TBY talks to Jurgen Peetz, CEO of Azerfon, on the ICT sector, partnership with Vodafone, and business strategies.

TBY You have been CEO of Azerfon since November 2010. What is your assessment of the Azerbaijani market so far in terms of the ICT sector?

JURGEN PEETZ The ICT sector has been designated as very high priority in Azerbaijan and expectations for the future are very high as well. The government is strongly supporting further developments and aims to make Azerbaijan an ICT hub for the CIS region. In that respect, for the last three years Azerbaijan has been one of the fastest growing economies. Azerbaijan plays a leading role in the development of the ICT industry in the CIS region, and ICT is the second fastest developing sector of the country’s economy. Intensive economic reforms carried out by the leadership of the country provide favorable conditions for the development of small and large businesses in Azerbaijan. Mobile communication has supported this growth fundamentally. Such dynamic development in the mobile communication market of Azerbaijan makes mobile telephony very accessible and progressive. There is almost 100% mobile penetration in the country, prices keep falling, services become more diverse with the application of latest technologies, and more and more people enjoy mobile connectivity. Based on these, I am confident that Azerbaijan will maintain its technological leadership in the region for a long time.

What is your evaluation of price levels in Azerbaijan compared with other countries in the region?

In the past the price levels weren’t as competitive as other markets in Europe or Turkey, but Azerfon played a very important role in making mobile communications more accessible and affordable, thereby stimulating the market strongly to be competitive. Our brand Nar Mobile has always been popular for its customer-oriented campaigns and transparent prices. For the first time in Azerbaijan Azerfon introduced a pre-paid, credit-based payment system, which allows subscribers to know the real value of their payments and control their communication costs. This practice was applied by the other two operators in Azerbaijan only starting from May 2011. The move from a unit-based system to a pre-paid, credit-based system has led to significant price decreases amongst the competition. As a result, the market has become more competitive. Prices have been reduced by as much as 60%, and the Azerbaijani people have seen that with this push mobile communications are becoming more affordable. The public will no longer be subjected to unnecessarily high prices, and can take advantage of more services for the same price.

What changes has Azerfon worked to implement lately?

For Azerfon’s customers, 2011 will be a year of major changes. As a part of our network expansion plan for 2011, we will significantly increase the number of GSM and 3G sites, expand our network to include metro stations and build an LTE network, providing a major breakthrough in mobile internet speed in Azerbaijan. Azerfon’s customers will soon enjoy a superior communication experience as the operator rolls out a significant expansion and modernization of its current GSM and 3G network. Under the first year network modernization contract signed with Nokia Siemens Networks, Azerfon will invest more than $65 million to ensure a superior, quality network in Azerbaijan. Implementation by Nokia Siemens Networks has already begun and is expected to be completed by the end of 2011. Being the key provider of 3G services in Azerbaijan we are focusing on the delivery of data services for customer needs. There is great potential in content development. We will soon implement a “future lab”, where we will give students and young professionals along with external investors the opportunity to develop applications.

What is Azerfon’s current relationship with Vodafone?

As you know, Azerfon entered into strategic partnership with Vodafone in 2009, and introduced its second brand, Azerfon-Vodafone (AF-VF), as a prestigious brand with 3G services. This partnership established a new era in mobile communications in Azerbaijan as it coincided with the launch of 3G services. It’s a non-equity partnership that gives us exclusivity for delivering Vodafone products and solutions in Azerbaijan, and we get support from a branding standpoint. For instance, this partnership gives us access to Vodafone’s global roaming network that enables customers to benefit from our most progressive roaming scheme based on a four zones-four tariffs approach. Vodafone, being the global leader of the telecoms world, has valuable experience in applying 3G technology, and Azerfon makes very good use of this experience and partnership to provide quality communication services to Azerbaijani customers. Through our partnership with Vodafone we are taking our customers to the global level and delivering a world-class communications experience. 

What’s the market positioning of the two brands that you manage? Azerfon operates in the mobile market of Azerbaijan with two brands—Nar Mobile and AF-VF. Nar Mobile, being the most affordable mobile brand, has been providing our customers with diverse offers and services, and gained wide popularity. The AF-VF brand targets high-income consumers, offering attractive packages for data transfer and attractive offers on international calls, along with value-added services. AF-VF is aimed at those customers that are more advanced in mobile communications, that need high-speed mobile connectivity, and travel frequently. Therefore, Nar is the people’s brand. We received the People’s Brand Award in 2010 for being affordable and appealing to the lower- to middle-income segment. 

How has the level of internet penetration evolved in Azerbaijan?

Internet penetration in Azerbaijan is growing dynamically. Since the launch of 3G services by Azerfon we are observing a growth in internet users. Azerbaijani customers follow the global trend of internet usage via mobile phones. Until recently, our 3G services were available only to AF-VF customers, whereas starting from November 2010, Nar Mobile customers can also benefit from high-speed mobile connectivity as well. That means we now have two 3G providers, affordable prices, and a range of 3G services to meet our customers’ needs. 

A new number portability law is to come into effect. What are your views on that?

We welcome number portability because it makes us an attractive partner and supplier. It’ll help us grow even faster. The coming into effect of number portability will make prices and companies more competitive, but I think we will stand out thanks to our quality of services and offers. 

How strong is your focus on customer care and service?

In Azerbaijan customer care hasn’t traditionally been a high priority. We have invested a lot in customer care, and soon our customers will have the best communications experience. We are constantly improving our customer care performance; trying to benefit from our partnership with Vodafone in that regard. We are also investing a lot into our network upgrade and expansion. A recent study conducted by the Wireless Technologies Association (WTA) showed that the average 3G speed in Azerbaijan is 1.7 megabits per second (MBps), which is a higher mobile broadband performance than in the UK. According to similar research done by the UK regulator Ofcom, the average mobile broadband speed in the UK is 1.5 MBps. We feel proud of delivering high-speed mobile connectivity at the best prices in Azerbaijan. Our 3G network allows our customers in Baku and the regions of Azerbaijan to enjoy real mobile broadband service at a higher speed than those in the UK. 

What’s your general outlook for the ICT sector over the medium term?

I am certain we will see more growth. I’m glad that the government is really pushing to make Azerbaijan an ICT hub for CIS countries. I think the region will be more competitive and Azerbaijan can realize huge growth in a sector other than oil 

and gas.

© The Business Year