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Central Asian incumbents up for sale - companies and markets

In its telecommunications report for 2Q09, analyst Companies and Markets has refined its review of Central Asia into a study of the five individual countries of the region. Fixed-line penetration remains low, even allowing for Kazakhstan's relative success. Proposed privatisations will be tempting once they have been agreed.

The current quarter sees some major changes to the layout of the Central Asia telecommunications report from UK analyst companies and markets. Fixed-line market data analysis has been separated into a country-by-country basis and there is additional market data analysis for the broadband sector. What is unchanged is the fixed-line forecasts for 2Q09 for the five countries: no new data has come to light.

The company believes that the fixed-line markets in each of the countries Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan have continued to grow through 2008. The region is, however, characterised by relatively low fixed-line penetration with all of the countries apart from Kazakhstan having fixed-line penetration of under 10%. Kazakhstan is "the jewel in Central Asias rather dusty fixed-line crown" with penetration of over 20.3% according to the analysts' estimates.

Owing to the relatively underdeveloped nature of the regions fixed-line infrastructure' the Internet and broadband sectors are "extremely immature." At the end of 2007, Kazakhstan led the way with 1.75% broadband penetration, followed by Kyrgyzstan with 0.05% and Uzbekistan with 0.03%. No data was available for Turkmenistan and Tajikistan.

The report is optimistic for the future: investment is being poured into the regions Internet and broadband sector and the coming years should see the sector developing rapidly. As well as the upgrades of fixed infrastructure to provide ADSL services, wireless technologies such as WiMAX and CDMA should see subscriber growth.

The recent launches of IPTV services in Kazakhstan and Uzbekistan illustrate the technological development of some small areas in the region, and the challenge for the operators in the future is to expand service coverage.

The incumbent fixed-line operators are earmarked for privatisation and although the privatisation processes have been drawn out they are likely to attract a great deal of interest when they finally go through. Major international players such as Russias VimpelCom and South Koreas KT Corporation already have a presence in the fixed-line and Internet sectors and the chance to acquire one of the national incumbents will pose too big an opportunity to pass up.

The mobile markets of each of the countries are by far the most liberal and the most developed but once again penetration and development varies greatly among the five countries. Kazakhstan leads the way again with an estimated mobile penetration rate of 97.9% and we expect it to remain the leading country in terms of mobile penetration over the remainder of our five-year forecast period.

However, in terms of subscriber figures Uzbekistan looks set to overtake Kazakhstan in 2009 despite having a much lower penetration. Huge subscriber growth rates throughout the region are putting pressure on ARPU as the operators target lower-value customers.

The regions mobile markets are home to some big hitters in the form of Russias MTS, VimpelCom and Megacom, Nordic TeliaSonera and Turkeys Turkcell, the latter through its JV with TeliaSonera, Fintur Holdings. In 2008 growth was particularly strong in Uzbekistan, which appears to be the most competitive market, with TeliaSonera, MTS and VimpelCom all present.

Further market liberalisation coupled with the entrance of new players should see the regions mobile markets continuing their rapid development, and by 2013 we forecast that only Turkmenistan will have mobile penetration under 100%.

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