Executive summary
Armenia’s mobile sector growing once more after suffering a major slowdown in the wake of the GFC.
Demand for telecom services in Armenia plummeted as the most damaging impact of the Global Financial Crisis hit the country in 2009. Mobile subscriber growth was negligible (around 2%) for the year. There has been some recovery since then in both the economy and the country’s telecom market. Coming into 2011, an improving national economy was seeing a recovery in the mobile market, with annual growth returning to ‘double digit’ levels.
The telecommunications sector in Armenia has experienced a rollercoaster ride over the last two decades. The sector slipped into decline following the collapse of the former Soviet Union in the 1990s, with the fixed-line teledensity falling markedly. This was partly as a consequence of the prevailing socio-economic instability within the region, but more significant a factor was that the country initially failed to embrace any vigorous reform in the telecom sector. Despite steadily improving economic conditions as the country underwent economic reform, the telecoms sector was slow to respond.
In the last few years – and despite the GFC - more positive signs have been evident, however; whilst these positive signs have not translated into any fixed-line growth, with that segment of the market continuing to be flat, much more encouraging has been the mobile segment, with subscriber numbers having increased fourfold since 2006. The growth in mobiles was considerably boosted by the introduction of competition into the market in 2005. As already noted, expansion in the mobile market slowed dramatically in 2009 as the faltering Armenian economy started to have a serious negative effect on the local telecom market. This raised major questions about how the market would perform in the short to medium term. But by 2011 it was clear that the market had bounced back on was on a steady growth path again.
Armenia’s path to a more competitive market has been slow. This had a lot to do with ArmenTel, the country’s national telecom provider, which had been granted the exclusive right to provide all telecommunications services in Armenia, including public switched telephony services and mobile telephony, until 2013. As a consequence of this monopoly, no other company was able to provide international satellite services either. The one segment of the market initially exempt from this monopoly was internet services.
In 2004 the government reached a compromise agreement with ArmenTel to end its exclusive rights to provide a range of services, including GSM mobile, satellite and mobile radio communications services in exchange for various other concessions, including the stipulation that only one alternative mobile operator would be allowed in Armenia until 2009. ArmenTel was to also retain sole rights to Internet telephony and the use of fibre optic cables.
The government subsequently made a controversial decision to choose Armenia’s second mobile operator without transparent and competitive bidding; Karabakh Telecom (K-Telecom), a little-known Lebanese-owned company, was officially awarded a licence to operate a GSM network in Armenia. K-Telecom launched its VivaCell service in 2005. Russian telco Mobile TeleSystems (MTS) purchased an 80% stake in K-Telecom in 2007.
The Public Services Regulatory Commission (PSRC), the country’s telecom regulator, awarded a third mobile licence in 2008 to Orange Armenia. The newly licensed operator was 100% owned by France Telecom (Orange). It launched a mobile service in 2009.
Note: Absence of official reliable statistics means that where necessary estimates have been included.
Key highlights:
- The mobile market in Armenia was on a positive growth path into 2011, having recovered from the serious setback the sector experienced in 2009;
- Growth in the country’s mobile market feel to just 2% in 2009, as the faltering national economy impacted on the telecom sector.;
- Coming into 2011 mobile penetration in Armenia had passed the 100% milestone, subscriber numbers having increased more than fourfold in just five years;
- There were around 3.3 million mobile subscribers in the country by January 2011;
- The issuing of a third mobile licence to new player Orange Armenia saw its service launched in 2009. By early 2011 it was completely vigorously in the market place;
- ArmenTel having launched its 3G mobile service in 2008, by 2011 take up was still modest;
- Fixed-line growth in Armenia remained relatively flat, with virtually no expansion activity;
- After years of slow progress in digitalising the national network, ArmenTel was expected to complete the program and achieve 100% national digitalisation in 2011;
- While there is a growing Internet awareness in the country, the Internet segment of the market remains sluggish, with user penetration at around 7% by 2011;
- Broadband Internet development has also been poor; the advent of wireless broadband service was offering the chance of faster expansion, however;
- At the start of 2011 the government announced plans to roll out a National Broadband Network in a project being implemented jointly with the World Bank.
Armenia – Key telecom parameters – 2010 - 2011
Category
| 2010 (e)
| 2011 (e)
|
|---|
Fixed-line services:
|
|---|
Total number of subscribers
| 640,000
| 650,000
|
Annual growth
| 2%
| 2%
|
Fixed-line penetration (population)
| 21%
| 21%
|
Internet:
|
|---|
Total number of subscribers1
| 125,000
| 130,000
|
Annual growth
| 4%
| 4%
|
Internet subscriber penetration (population)
| 4%
| 4%
|
Mobile services:
|
|---|
Total number of subscribers (million)
| 3.30
| 3.75
|
Annual growth
| 24%
| 14%
|
Mobile penetration (population)
| 100%
| 113%
|
(Source: BuddeComm)
This report provides an overview of the trends and developments in the telecommunications markets in Armenia. Subjects covered include:
- Key statistics;
- Market and industry overviews;
- Major operators (mobile and fixed)
- Regulatory environment;
- Infrastructure;
- Mobile market;
- Internet market, including broadband;
- Broadband services, including fixed and mobile.
