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Azerbaijan - Telecoms, Mobile and Broadband

  • November 2016
  • -
  • Paul Budde Communication Pty Ltd
  • -
  • 46 pages

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Azerbaijan's telecom sector continuing on a steady path
Coming into 2016 Azerbaijan's mobile subscriber base had passed 10 million and mobile penetration was over 110%. After a period in which annual growth rates had been around 50%, mobile subscriber growth had moderated to fall to around 5% in recent years. This pattern looked likely to continue in the short term.

Operator Azercell maintained its position as market leader, but its earlier dominance was being slowly eroded and market share had eased back to around 40%, down from more than 50% in years past. The second and third ranked operators, Bakcell (33%) and Azerfon (25%) were both throwing out challenges to Azercell's market share if not its number one ranking. (Note: There are some inconsistencies in the available subscriber statistics for Azerbaijan, but the overall trend appears evident.)

The country's fixed-line network provides good national coverage and subscriber numbers are still expanding at a modest rate (contrary to the pattern in other regional markets). Azerbaijan was claiming a positive fixed-line penetration of almost 20% by the start of 2016. Just over 80% of fixed lines are in urban areas, however, despite 50% of the population living in rural areas.

In the meantime, the number of internet users in the country had passed the 6 million mark by early 2016 with an internet user penetration of about 63%. Fixed broadband subscriptions had increased from just 100,000 in 2009 to more than two million and strong growth was continuing. Mobile broadband had rocketed from just 19,000 in 2009 to 6.4 million by end-2015. Into 2016, the number of mobile broadband subscribers was growing at an annual rate of around 15%.

The government has announced that the country's second telecommunications satellite, Azerspace-2, was to be launched by 2018. Earlier, Azerbaijan had put its first telecommunications satellite into orbit. The Azerspace-1 satellite was providing communications coverage for Azerbaijan, Central Asia, Europe and Africa with a mission life of 15 years. Its service offerings included digital broadcasting, internet access and data transmission, among others.

The expansion of the country's telecom sector has taken place in the context of a very strong developing economy. Azerbaijan has seen rapid economic expansion, recording annual GDP growth levels of up to 30% a few years back. However, the economy suffered a major setback following the Global Financial Crisis (GFC). The poor state of the global economy saw a big drop in Azerbaijan's oil and gas exports; real GDP grew by just 0.1% in 2011. Since then there have been signs of a patchy recovery as the country adjusted to the global realities. The anticipated slower expansion in oil production was acting as a considerable drag on the country's GDP growth. Growth has been fluctuating. In 2015 was forecast by the IMF at less than 1%, but came in at 4%.

Apart from the economy the other major issue hanging over the telecom sector involves the corrupt business practices that prevail in the local industry.

Companies linked to the family of the President Aliyev have been playing a significant role in telecoms that has been cause for concern. Transparency International's Corruption Perceptions Index (2015) for Azerbaijan was 29 out of 100 ranking it 119 out of 168 countries rated.

Key developments:

after a period of rapid expansion, the mobile market in Azerbaijan was continuing to grow coming into 2016, but at a more modest annual rate;
with around 11 million mobile subscribers by 2015, the total numbers had increased fivefold since 2005;
of the three major mobile operators Azercell remained the clear market leader with over 40% of the subscriber base;
Azerfon planned to introduce LTE-Advanced (LTE-A) technology in 2016.
ISP Delta Telecom was replacing its WiMAX network with LTE technology, setting the scene for Delta to become a new mobile operator;
as the fixed-line market slowed, penetration was close to 20% coming into 2016;
Azerbaijan's internet usage was expanding quickly;
mobile broadband subscribers had rocketed from just 19,000 in 2009 to around 5 million in 2015;
the country's first satellite, Azerspace-1, was put into orbit in 2013;
Azerspace-2 was planned for 2018;
an MNP scheme was introduced by the MCHT in cooperation with the mobile operators in 2014;
Azerbaijan having initiated an e-government project, implementation was reported to be making good progress;
the privatising of state-owned telecom enterprises remained on the government's agenda, with a new strategy announced in 2015 for the critical privatisation of Aztelekom;
although he ministry had reported in 2014 that the setting up of an independent telecommunications regulator, .by 2016 there was no sign of the government moving on this;
mobile operator Azerfon has acquired ISP CityNet to expand its commercial reach.


Companies mentioned in this report:

Aztelekom; AzEuroTel; Azercell; Bakcell; Azerfon; Catel; BakTelekom (BTRIB); Eurasiacom; Fintur; Vimpelcom (Beeline);

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