Kyrgyzstan - Telecoms, Mobile and Internet - Historical

Executive summary

Kyrgyzstan appears to take a step backwards with decision not to fully privatise Kyrgyztelecom

The telecommunications sector in Kyrgyzstan has been generally characterised by an open market that welcomes both foreign and domestic investors. This has been effectively done in accordance with the requirements set down by the WTO. Under the terms of the country’s accession to the WTO (which took place in 1998), full liberalisation of the telecoms market had been expected to be achieved by end-2006. According to the ITU, Kyrgyzstan had implemented full competition across all segments of its telecoms sector by 2007. Nevertheless, despite the market being ‘fully competitive’ there remained more to be done on the regulatory front to take full advantage of the reforms already in place. There also remains a culture of poor transparency in some aspects of corporate behaviour; this needs to be addressed if the telecom market is to reach its full potential.

The telecom sector has been part of the final phase of a large scale privatisation program that has been steadily progressing in the country since 1992. The start of market reforms in 1991 saw the state telecommunications agency, Kyrgyztelecom, begin to expand and upgrade its legacy telecom network, which at the time was out-dated and poorly distributed. With the expansion of the telecoms sector, upgraded standards have been adopted. At the same time, a new regulatory authority – the National Communications Agency which later became known as the National Agency for Information Resources, Technologies and Communication - was set up to oversee the sector. At an early stage, Kyrgyztelecom was restructured as a public corporation and the government moved towards a partial sale of the operator to the private sector. Around 10% of the company quickly passed into private hands. After a series of failed attempts to sell off the government shareholding, the government continued to hold almost 78% of Kyrgyztelecom.

In a surprise move the government decided in September 2013 that it would not sell its majority shareholding in Kyrgyztelecom. The reason given for the decision was that ‘[privatisation] could lead to an increase in retail fixed line tariffs in the country.’

In the meantime, private operators, which actively function in the mobile market and in the provision of internet services, have been actively investing in the necessary infrastructure. The two big GSM operators – Sky Mobile (Beeline) and MegaCom – have continued to dominate the market, claiming around 75% of the total mobile subscriber base between them. They have been joined by Nur Telecom; this third ranked player had grabbed a 20% market share by 2014. Since the first GSM network was launched in 1998, the number of mobile subscribers has grown rapidly from a few thousand in 1999 to around seven million by early 2014. Growth in the country’s mobile market was continuing to moderate compared with the general growth in recent years. It was likely that the next few years will see annual expansions of less than 10%. With positive indications that the market will continue to steadily expand for some time yet, there is growing interest in the development of mobile broadband and data services.

As for fixed-line services, the country’s national teledensity had fallen to 8% by 2013, not much different from the figure a decade earlier. Growth in this market segment had effectively stalled. Apart from the lack of growth, there was concern over the imbalance in the market place. Teledensity was around 25% in the capital, but only 5% in the rest of the country.

Kyrgyzstan’s internet user penetration was running at 23% in 2013. By 2012 there were only about 7% of households with a PC. Inevitably cybercafés have become a popular means of accessing the internet in the country. Around 50% of all users were estimated to access the internet in this way, with the workplace and educational institutions also making up a significant proportion of access points. Fixed broadband internet services, whilst a growing proportion of the market, are still small in number. However, since 2011 there has been particularly strong growth in mobile broadband subscriptions. This phenomenon is rapidly changing the shape of the internet market.

Key developments:

• By mid-2014 mobile penetration in Kyrgyzstan had passed 125%;
• After very strong growth in the three years to 2008, the expansion of the country’s mobile subscriber base had eased, the annual growth rate running at less than 10%;
• Fixed-line penetration in Kyrgyzstan stood at 8% by end-2013, with the market having completely stalled by that stage and no sign of further growth;
• The conversion of the country’s fixed network from analogue was moving slowly, with an estimated 85% digital by 2013, but well up from just 37% in 2004;
• Kyrgyzstan’s internet usage has undergone a healthy expansion over the last few years, with user penetration reported at about 23% coming into 2014;
• Actual internet subscriptions remained generally low (around 3% penetration for fixed internet connections), with the local population making considerable use of public access (cybercafés, etc);
• The fixed broadband internet market was relatively small with subscriptions running at around 1% of the population;
• On a more positive note mobile broadband services have grown rapidly in the last 3-4 years;
• Mobile broadband subscribers totalled 1.3 million coming into 2014;
• According to the ITU, Kyrgyzstan has implemented full competition across all segments of its telecoms sector.

Kyrgyzstan – key telecom parameters – 2012 - 2014

(Source: BuddeComm, based on industry data)