Telecoms & IT
All Wired Up
By TBY | Azerbaijan | Jun 25, 2014
All Wired Up
ICT sector revenues for 1Q2014 climbed 13.3% compared to the same period of the previous year, to $485.5 million, including revenues from postal services in Azerbaijan. The ICT sector minus postal services grew by 23.6% in 1Q2014, with 78% of revenue stemming from the private sector. The ICT sector overall accounted for 1.9% of GDP in 1Q2014.
The proud Republic of Azerbaijan is not pausing to congratulate itself on its achievements in ICT. Prof. Dr. Ali M. Abbasov, Minister of Communications & High Technologies, announced in April 2014 a new, two-phase effort in the state program to develop the information society in Azerbaijan between now and 2020. The Ministry will hire a consultant to lay out, by the end of summer 2014, new proposals for action in the national strategy to realize the country’s economic potential by improving governance methods—the e-state—and better employ existing capacities, while developing new ones to make Azerbaijan not only adapted to the new age of modern technology, but a full participant in it. Under the “Azerbaijan 2020: Vision for the Future” strategy program, the Minister sees revenue for the sector increasing up to five fold by 2020 and says investment in it by then will have reached $4 billion. The state last year recorded nearly $260 million of investments in ICT, part of that figure from its own start-up fund, which is now authorized to issue loans or grants ranging from $12,000 to $382,000. Terms on start-up loans and grants range from 36 months to 10 years.
A STRONG RECORD
Over the past decade, Azerbaijan has seen tremendous growth in ICT, with the ICT development index rising from 2.58 in 2005 to 5.30 in 2012. In terms of value, the mobile telephony market has risen more than three fold, from $363 million in 2005 to an estimated $1.1 billion in 2013. In the same period, the country’s internet market increased in value 12 fold, from $8.6 million to an estimated $140 million. Internet usage in less than a decade has climbed from 8% of the population to 70%, with half the population enjoying access to broadband internet service.
The government is committed to financing the sector through fiscal policy as well as via more direct means. Since 2005, the average mobile tariff has dropped from $23 to $9, and the internet access tariff has dropped from $6.30 to $1.90. The lower rates are reflected in the income data. Azerbaijan’s mobile cellular access tariff, as a percentage of monthly income, dropped from 16.1% to 2.4%, and the country’s internet access tariff as percentage of monthly income dropped from 4.5% to 0.5%.
As 2013 was the best year for high tech in Azerbaijan’s history, the related Ministry is pushing to achieve greater success in 2014. This year the government expects to complete the digitalization of all television broadcasts. In order to further development of broadband internet access, the country is launching a fiber to the home (FTTH) project to increase the broadband internet penetration rate to 85%. For the early stage of implementation, the government is relying on the State Oil Fund of the Republic of Azerbaijan (SOFAZ) to allocate about $131 million toward the project, which is being managed by Alcatel-Lucent in partnership with the national fixed-line operator, Aztelecom. The fixed-line penetration rate is 18% as of 2014.
TREND TO PRIVATE SECTOR
In addition to Alcatel-Lucent, other companies active in the ICT sector in Azerbaijan include Azercell, Azercosmos, Bakcell, Caspian Navtel, Caspian Telecom, Cisco, HP, Intel, Microsoft, Azerfon, Oracle, Sazz, Simbrella (SimKredit), and Ultra. State-owned Aztelecom and BakTelekom are set to be merged and privatized in 2014. The government in December 2013 finalized plans to restructure and merge the two companies before privatizing the resulting joint stock company, after which the state will act only as a regulator.
The mobile penetration rate in Azerbaijan has already reached an impressive 110% as of 2014. Leading mobile operator Azercell, with 4.5 million subscribers, is also the largest investor and taxpayer in the non-oil sector. The company, controlled by Telia Sonera, has so far invested nearly $1.3 billion in the country and directly or indirectly created over 12,000 jobs for the labor force. Azercell has built over 1,200 2G/3G/4G base stations in the country and reported voice and data demand soared 120% in 2013. Tapping its parent company’s international experience and know-how, Azercell has helped introduce a wave of mobile technology into the country, profoundly affecting how Azeris live and work, from taking the metro RFID for mobile payment, to mobile banking, M2M, internet, and e-signature. Azercell is also helping develop the country’s ICT capacities by, in 2009, launching “The Cocoon,” a business incubator.
Bakcell, the country’s first mobile operator and the leading mobile internet provider, saw its data traffic grow by 100% in 2013. The company adapted to the February 2013 introduction of mobile number portability (MNP) and now has 60,000 iPhones registered on its network. Bakcell provides mobile internet service under the Sür@ brand name. Azerfon’s Nar Mobile saw its subscriber base grow 10% in 2013 while revenue for the year climbed 25%—fed by a 130% increase in data traffic on the Nar Mobile network last year. Another mobile technology provider, Simbrella, has brought its SimKredit to Azerbaijan—its main product line is popular elsewhere, with 80 million subscribers around the world.
Some aspects of the telecommunications industry remain in state hands, namely the backbone infrastructure, including nationwide IP/MPLS network, Azdatacom, and the new pride of the nation, Azerbaijan’s first telecommunications satellite, Azerspace-1, which blasted into orbit from Kourou, French Guiana in February 2013. Run by the state space agency, Azercosmos, the satellite serves Africa, the Middle East, Europe and Central Asia via 36 transponders on the C- and Ku- bands. The government has tentative plans to launch two more satellites within the next few years.
Azerspace-1 cost $230 million, but the government only had to fund 15% of the cost as the rest was financed by American and French export credit banks—the US-based Orbital Sciences Corporation built the satellite, based on the STAR-2 platform, and the French took it aloft on an Ariane 5 rocket. Azerbaijan achieved low-cost financing by working closely with industry leaders, a strategy the country follows at home as well as in space. For example, Alacatel-Lucent is the sole supplier of technology, particularly its state-of-the-art 100G optics equipment, on the Azerbaijani section of EPEG, a +10,000-kilometer fiber-optic cable connecting Frankfurt to Oman. The company, heir to the famous Bell Labs high-tech heritage, is instrumental in developing Azerbaijan’s ultra broadband access as well as LTE, small cell, and metro cell technologies.
Caspian Navtel has sold over 10,000 navigators and under half again as many licenses to some 25,000 users. Caspian Telecom operates the largest fiber-optic network in Azerbaijan and plans to increase its services by launching IPTV in 2014. American IT services provider Cisco established operations in Azerbaijan in 2006, and today works with some 40 partners on large projects as diverse as Baku White City, Heydar Aliyev International Airport, the Olympic Game Stadium, and the new SOFAZ headquarters. Another systems integrator is Ultra, which partners with Cisco and other IT providers like HP, Intel, Microsoft, and Oracle on major projects such as e-library, ASAN, and an e-learning platform.
Aside from e-learning, the state ICT program appreciates the need for training and education—in 2013 established and began enrolment for the University of Information Technologies—and also business incentives to develop domestic know-how. In 2012, President Aliyev established High Tech Park, which offers seven-year tax breaks and other incentives for investors. The newest resident of High Tech Park is Pi-Campus, an incubator of ideas and ICT innovation. The government is committed to making Azerbaijan a real player in ICT and is working to develop the sector on every front, from privatizing the national telecoms companies supporting the latest fiber-optic technology, to starting techno parks and launching its own satellites—the sky truly is the limit for Azerbaijan.
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