IT & Telecommunication developments in Kazakhstan
July 2007
Author: Beibit Yerubayev, BISNIS Representative for Kazakhstan
INTERNATIONAL
COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE,
2006. ALL RIGHTS RESERVED FOR USE OUTSIDE OF THE UNITED STATES.
I. General
Market Info
According to the national statistics agency
Kazakhstan’s 2006 GDP per capita reached $5,100, which is about the current
level of GDP in the Czech Republic, Hungary and Poland. By 2015, it is targeted to reach $ 9,000.
According to the World Bank rating, Kazakhstan currently is classified as a
middle-income country.
Economic activity remains strong in Kazakhstan, with
2006 marking the seventh consecutive year of real GDP growth in excess of 9 %.
Throughout 2006, key social indicators continued to improve and unemployment
continued to decline.
The real GDP growth is expected in 2007 to total 8.6
% that will allow the GDP per capita to reach $6.560.
The Republic of Kazakhstan is now paying great
attention to its development of IT & telecommunications systems as being
an important factor and condition for integration with the international
community. The Kazakh IT & telecommunications market is one of the boom
sectors of the country's economy. According to the national statistic agency
the annual growth in the sector averaged 28% in the last three years, which is
comparable with the 35% growth in the oil and gas sector.
Regardless of the boom in the sector, the statistics
for the country's IT & telecommunications market are not in line with the
country's economic development. The Kazakh IT & telecommunications share of
the market barely exceeds 0.1% of the total global market.
According to CMAR (Center for Marketing and
Analytical Research www.cmar.kz) the sector
accounts for 1.8% of GDP in Kazakhstan. In Russia it accounts for 5.2%.
Kazakhstan lags three years behind Russia in this, despite the fact that the
Kazakh model of developing this market is similar to the Russian one in many
respects.
In terms of financial, the market was 202 billion
KZT or $1.6bn (excluding VAT) in Kazakhstan and $36.4bn in Russia in 2005. For
example, Discover Networks Europe's revenue (a medium-sized European
telecommunications company offering payable television services) was 50% more
than the revenue from the Kazakh telecommunications market.
According to expert forecasts, the Kazakh market
will total 320 billion KZT, or $2.6bn, by 2008. However, the growth rate is
expected to fall from 28% to 18% in 2006-2008. The Kazakh government is
currently focusing its efforts on reducing charges for fixed-line and mobile
services and the Internet, which is why in the short-term state policy will
slow down any growth in telecommunications companies' revenue.
However, this will not decrease the client base or
consumption in physical terms.
The
country's geographic and demographic features - a large territory and low
population density - have a great impact on the telecommunications market in
Kazakhstan. Kazakhstan is the ninth largest country in the world, behind
Argentina and Brazil, whereas in population terms it is only 60th. As a result,
the population density in Kazakhstan is very low and stands at 5.5 people per
sq. km. This is a third lower than in Russia and tens of times lower than in
Europe. This combination of large territory and small population, fairly high
proportion of rural inhabitants (about 50%) and large households (3.5 people
per household on average or four people in rural areas) explains the low level
of penetration by the main telecommunications services in the country.
According to the National Statistics Agency In
Kazakhstan, only 53% of households have fixed telephone lines compared to 62%
in Russia and 97% in Germany.
It
should be noted that the penetration of fixed telephone lines depends on the
size of the settlement: it is from 76% to 87% in major towns and large cities
and 38% to 44% in villages and medium-sized and small towns.
That fact explains the reason why most Kazakhstani families
do not have computers and Internet access. For example, only 17% of Kazakh
households have home computers and two-thirds of them are in cities (29% of
households have computers in the Czech Republic, 32% in Hungary and 65% in
Britain). Only about 8% of Kazakh households have Internet access (19% in the
Czech Republic, 14% in Hungary, 34% in France and 56% in Britain).
In general, 35% of the Kazakh households that have
computers can access the Internet (65% in the Czech Republic, 44% in Hungary
and 86% in Britain).
The structure of the Kazakh telecommunication market
in terms of revenue from various services.
According
to the government research in 2005, the largest segment of the market was
mobile services with 41% of the total market, and second was the fixed
telephone line segment (33%). Internet and data transfer accounted for 10% of
the market. A boom in new types of telecommunications leads to a fall in
revenue from the fixed telephone line segment, which already lags behind modern
services such as mobile services. Revenues from fixed-line and mobile services
were comparable in 2004 (37% and 36% respectively), whereas the situation
changed significantly during 2005.
