Telco sector bigwigs converge on Istanbul

Doing telco sector business in Turkey, the Caspian region or Central Asia?
......head for Eurasia Com at Istanbul's Conrad Hotel this March.

A belated Happy New Year to all loyal readers of (and occasional visitors to) DevelopingTelecomsWatch.

I daresay some of you will have found 2009 above-averagely challenging and are looking forward hopefully to a more prosperous and settled year ahead.

With this in mind, DTW will soon be evaluating some predictions about what 2010 may have in store for those of us with an interest in the telecoms sector in emerging markets and developing countries worldwide.

In the meantime, we will be using the announcement of the conference agenda for this year's Eurasia Com conference in Istanbul as the inspiration for a look around developments in Turkey, the Transcaucasus region and Central Asia. These are the markets from which the event gathers telecoms sector leaders for two days of discussions and networking.

My guess is that I will not be able to attend the conference - taking place at Istanbul's Conrad Hotel on 23-24 March - but I would definitely recommend it as a useful place to make new contacts and catch up with existing ones if you do business with the telecoms operators of that part of the world. I feel qualified to make this recommendation, having attended two iterations of the event, and having been involved in its development between 2006 and 2009.

This year's speaker panel includes a glittering array of telecoms leaders from both the host country and from numerous CIS markets. Those able to attend will have the opportunity gain a uniquely valuable opportunity to learn from these panellists - and some will doubtless advance their cases for doing business with the speakers' organisations.

While I daresay, however, that many of the presentations and public panel discussions will be somewhat insightful, my experience of attending many conferences has taught me that delegates can learn far more by being above-averagely proactive. This means being a real participant rather than a mere attendee. It means doing more than just scribbling/typing notes during the conference sessions. It means more than downloading the presentation slides.

So, if you make it to the Conrad Hotel in Istanbul, be sure to come prepared with the questions you particularly want answered. Then make the effort to direct those questions to relevant speakers, keeping in mind that however effectively the sessions are moderated, there will not be time for the Chair to deal with everyone who has something to ask. Should your most urgent questions not get dealt with, be sure to be one of those confident people seen springing from a front row seat to shake hands and exchange business cards with the hottest speakers the second the session breaks for strong Turkish coffee. Then might be the time you will finally make your point or extract the answers you're looking for. Or your possibly rather sensitive enquiry might best be handled over that coffee and a piece of sweet, flaky baklava. Failing that, the business card you've gained could be the key to setting up post-event conversations.

Question time: get the answers over coffee and Turkish treats at Eurasia Com

Does this all sounds like advice that's basic to the point of being a bit patronising? I hope not. It is, after all, offered as a result of having watched countless conference delegates fail to maximise the value of the investment their companies had made by paying for them to attend - even with the free tickets for which employees of telecoms operators and service providers are eligible at Eurasia Com and other Com World Series events, some costs are implied, be it plane tickets and hotel bills for out-of-town delegates, or just the cost of being away from the day job.

If you do decide to attend, and do attend on a mission to learn about developments in the region covered by the conference, what questions might you direct to the numerous worthies on the speaker panel?

Given that the CIS markets of Central Asia and the Transcaucasus region were among the first places that Russia's major telecoms players looked for international growth opportunities, you would hope that Eurasia Com is able to offer access to their top management. The event does not disappoint - gracing the stage for the opening Keynote Session will be Mustafa Kiral, Vice President of Altimo and Oleg Raspopov, who heads up the 'Foreign Subsidiaries' Business unit of giant Russian cellco MTS.

Any industry watchers with a strong interest in the latter company, might be tempted to try and squeeze in a question about the operator's hopes for its mobile broadband offering in Moscow, now that 3G services can finally be made available in the Russian capital. A full year after 3G services were offered in other parts of Russia, Muscovites learned last month that the country's military authorties were finally ready to cede control of the necessary spectrum and enable operators to switch on their W-CDMA base stations.

Given Mr Raspopov's responsibilities, however, and given the geographical coverage of the conference agenda, perhaps it might be more germane for delegates to ask the MTS man whether his company has any interest in further extending its CIS footprint. At present, MTS subsidiaries compete in Uzbekistan, Turkmenistan and Armenia. Away from the immediate focus region for this conference, further MTS business units operate in Ukraine and Belarus.

