TBY talks to Ali M. Abbasov, Minister of Communications and Information Technologies, on the roll out of the broadband network, further steps to liberalize the telecoms market, and Azerbaijan’s first satellite.
TBY What efforts have been made to improve the telecommunications network over the past decade?
ALI M. ABBASOV The telecoms sector in Azerbaijan is developing rapidly and plays an important role in the reliable development of the country’s economy. The sector enjoys healthy competition and the investment conditions on offer are favorable. More than $1.5 billion has been invested into the telecommunications sector over the last 10 years, and approximately 21% of that investment was from abroad. New fixed and mobile network operators have entered the sector, and the state’s share in five telecommunications companies was sold off through privatization campaigns. The share of the private sector in the telecommunications sector has risen from 62.7% to 80% as a result of our liberalization efforts.
The telecommunications sector has truly been transformed over the past decade. The country has been fully connected, and approximately 40% of the network has been installed on the basis of next-generation network (NGN) technology, with the national highway network being digitalized as well. The AZDATACOM and DWDM networks transfer high-speed information from Baku to all regions in Azerbaijan to strengthen this information exchange. This groundwork provided great opportunities for the development of our internet infrastructure. The connection speed with international internet networks has increased 50 times and stands at 40 GB per second. It is these ongoing achievements that characterize the dynamic development of the telecommunications sector.
What investments has your Ministry encouraged to improve fixed broadband infrastructure and what targets do you have for penetration rates in the upcoming years?
In order to access broadband services in all territories of the country we had to update, reinstall, and digitalize the telecommunications network. We are encouraging SMEs to provide internet services in Azerbaijan. No special consent is required for this type of activity. As a result, up to 30 internet providers operate in the country now and all of them are private companies, except for two. The internet segment has seen huge development over recent years. Tariffs for broadband internet services have fallen 10 fold over the last three years, and the volume of internet services has increased almost four fold, with the volume of broadband services up almost seven fold in the last five years. We have a penetration level of 50%, and 15% of these users are broadband internet users. We try to increase the penetration level of broadband services to our society via the provision of technical opportunities, pursuing an effective policy that targets the simplification of connection procedures to provide a quality service. We are currently developing a new strategy to develop broadband internet services, which will determine our long-term development goals.
What steps still need to be taken before the full privatization of Aztelekom and what impact will it have on competitiveness?
Privatization is strategically important given that Aztelekom is the international operator of Azerbaijan, has a large telecommunications network, and is a universal service operator. In this respect, action must be taken to restructure the company before its full privatization and transformation into a joint-stock company. The privatization of Aztelekom will also stimulate other participants in the market to offer new quality services. In short, the provision of a competitive and healthy business environment for telecommunications operators to develop the market and satisfy users is a main target for us.
What is the status of the number portability regulation, and how will it affect the sector?
We have met with the representatives of specialized companies in order to make mobile number portability a possibility. Now we are working together to draw up normative legal documents and form a technical basis to regulate the system in Azerbaijan. The progress made so far in the mobile communications sector allows us to predict that the application of the system will positively influence the development of the sector, enhance healthy competition, and enable users to obtain high-quality services on more advantageous terms. Furthermore, it will regulate the effective and reliable use of number resources. Evidence shows that telecommunications operators that offer high-quality, profitable, and modern services attract more subscribers to their networks.
How are you cooperating with international partners to launch an Azerbaijani communications satellite and what does this milestone represent for the development of the Azerbaijani economy?
Launching the first Azerbaijani satellite is strategically important for the country, and the program is under direct state control. Satellite manufacturing is a new field of industry for our country. Therefore, we are working with a combination of international consulting companies, experts, and local specialists. The agreement to manufacture the first telecommunications satellite for Azerbaijan and its launch was signed with Orbital Sciences Corporation of the US and Arianespace of France, respectively. A close partnership exists with leading international institutions to finance the project. The launch of the first telecommunications satellite is scheduled for late 2012. When speaking about the benefits of the satellite for our country, we do not only pay attention to the financial revenues expected to be generated from the satellite, but also to its strategic role in the development and promotion of national prestige. Azerbaijan will become a member of the world satellite family, and this will create opportunities for the manufacturing and application of satellite technologies. The calculations of local and foreign specialists and consulting companies estimate that the telecommunications satellite will be profitable, and the satellite will be able to cover its expenses within approximately five to seven years of operations. Thereby, this will have a positive influence on the development of the economy.
It has been suggested that Azerbaijan could see growth of over 20% in the telecommunications industry in 2011. What are the key drivers behind this growth?
The acceptance of the ICT sector as a leader in the development of the economy has paved the way for the comprehensive development of the sector. In the past six years, the ICT sector has grown five fold, with an average annual growth rate of 30-32%. Results from 1Q 2011 provide grounds for our optimistic forecasts. Thus, compared with the statistics of the corresponding period in 2010, the ICT sector has grown 24.7%, with the telecommunications sector specifically seeing growth of 19.2%, and the IT sector growing two fold. We hope a 30% growth rate will be achieved in 2011.
What role do you see the IT industry playing in developing the services portion of Azerbaijan’s GDP?
The ICT industry will play a central role, characterized by the rapid development of the mobile sector for the most part and the dynamic development of the IT sector. IT hardware manufacturing is increasing, the professional levels of new companies are improving, and new companies are actively taking part in the spread of e-banking services and commerce in Azerbaijan. Azerbaijani IT companies are not only successfully involved in national projects in the South Caucasus and Central Asia, but also export their products to regional markets. One of the main forthcoming aims is to increase the weight of the sector in the country’s economy, promote the activity of new companies, as well as improve local production and export volumes. We have started to create Regional Innovation Zones (RIZs) in order to attain these goals. RIZs will promote investment in the field from both domestic and foreign companies, as concessionary conditions will be applied.
What is your outlook for the communications sector in 2011 and over the medium term?
We have a number of goals to reach in the next few years in accordance with the State Program on the Development of Information and Communication Technologies in the Republic of Azerbaijan for 2010-2011, the most notable being the formation of e-government services. The necessary measures are also being taken to implement large-scale projects and achieve projects of strategic importance over 2011. I hope that the application of new technologies in the telecommunications sector will increase, with more reliable access to high-quality and modern telecommunications services. The information security of the population will be safely protected, and we will continue to develop satellite technologies and our space industry.
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