharp fixed-mobile distinction was becoming increasingly fuzzy around the world. They thought about what had once been pure play mobile operators offering other kinds of broadband service, either by building new networks (copper, fibre, fixed-wireless) or in partnership with established fixed-line operators. They thought about new mobility propositions from companies whose previous offerings had not been in the cellular space. They thought about incumbent fixed-line operators merging with previously quite separate mobile business units (think in terms of what Deutsche Telekom is doing all over the CEE region).
• Throughout this evolution, Informa's series of events has stuck to a pretty successful business model, which is still in place today - operators (and other telecoms service providers) attend for free, with most of the revenue coming from any organisations with products and services to sell into the operator space. This includes the major network technology vendors and all manner of software companies, systems integrators, consultancies etc.
• Eurasia Com is a relatively new part of the Com World Series, although this year's iteration was the fourth to take place in Istanbul, having been relocated from Almaty, Kazakhstan, where the event first took place in 2006.
• The challenge which the organisers face - and which I feel they met pretty successfully this year - is bringing together a crowd from what are quite diverse markets. A large Turkish contingent (representing the likes of Turk Telekom, Vodafone Turkey, Turkcell, Avea and Koc.net) mixes with delegates from the former Soviet republics of Central Asia and the Caucasus, making it necessary to arrange for everyone to gain from presentations in Turkish, Russian and English. If you attend next year, expect to spend some time wearing a headset which pipes the simultaneous interpretation right into your ears.

That, then, is a little about the event, its origins and how it works on the day. The challenge mentioned above (making the conference relevant for both Turkish delegates and for guests from the CIS) was dealt with this year by having elements of the second day billed specifically as a 'Turkey focus' session, thereby acknowledging that there probably do exist some differences between the concerns of the local audience of those of the visitors from the former Soviet republics where market conditions are quite different.

I am pleased to report that this worked well. As a veteran of more conferences than I care to remember, I have got used to seeing events looking busy on day one and feeling a lot less vibrant on the second day. At Eurasia Com 2010, delegate numbers were, I think, possibly even higher on 24th March than they had been on 23rd.

So, what was discussed during these two days of slideware, panel sessions and offline networking? Well, in the sessions I managed to catch, highlights included:

• Informa analyst Gemma Bunting cautioning delegates to remain open minded about real mobile penetration rates across the CIS, noting that multi-SIM usage makes accurate measurement quite difficult and pointing out that in the supposedly saturated Russian market over 20 million subscriptions were added by operators last year.
• Informa's Bunting noting that ARPU is declining sharply in some markets - Uzbekistan was given as an example - USD 9/month in 2007, dropping to USD 4/month by 2009.
• Gemma Bunting wondering about the impact of Tele2's acquisition of a mobile operation in Kazakhstan and observing that the Swedish group is known for its aggressive pricing.
• Ineke Botter, CEO of Azeri cellco Bakcell indicating the a mobile money offering from her company might not be iminent but was certainly "on the roadmap".
• Mustafa Kiral of Russian telecoms investment group Altimo indicating that his company is in the market for opportunities to acquire majority stakes in telecoms operators in emerging markets - African markets were mentioned.
• Altimo's Kiral sounding lukewarm at best when the conference Chairman asked if Altimo is considering investments in the wireline space.
• Mehmet Hasanov of Aztelekom talking up the revenue potential of the wholesale business and wondering why telcos' marketing people are generally so inclined not to get excited about it.
• A few snippets about the planned privatisation of Tajiktelecom.

I was not surprised, also, to learn more in offline conversations than I did from listening to presentations. The lesson here, for those few conference veterans who do not already know, is that it's important to get proactive at these gatherings - get among the delegates and speakers, working the room and maximising the opportunity to develop a good number of valuable contacts under one roof.

My guess is that 2009 was at least moderately challenging for conference organisers and that delegate numbers across the events industry may have been negatively affected by financial worries on the part of target audiences. My recent experience in Istanbul, however, just went to confirm that there continues to be no substitute for making face-to-face contact with potential new clients and partners and that events of this type can be a pretty good one-stop-shop for doing so. I would also particularly recommend this and other events in Informa's Com World Series for the way in which they gather crowds from given higher growth regions around the globe.

Eurasia Com: doing the business in Turkey and the CIS

Azerbaijan: as the Ministry pushes 3G licences, the market is eyed by giant Russian cellco

It's time to take a break from writing about the rumoured sales of Zain's African assets to Vivendi (or whichever potential buyer is the flavour of the day), although I daresay there will be cause to return to that theme before too long.

Instead, I wanted to take the opportunity to take a look at a part of the world about which I got to learn a little while producing three annual iterations of a conference for telecoms execs from the former Soviet Republics of Central Asia and the Caspian region. One of these countries, Azerbaijan, is, according to recent local reports, moving closer to making 3G mobile licence awards, with the the Ministry of Communications and Information Technologies planning to distribute spectrum by the end of this year.

This is apparently not the Ministry's first attempt to bring 3G services to Azeris. According to a brief TeleGeography report, the MCIT submitted a 3G frequency use proposal to the country's cellcos in July 2008, "but few developments have emerged since."

Now, according the the Minister, Ali Abbasov, all the three of the country's GSM operators have already applied to the Ministry for 3G licences. These three operators are: Azercell, Bakcell and AzerFon (brand name: Nar Mobile), with market shares of 58.66%, 22.29% and 18.00% respectively as of March 2009, according to WCIS. A fourth player, CDMA operator CATEL/FONEX has just over one per cent of the country's mobile subs.