Strikingly absent from the MTS sphere of influence are two of the region's potentially more attractive markets - MTS does not compete in either Kazakhstan or Azerbaijan.

In June last year, MTS CEO Mikhail Shamolin told Reuters that his company was looking at acquisition opportunities in both countries, having decided that the prospects for a start-up operation were not good in either market.

It now appears, however, that the opportunity to make an acquisition in Kazakhstan has now passed. That country's mobile arena is contested by four operators, with the market split as follows, as of end-December 2009, according to the WCIS service offered by the organisers of Eurasia Com, Informa Telecoms & Media:

• Beeline Kazakhstan (Vimpelcom), 43.27% share
• KCell (TeliaSonera Eurasia/Turkcell), 42.87
• Neo, 7.29%
• Altel, 6.57%

The two leading mobile operators, then, are controlled by MTS's main rivals in the region and are therefore, surely, extremely unlikely targets for addition to Mr Raspopov's Foreign Subsidiaries Unit. Altel, too, as a rare example of a CDMA operator in the region, strikes me as a company one cannot easily imagine on the MTS shopping list.

Neo, a late entrant GSM operator which went to market in 2007, would be the logical choice for an MTS purchase. A majority stake in this cellco, however, is to be snapped up by Tele2, the Sweden-headquartered pan-European telecoms group. This transaction, as reported in December, involves Tele2 paying around USD 77 million for the 51% stake held by Kazakhstan's incumbent fixed line operator, Kazakhtelecom, which also owns 49% of KCell. According to a Wall Street Journal report, Tele2 has the option to buy the remaining 49% of Neo shares in five years' time from private investment group Asianet Holdings BV.

It will now be interesting to see how much Tele2 makes of the opportunity that MTS has declined to puruse in Kazakhstan. Interesting, too, to see how far the company's usual preference for competing aggressively on price will impact on the Kazakh market.

Speaking on a conference call, Tele2 said that Neo currently has lower prices and lower ARPU than its two larger rivals, so it remains to be seen whether tariffs can be cut further in order to gain market share. According to the WSJ article, a market share of 20% is what Tele2 has in mind.

Of further CIS markets likely to prove attractive to MTS, perhaps only Azerbaijan remain. A June 2009 article here at DTW noted that the Caucasus region country, although quite small with a population of just under 9 million, is oil-rich and relatively prosperous. It is notable, therefore, that of the three groups with footprints across the southernmost CIS markets, only the TeliaSonera-Turkcell joint venture Fintur Holdings has a presence - in the form of market-leading MNO Azercell, none of whose competitors are aligned with a significant multinational telecoms groups. Of these competitors, one will be represented at Eurasia Com by its CEO - Ineke Botter, who heads up Bakcell, is among the speakers. A cheeky question one might direct to Ms. Botter would be to ask whether she feels either her company or the third entrant, Nar Mobile, is a likely acquisition target for MTS or Vimpelcom, which similarly has no presence in Azerbaijan.

With Tele2 having seized the opportunity to move into the Kazakh market, conference delegates may be wondering what impact this may have on the country's telecoms landscape. Questions along these lines can be raised at Eurasia Com, the ideal time for this probably being a morning session on Tuesday 23rd March which deals specifically with the rapid maturation of the Kazakh telecoms market. Fielding the questions will be Kuanysbek Bahytbekovich Yesekeev, Chairman of that Kazakhstan Agency of Information Technologies and Telecommunication, and Maxut Sauranbekov, President of CDMA operator Altel.

A new feature of the conference this year is a day two session focussing specifically on the Turkish market. A very strong line-up of speakers will be on hand to debate the key issues. These include:

• Erkan Akdemir, CEO of Avea, the mobile operator in which incumbent wireline telco Turk Telekom holds a controlling interest
• Mehmet Toros, Turk Telekom's VP International and Wholesale
• Tayfun Cataltepe, the Chief Corporate Strategy & Regulations Officer of market-leading MNO Turkcell
• John Samarron, CTO of Vodafone Turkey

This year's event looks set to be even more useful than previous iterations and I look forward to feedback from colleagues and contacts who are able to attend.

Telco sector bigwigs converge on Istanbul

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

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.

Who provides telecoms services in states with limited recognition?