The communications sector has increased its share in GDP to 2.5% in recent years, driven mainly by the mobile segment. While the mobile telecoms sector constitutes 60% of total revenue, the fixed-line market is, however, making a slow comeback following the end of KazakhTelecom’s monopoly in 2004. Demand for hardware and IT services are also engines of growth for the IT sector, while e-government continues to thrive as internet use grows.
In contrast with the mobile segment’s domination over the telecoms arena, which now boasts 21 million subscriptions, fixed-line penetration is now at 25%, in a country where it has been hard to overcome geographic infrastructure challenges. The ending of KazakhTelecom’s monopoly in 2004 heralded the entrance of alternative providers, such as Ducat, Astel, and TransTeleCom. Growth is at around 5%, and there are over 4 million subscribers. The penetration rate for households is estimated at 6.5%, which indicates a well-developed corporate segment.
In terms of the overall communications sector, KazakhTelecom is the biggest earner, at 34.4%. This is followed by GSM-Kazakhstan, owner of the Kcell brand, and Beeline, which have 32.4% and 23% market shares, respectively. Almaty and Astana are the clear hubs of communication in the country, with the former consuming 70% of the nation’s communication services.
Growth in the mobile market slowed to 10% in 2011, down from 16% in 2010, due to saturation in the market and consolidation in a sector that has seen rampant multi-SIM ownership. There
are now 21 million mobile subscriptions in the country, putting penetration at 130%. Kcell, a subsidiary of fixed-line operator KazakhTelecom, and Beeline dominate the sector, while Tele2 entered in 2010 through a 51% purchase of Neo Telecom, and currently has around 1.5 million subscribers. In terms of cost of services,
Kazakhstan ranks highest in the CIS region, and consequently, despite its small population, the country ranks third in mobile revenues after Russia and Ukraine. Although the average cost per minute has decreased by around 20% in recent years, in its 2011 analysis, ComNews Research concluded that the cost of mobile services in Kazakhstan are twice as expensive as they are in Russia and three times more expensive than in Kyrgyzstan. High prices are reflected by consumer habits. “On average, people in Kazakhstan were using around 100 minutes a month, while in Russia people were using 200 or more minutes,” said Andrey Smelkov, General Manager of Tele2, adding, “In Uzbekistan and Kyrgyzstan, people used three or four times more minutes than consumers in Kazakhstan.” Yet, the price differences are understandable, adds Veysel Aral, CEO of Kcell, commenting “comparing tariffs in Kazakhstan with those of China or India, cellular communication service tariffs in Kazakhstan will certainly differ significantly.”
The number of internet users is rapidly growing in Kazakhstan, with the figure now exceeding 3.5 million. An annual growth rate of 36% saw the penetration rate rise to 21% in 2011, yet the broadband penetration rate is still in single digits, at 6%, indicating the wide use of mobile internet services across the country. “In Kazakhstan, the number of people connected to the internet via mobile phones is equal to, if not more than, the number of people using the internet through a fixed-line connection,” Karel Holub, General Manager of Nokia South CIS, told TBY in an interview.
GPRS services and high-speed internet access are increasing their weight in mobile operators’ portfolios. The three major players are promoting 3G services and looking to invest in infrastructure development. “We have launched a number of revolutionary offers that has made mobile internet available to the masses at a cost that can go down to KZT1 per 1 MB of data… we have been working on improving data transmission speed, actively developing the 3G network and increasing mobile data speeds within 2G networks,” Aral told TBY. Looking ahead, 4G technology is also set to make an entrance into Almaty and Astana in 2012.
The IT sector has failed to see the kind of growth that the telecoms market has seen in recent years, contributing around 1% to GDP. The sector is underlined by the demand for hardware, and the production and sale of IT equipment constitutes more than 50% of the market. IT services and software, on the other hand, account for 41% and 6% of the market, respectively. The Customs Union is providing hope to the sector in terms of exports, and its evolution into a Eurasian economic zone offers long-term growth prospects. “We have big opportunities to bring innovative solutions to Kazakhstan; the problem is market volume,” said Erik Shortanbayev, Director General of SKYMAX Technologies. “A customs union was created, and next year it will evolve into a Eurasian economic zone… This will bring us also new opportunities to grow and develop in other markets.”
IT parks have also formed the cornerstone of government efforts to get the ball rolling on IT development, with companies located in such parks free from VAT, duties, and corporate tax. The aim of the parks is in line with diversification efforts, and hopes are that it will increase the value of the sector’s exports.
Kazakhstan’s e-government program first took off in 2005, and the state’s information web portal was launched in 2006. The state web portal has been operational since 2006, and in that time the country has moved from 65th to 38th place in the UN’s e-government index ranking. In terms of e-participation, the country also ranks joint second with Singapore. The government portal boasts 25,000 clicks per day, and provided more than 8 million e-services, granted 917,000 digital signatures, and 3,500 licenses in 2011. The most popular services are payment of fines, taxes, and allocations to pension fund premium payments. New services such as online application of ID renewals are also planned to be launched by the end of 2012. The target is to fully transfer key social services online by 2014.
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