Given that oil-rich Azerbaijan is potentially quite an attractive market, it is striking that only one of these operators is associated with a significant multi-country group - market-leading Azercell is controlled by Fintur Holdings, a joint venture between giant Scandinavian telco TeliaSonera and Turkey's Turkcell. Fintur Holdings, via a mix of majority stakes and management control arrangements, is also active in Kazakhstan, Moldova, Georgia, Uzbekistan, Tajikistan, Cambodia and Nepal.

Strikingly absent from the Azeri market are big Russian cellcos, two of which, Vimpelcom and MTS, have each built a multi-country footprint across other parts of the former Soviet Union. This may be set to change, if recent comments from the latter company's CEO are interpreted as representing a firm commitment to further international expansion.

Speaking to Reuters on the sidelines of the of the St Petersburg Economic Forum earlier this month, MTS CEO Mikhail Shamolin said "there are two countries (where) we are not present yet and I believe we should be present... Kazakhstan and Azerbaijan."

Shamolin added that MTS is not thinking in terms of start-up operations in either country, which seems sensible given that mobile penetration in Azerbaijan and Kazakhstan stand at 71.11% and 93.81% respectively according to WCIS. "We are looking at acquisition opportunities there," said Shamolin. "We are waiting until the right time comes. When this opportunity shows up then we will consider it carefully." He added that the company was not holding specific talks with any Kazakh or Azeri firms.

In Azerbaijan, you would have to guess that TeliaSonera and Turkcell will look to hold on to their market-leading MNO. So let's see which of Bakcell or Nar Mobile might be targeted for an MTS takeover.

Azerbaijan: as the Ministry pushes 3G licences, the market is eyed by giant Russian cellco

Nordic telcos' emerging markets plans for 'challenging' 2009

In July 2007 I was pleased to provide meeting facilities for in Dhaka, Bangladesh for a gathering of the South Asian GSM Forum, whose Chairman Mehboob Chowdhury was a key supporter of the following day's Mobile South Asia conference of which I was co-organiser. Mr Chowdhury, a former Chief Commercial Officer of Orascom Telecom-backed Banglalink, had fellow Forum board member Stein Naevdal run the pre-conference meeting. Mr Naevdal, now CMO at Bakcell of Azerbaijan, was with Bangladeshi operator Grameenphone at the time, a company owned by Grameen Telecom and Telenor.

Having had the opportunity to meet members of Grameenphone's senior management team, and having had a quick look round a Grameenphone retail store on the busy streets of Dhaka, I have continued to take an interest in the performance of this and other MNOs across Telenor's collection of emerging markets operations.

An article carried yesterday by Telecompaper reported Telenor's cautious forecast for the "challenging" year ahead: stable organic revenues and an adjusted EBITDA margin around 34 percent, versus a reported 34.7 percent in 2008.

The article indicates that the Norwegian company's $US 1 billion purchase of a majority stake in Indian cellco Unitech Wireless is not expected to add significantly to revenue and will generate and EBITDA loss of of NOKA 2-2.5 billion ($US 295 million-369 million). Revenues are not expected to begin flowing from the greenfield operator, which has licences in all 22 of India's telecoms circles, until mid-2009.

The largest shareholder in Telenor, the 7th-ranked telecoms operator in the world in terms of subscriber numbers, is the Norwegian Government, which was apparently initially supportive when the business proposed a rights issue in order to fund the Unitech Wireless purchase while maintaining the company's credit rating.

While Telenor CEO Jon Fredrik Baksaas has continued to express great confidence in the long-term value of the move into the Indian market, investors have not responded well to news of the acquisition. The proposed rights issue has also attracted criticism, not least from Norway's Conservative opposition, which attempted to persude the Government to prevent Telenor from selling shares to fund the Indian adventure.

A Bloomberg TV interview with Baksaas on November 9th was prefaced with a reminder that Telenor's share price fell by as much as 20% on the trading day on which the Unitech deal was announced. Baksaas reponded by saying "The negative swing in the share price was greater than we had expected... but in order to build a long-term... mobile operation takes years." He reminded viewers that the company has been making such long term bets in Ukraine, in Russia, in Malaysia and in other countries for many years. "It is a period of investment that's needed in order to grow towards a sustainable, long-term position," Baksaas explained.

Baksaas told viewers about the criticism Telenor faced when entering Ukraine, then "one of the poorest countries in Europe" in 1997 and stated that Kyivstar now one of the best performing contributors to the Telenor business.

When interviewed by the same channel twelve days later, by which time the fall in Telenor's share price (since the Unitech announcement) was 26%, described by the interviewer as the largest in eight years, Baksaas was speaking about the good growth prospects afforded by India's low teledensity relative to other countries in the region. He sounded lukewarm about the prospect of Unitech getting involved in the Indian 3G licence auction, saying that the company would be intitially focused on "basic services". Baksaas was also keen to express the belief that the telecoms industry is likely to be more resilient than many sectors in a downturn.

Late last month, Telenor finally withdrew the proposed rights issue, electing instead to fund its investment in Unitech Wireless in India through a combination of cash flow and issuance of additional debt. A proposed immediate result of this will be to make no payment of dividend to shareholders for 2008 or 2009.

Yesterday, another Nordic telecoms giant was reporting a positive contribution from emerging markets business units. As reported by Telecompaper, TeliaSonera's Eurasian activities continued to show strong growth, with sales up 45 percent to SEK 4.2 billion and EBITDA rising 57 percent to SEK 2.1 billion. Consolidated since October 1, 2008, the operations in Nepal and Cambodia affected net sales positively by 5.8 percent. However, according to Total Telecom, TeliaSonera cautioned that it needs to "be prepared for a potentially drawn-out economic downturn that may affect consumer and corporate behavior."

Nordic telcos' emerging markets plans for 'challenging' 2009