The share of revenue from mobile services increased
by 4 percentage points whereas that of fixed telephone line services decreased
by 6 percentage points. However, the figures for Internet and data transfer and
services to operators did not change between 2004 and 2005.
Mobile
services
The segment is made up primarily of cellular services,
which account for 97% of the segment.
The cellular services segment is the most
dynamically developing segment in the country’s telecommunications market.
According to CMAR (Center for Marketing and
Analytical Research www.cmar.kz) revenue from
services in the segment grew by 40% in 2005, and the average growth in the
number of subscribers was over 70% in 2003-2005.
The average spending on mobile services by
individual subscribers was 1,400 KZT per month in 2005 and about 19,000 KZT a
month by corporate subscribers. And as of January 2006, the number of
subscribers to mobile services was 5.6 million people and the penetration of
mobile services was 36%. This means that the number of subscribers to mobile
services is 80% higher than that of fixed-line subscribers and that spending on
the former is higher than on the latter.
Growth in the mobile services segment accounts for
55% of the growth in the entire telecommunications market in Kazakhstan at
present and this tendency will only increase. The development potential of this
segment in the country is very high and significantly exceeds the development
potential of the fixed telephone line segment. According to world trends, a
penetration of mobile services of about 60%-65% would be in line with
Kazakhstan's current economic development. Kazakhstan is capable of reaching
this figure by mid-2008. By 2010, mobile services will account for at least 50%
of the total telecommunications market in Kazakhstan. The highest potential
number of subscribers is estimated at 12.5 million or 82% of the total
population. The largest mobile operator in Kazakhstan is GSM-Kazakhstan (with
the K-Cell and Activ brands); in 2005 it accounted for 68% of the mobile
services market in monetary terms.
Internet and data transfer
This
segment is among the top three dynamically developing segments of the Kazakh IT
& telecommunications market along with mobile services and cable
television. According to CMAR (Center for Marketing and Analytical Research www.cmar.kz) in 2005, the average spending on
the Internet by individual users was 1,050 KZT per month and about 18,000 KZT
per month by corporate users and the segment grew by 36%. It has already been
stated that, in 2005, 5% of Kazakh households had Internet access; 56% of legal
entities use the Internet and data transfer. Despite its relatively small share
of the market (10%), the segment has promising potential. The number of
Internet and data transfer users is estimated at 273,000 (both individuals and
legal entities) at the moment, whereas market studies estimate the capacity of
the Internet market (the highest potential number of users) at 1.6 million
users.
The
government is paying great attention to increase public Internet access. In
particular, the Program to Develop the Kazakh IT & Telecommunications
Sector in 2006-2008 aims to reduce fees for Internet services, find ways of
reducing prices for computers and improve the content of the Kazakh Internet
zone.
Five
primary providers are operating in the Internet market in Kazakhstan and they
all have separate access to the global network: Kazakhtelecom, Nursat, Ducat,
Golden Telecom and Astel. Kazakhtelecom is the largest Internet provider and
accounted for 61% of the market in 2005.
Space
conquest
The first Kazakh
telecommunications satellite KazSat launched on 18 June 2006 was officially
activated on 15 December 2006. After several months of testing, the Katelco
satellite network had a live broadcast of the official meeting devoted to the
15th anniversary of the nation’s independence.
According to Kazakhtelecom,
the satellite testing results met the standards of the International
Telecommunications Satellite Organisation. The full capacity of KazSat is 864 MHz;
760 MHz are meant for lease, 8 MHz are left for the guard band, and 96 MHz in
store.
At present, the satellite
load is 40%. Seven telecommunication companies, such as Astel, Katelco, Nursat,
Today Telecom use KazSat. It is planned to achieve the satellite load of 70% by
the end of 2007.
The prices for satellite
services were set at a competitive level to create favourable conditions for
Kazakh operators. They depend on the bandwidth and contract period, but are on
average 5% lower than those of international satellites.
It is planned to launch five
telecommunications satellites by 2020. The launch of KazSat-2 (designed by the
Khrunichev State Research and Production Space Centre in Russia) is scheduled
on 2009, KazSat-3 on 2013. The main control centre will be located in Akkol
(Akmola Oblast) and a secondary control centre near Almaty.
Alatua IT City
Alatau
IT City is special economic zone with preferential tax and customs conditions
for all informational and communicational companies, working in the territory
of park
•
Special economic zone «Park of informational technologies» was created by
Decree of the President of RK #1166 «About formation FEZ » of August 18, 2003.
