Kazakhstan 2014 | ICT | REVIEW: ICT

A model of successful liberalization, new ICT solutions are helping to keep this large country connected.

Kazakhstan is primarily a mobile-dominated market, with the medium exceeding fixed-line usage in 2004; SIM ownership in 2013 was estimated at 186%, according to BuddeComm. The high pickup of mobile devices, and especially smartphones, driven undoubtedly by the challenge of getting fixed infrastructure to rural areas, has also boosted internet usage. Mobile data services now represent one-quarter of the total mobile market in revenue terms. That brings the number of internet users per 100 people to 50, while the figure for fixed broadband stood at a lower 9.7 as of 2012. But fixed telecoms services are certainly not dead, with subscriptions holding steady at 27%; there are currently around 4.5 million subscribers, over 90% of which are Kazakhtelecom customers, despite liberalization opening up the sector in 2004.

The advent of widespread internet use is also serving to improve the e-commerce offering, and shoppers are being tempted online to hunt for bargains. In 2012, 7% of internet users made purchases over the web. Although still a ways off the 20% figure in Russia, purchases were worth $300 million, with figures in the banking industry suggesting that number could grow 10 fold in just a few short years.

Elsewhere, Kazcosmos, the national space agency, had plenty to celebrate in April 2014 with the successful launch of KazSat-3, which lifted off from the Baikonur Cosmodrome on a Proton-M carrier rocket. Now in orbit, the satellite will provide telecoms services, broadcast television, and deliver high-speed internet access.


There are four mobile operators in Kazakhstan, the largest of which is Kcell. Next up is Beeline, followed by relative newcomers Tele2 and Altel, the latter a fully owned subsidiary of Kazakhtelecom. With penetration at 186%, it's likely the market is approaching saturation, with operators now scrambling to boost their value offerings. On that front, Altel, the smallest player in the market, got a big leg up when it was given a monopoly on LTE, or 4G. That came on the back of successful Kcell and Beeline 4G testing as far back as 2010, leading to rumblings in the sector. The monopoly will last until 2015, but Altel is determined to make the most of the time; it began switching off its 3G network in 2013 as the 4G rollout moved ahead.


Fixed-line penetration stands at approximately 27% according to BuddeComm estimates, with six operators offering telephony services in the segment. Of the 4.5 million subscribers, 93% were Kazakhtelecom customers as of 2012, suggesting many haven't seen a need to switch operator since the sector was opened up in 2004. Alternative providers include Ducat, Astel, and TransTeleCom, while household penetration is approximately just under 7%, suggesting that the corporate segment is the key driver for the sector.


Approximately 9.7 people per 100 are fixed broadband subscribers in Kazakhstan as of 2012, placing the country 79th globally. This is also up from 2.15 people per 100 in 2008, suggesting a fairly rapid uptake. The brakes could have been applied, however, with the advent of smartphones and the fast uptake of data services. When mobile users are considered, internet penetration rises to 50 people per 100, with a government plan in place to boost coverage to 100% through the extension of both fixed and wireless services. Another added benefit of wider internet usage is e-commerce, which is also on the rise in Kazakhstan; 7% of internet users made purchases online in 2012. While this means the country lags behind the likes of Russia, at 20%, or even Turkey, with 10%, the practice is likely to grow as coverage increases.


According to the OECD's last survey in 2009, 83% of the ICT sector in Kazakhstan was represented by communications, with the remainder of the pie made up by computer services, hardware, and software. As part of a government plan to see the ICT industry reach a yearly value of KZT172 billion, or 3.8% of GDP, by end-2014, the share of local content is expected to rise to 10% in IT hardware and as much as 80% in IT services. This is up from 3% and 30% in 2009, respectively. In terms of sales, in 2012, hardware represented 82% of purchases, followed by licensed software at 2% and services at 16%. In terms of IT costs, the government, oil and gas firms, and financial companies are the biggest consumers, at 42.1%, 24.8%, and 12.5%, respectively, according to the Kazakh Association of IT Companies.


Kazakhstan has long had an association with space exploration, being home to the Baikonur Cosmodrome, which was long the heart of the Soviet Union's space industry and is now leased by Russia. In April 2014, it was also the launch pad for KazSat-3, Kazakhstan's third satellite after KazSat-1, launched in 2006 and lost in 2008, and KazSat-2, launched in 2011. KazSat-3 is a telecommunications satellite that will also provide high-speed internet access across Kazakhstan and neighboring countries. And there is more to come in 2014—the year will witness two more launches, both of which are Earth remote sensing satellites being developed in partnership with Airbus Defence and Space.

Kazakhstan is currently undergoing a mobile spring, with 4G services sweetening the deal for subscribers across the country. Although this by no means indicates that fixed services are dead, in neither the telephony nor internet sectors, the smartphone has had the largest impact on the sector since liberalization broke up Kazakhtelecom's monopoly in 2004. And with the mobile market approaching saturation, operators will continue scrambling to boost their offerings and tempt customers their way.