TBY talks to Richard Shearer, CEO of Bakcell, on the effects of 3G, 4G prospects, and expectations for mobile number portability.
TBY How has the first nine months of your tenure at Bakcell been?
RICHARD SHEARER It has been a very active period. The market has gone through some significant changes. As I joined there was a switch in the market from a kontor (unit) system to a manat-based credit system of payment, which was a seismic shift that saw prices drop quite considerably. Our main competitor dropped its prices very significantly, which put a lot of pressure on the market, but overall, we have performed very strongly in 2011; the number of subscribers is up, revenues are up, and our profit margins are very healthy. All in all, I am very pleased with the performance. We recently launched 3G and it has been very successful. We had over half a million customers within three days, which we were extremely pleased about, and it shows the real potential for mobile data services here in Azerbaijan. We think there is significant pent-up demand, and Bakcell is well positioned to meet it. The response we have seen from our customers proves that they also believe we hold a strong position in the market. We think our users are probably the largest body of true mobile internet users in Azerbaijan at the moment, which is a great achievement.
What does 3G technology unlock for the future of the sector?
We analyzed traffic over the first few days and weeks after launching the technology and found that around 60% of customers were using 3G to surf the internet and use applications, such as Facebook and YouTube. Fortunately, we have not been bitten by data-intensive downloads and we are really pleased that customers are using the terminals for what they are there for, which is exploring the internet, using internet-based services, and checking email. The overall experience seems to be that customers are getting fast internet access from Bakcell and are utilizing these services.
Is Bakcell eyeing 4G?
At the last BakuTel conference we demonstrated commercial 4G in a full pre-commercial deployment. A Long Term Evolution (LTE) system has been deployed on our network. We have an existing spectrum, which we can mutualize, and we strongly believe that there is a potential market here. However, we want to grow the 3G-user market first, because it represents a very significant investment. It is important to build up this market and increase 3G awareness before making the move into fast remote-complex technology. At BakuTel we were able to achieve download speeds in excess of 100 Mbps, and we demonstrated full-HD TV streaming over mobile internet using LTE technology. We see important potential and opportunities in services like video on demand and catch-up TV rather than mobile TV. However, looking at European markets it seems as though the revenue potential for cell phones is not so significant. In that regard, tablet computers are where the greatest opportunities are for the future.
What are your expectations for mobile number portability (MNP)?
I think MNP is definitely of benefit to the market. We are very committed to the introduction of MNP. It’s been shown in other markets to increase customer choice, which is always a good thing. For us, we see a significant opportunity to attack the corporate segment and also the national business segment. Bakcell’s revenues and profits mostly come from the consumer market, but we see opportunities to move into the big international corporates and also big national businesses operating in Azerbaijan, which for one reason or another generally have accounts with our competitors. We think the credibility we have built up in the consumer market puts us in a very good position to move into those segments.
What is your split between pre-paid and post-paid subscribers, and in which segment are you seeing the strongest growth?
Overall the market is 96% pre-paid and 4% post-paid, though we have a slightly higher proportion of post-paid customers than the market average. Pre-paid is the segment that is showing the strongest growth right now. From my experience in Western European markets, everyone focuses heavily on post-paid, because those customers have been tied in with long-term contracts. However, that’s not the dynamic in this market. In Azerbaijan, contracts can be terminated with a month’s notice on the part of the customer, so post-paid only buys you one month’s loyalty, unlike Western Europe where it is between a year and 24 months. Therefore, in Azerbaijan pre-paid and post-paid are much more just a means of payment rather than defining customer types.
How is the company working to promote mobile internet services?
Bakcell is an exclusive partner of Facebook, and we recently signed on as exclusive partner of Opera Mini, the most popular mobile browser that is not pre-loaded onto mobiles and works with almost all brands as well. We also have a partnership with Twitter. We are committed to bringing the mobile internet experience to our customers, whether they are pre- or post-paid.
What level of coverage does your network provide for its subscribers nationwide?
We operate with around 99% population coverage, which translates to around 92% geographic coverage. We cover all the main cities with 3G, around 62 cities to be precise. Bakcell is constantly deploying additions to its network across Azerbaijan. Bakcell will continue investing to support having the best network in the country.
What is your outlook for the sector for 2012?
We believe 2012 will be the year when data technology takes off. The increasing availability of smartphones as well as the availability of terminals are driving market behavior in Azerbaijan. Thanks to second-hand phones coming from the European market, prices are also decreasing. The more smartphones there are, the more internet users there will be. That is also one of the reasons why Bakcell is investing heavily in 3G.
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