•
Location Alatau IT City 25 km. from Almaty city, Alatau, 7 km from airport
Types
of activities of Alatau IT City:
•
Formation of modern infrastructure “Alatau IT City”, including the development
of business-plans, designing estimates, building and installation works, land
improvements of park
•
Handling of research and experiment-constructive works on formation and
implantation of projects in the field of informational technologies
•
Designing, development, introduction, software manufacturing and data, hardware
tools of informational and communicational technologies
•
Marketing researches in the field of informational technologies
•
Training and re-training of high-qualified specialists, having certificates in
the field of informational technologies on international standards
Objectives:
Alatau
IT-City was founded with aim of creation of base for slapping development of
IT-business in Kazakhstan. For achieving the set goal AITC is positioned as
center of high technologies in the Central Asia. Universal infrastructure of
Park, including commercial and manufacturing building complexes, logistical and
data-centers, can satisfy any needs of consumers in the sphere of doing
business. Modern dwelling infrastructure, and also different recreation zones,
should provide deserving and high standard of living for employees of company in
the territory of the special economic zone.
Significance
of AITC will be noticed in every sector of the economy, for example, by
universities for transition and commercialization of technologies, by private
sector for profit (as type of business of immovable property), by government
for creation of work places, in order to build technological opportunity in
private sector and to increase the economic growth.
According
to the authority of the IT City the creation of brand Alatau IT-City will be
associated with quality, superiority and innovations.
Personal computer
The personal computer (PC) market has witnessed
steady growth in Kazakhstan, with increasing numbers of local firms assembling
computers, and a number of important computer projects springing up. There is
also a rapidly growing market for computer spare parts. Some domestic companies
specialize in assembling computers from imported spare parts in order to make
their products less expensive and to avoid customs duties, value-added tax (VAT)
and import tax. Locally assembled computers occupy 65% of the market.
The computer services sector is also rapidly
expanding to meet increased demand, as growing domestic businesses need more
advanced information technology (IT), equipment and services. An increasing
number of small and medium-sized enterprises (SMEs) are becoming computerized.
Important growth areas include integration services, systems and networks
implementation, hardware maintenance, and training.
Kazakhstan ranks 13th out of 14 east European
countries in the Economist Intelligence Unit's e-readiness report 2006. The
country’s worldwide standing is 64th out of the 65 countries covered. Although
Kazakhstan is in the early stages of developing its e-commerce sector, there
are promising signs of growth, such as the rising use of the Internet in urban
centers.
Key
players: IT technology
Motorola, Lucent Technologies, Cisco Systems,
Ericsson, Siemens, Alcatel, Nokia and Nortel are some of the leading
international companies operating in Kazakhstan. The main foreign companies in
the computers and peripherals market include Siemens, Bull, LG, Daewoo,
Samsung, and Hyundai. The leading US manufacturers in Kazakhstan are IBM,
Hewlett Packard/Compaq and Dell.
Supply
telecoms
Kazakhstan suffers from a poor and antiquated
telecoms infrastructure, which it inherited from the Soviet Union. However, the
situation is gradually improving. The state-controlled telecoms company,
Kazakhtelecom, is building a fully digital national network, based on local and
long-distance digital switches and fiber-optic lines linking all the main
cities in the country. The proportion of digitization of the local telephone
network was up to 60% by the end of 2004, according to Kazakhtelecom. In
addition, companies including Kazakhstan’s national railway company and
Kaztranscom (which is a subsidiary of the national oil company, Kazmunaigaz)
are using existing transport networks to lay fiber-optic and other
communications lines.
The Kazakh telecoms market was liberalized in 2004
with the passage of new legislation giving all operators equal access to the
network. Foreign ownership of telecoms companies is nonetheless restricted to
49%.
Key
IT & telecoms players
Kazakhtelecom is the largest telecom company in the
country. The company provides a full range of communications services,
including basic voice services (local, domestic, long distance and
international); telegraph and telex; data services; access to the Internet;
channel leasing; satellite network services; and telephone business network
services. It is the sole operator providing rural communications services in
the country, although, as a result of market liberalization in 2004, it no
longer has a monopoly on the provision of international and long-distance services.
By April 2005 four other companies had received licenses for these services
namely, Transtelecom, Kaztranscom, Arna (DUCAT), and Astel.
Three operators provide mobile communications
services in Kazakhstan: Altel, Kar-Tel and GSM-Kazakhstan. Altel was the first
operator of mobile telephony in Kazakhstan, starting in 1994. Altel has changed
its network over to the code division multiple access (CDMA) standard from an
advanced mobile phone service-narrowband advanced mobile phone service
(AMPS-NAMPS) network. In August 2003 Ericsson and Altel signed a contract,
valued at over US$30m, to deploy a nationwide wireless network in CDMA2000 1X.
In 2004 Ericsson also conducted a 450-mhz CDMA2000 trial zone in Talgar, near
Almaty. A local operator, Dalacom, participated in the trial, in co-operation
with the Kazakh Agency for Information Technology and Communications. Ericsson
hopes to develop CDMA2000 in 450 mhz as a key supplier of telecommunications in
rural networks.
GSM-Kazakhstan was established in September 1998 in
a partnership between the largest mobile operator in Turkey, Turkcell (with a
51% share), and Kazakhtelecom (with a 49% share). In May 2000 Turkcell
transferred all of its shares to its affiliated company, Fintur (Netherlands).
The company operates under the trademark, KCell, and is the largest mobile
operator in Kazakhstan, with 2m subscribers. Kar-Tel is the second most
important player in the mobile telephony market. The company was a joint
venture between Rumeli Telecom (Turkey) and Investel, but was bought for
US$350m by Vimpelcom (Russia) in August 2004. Kar-Tels share of the market is
31%, operating under the Excess and K-Mobile trademarks. In May 2005 Kar-Tel
signed an agreement with Motorola (US) for a US$100m expansion plan. Other
significant domestic telecoms service providers operating in the Kazakh market
include Ducat, Golden Telecom, Katelco, Nursat, TNS-Plus and Aksoran, which
specialises in wireless networking.
USEFUL
RESOURCES
Sustainable Development Fund “Kazyna”
Astana,
Business Center “Arman”, 4th floor
Telephone:
+7 (3172) 79 24 95
Fax:
+7 (3172) 79 24 96
E-mail: yerlan.manatayev@kazyna.kz
Investment Fund
47 Abai Ave. Office 3-1
Astana, 010000
Tel.: (7-3172) 591-030
Web: http://www.ifk.kz
Email: ifk@ifk.kz
National Innovation Fund
Akmaty 050013, 26a Abai Ave.
Telephone: in Almaty 7 (327)
259-98-16
Astana: 7 (3172) 334356,
215485
E-mail: info@nif.kz
Insurance Corporation
4-th floor 100 «В»,
Furmanova St.,
Almaty, 050000
Telephone: 7 (3272) 95-21-71
E-mail: info@kecic.kz
Center for Marketing
Analytical Research
Almaty, 62 Sharipova St.
Telephone: +7 (3272) 590-690
Fax: +7 (3272) 582-151
Email: info@cmar.kz
KazInvest
050040, Almaty
Telephone: +7 327 261 09 20
Fax: +7 327 250 12 77
Email: Kairatk@kazinvest.kz
Web: www.kazinvest.kz
USG Resources (local
offices)
Embassy
of the United States of America in the Republic of Kazakhstan
Astana, 010010
Ak Bulak 4,
Str. 23-22, building #3
Phone: 7 (3172) 70-21-00
Fax: 7 (3172) 34-08-90
Email: info@usembassy.kz
American Chamber of
Commerce in Kazakhstan
tel.: 7 (3272) 587938, +7 (3272) 587939, +7 (3272) 587940
fax: 7 (3272) 587942,
Email: info@amcham.kz
US Embassy Almaty
U.S. Commercial Service
Samal - 2, 97 Zholdasbekov
St. - 11th fl.
050099 Almaty, Kazakhstan
Tel: 7 (3272) 50-49-50,
50-48-50
Fax: 7 (3272) 50-49-67, 50-48-74
Email: almaty.office.box@.mail.doc.gov
Major
Players:
KazakhTelecom
URL: www.telecom.kz
KazTransCom
URL: www.Kaztranscom.kz
GSM
Kazakhstan
URL: www.K-cell.kz
KaR-Tel
URL: www.k-mobile.kz
Golden
telecom
URL: www.goldentelecom.kz
Katelco
URL: www.katelco.kz
Nursat
Altel
Distributors:
LogyCom
LogyCom is recognized as a high growth company in
the PC market, taking the third place in the Central Asia.
Alsi
Alser
URL: www.alser.kz
Liner
URL: www.liner.kz/
White Wind
URL: http://www.ww.kz/
********************************************************************************************
For further information on this topic or how BISNIS
can help you in Kazakhstan, contact:
Beibit Yerubayev
BISNIS Representative—Kazakhstan
4 Bogenbai Ave. office-6
Astana, Kazakhstan 010000
Telephone: (+7 3172) 23 63 17
Fax: (+7
3172) 23 63 17