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SERVICE MARKET
The market for commercial public telecom services grew to about
US$100 million by the end of December 2005. The forecast for 2006
is an increase of around 35% based on the historically high growth
levels plus the introduction of one additional nationwide mobile (GSM)
licensee as of 15 April 2006 and the possibility of one more
nationwide mobile (GSM) and up to four additional unified services
licensees by the end of 2006.
TELECOM INDUSTRY TRENDS
There is very robust demand for all kinds of telecom services. The
mobile (GSM) services market has essentially doubled during 2005,
and the number of urban areas with coverage has likewise doubled.
Consumers are demanding higher quality of service and the regulator
has responded with drive tests and enforcement campaigns.
BUSINESS ENVIRONENT
Market conditions and competition
Market conditions in Afghanistan are generally favorable. The
Afghan Constitution provides guarantees to the protection of private
investment and property and a new Private Investment Law,
promulgated in 2005, provides further details. The Companies Law
and Commercial Code is expected to be drafted during the course of
2006. The Ministry of Communications has adopted a forward-thinking
policy and encouraged private investors. A new Telecom Law was
promulgated by President Karzai on 18 December 2005 that is very
favorable towards private investment, competition and consumer
protection. The Ministry of Commerce has begun serious preparations
for World Trade Organization (WTO) accession.
Market structure and trends
The telecom market is currently dominated by two nationwide mobile (GSM)
service providers that were licensed in 2003. In September 2005,
the regulator concluded an international competitive tender for two
(2) additional nationwide mobile (GSM) licenses that were awarded
for US$40.1 apiece. The incumbent wireline service provider, Afghan
Telecom was corporatized in September 2005 with the government of
Afghanistan owning 100% of the share capital. Afghan Telecom will
very likely be fully privatized (sold) during 2006. The regulator
completed an international competitive tender for Local Fixed
Service Provider (LFSP) licenses in December 2005 and at least four
(4) applicants are expected to be licensed to serve approximately
300,000 additional users in rural and underserved areas of
Afghanistan. About a dozen nationwide Internet Service Providers
(ISPs) have been licensed and there appears to be solid demand for
additional players. Thuraya is also providing satellite mobile
communications services and cooperates with a national service
provider since late 2004.
Key players
Afghan Wireless Communications Company (AWCC) was awarded a
nationwide GSM mobile license in January 2003, and is owned (80%) by
Telephone Systems International (TSI), a US based company and (20%)
by the Ministry of Communications. An effort is underway to dispose
of the government’s stake.
Telecommunications Development Company of Afghanistan (TDCA) – doing
business as “Roshan” – was awarded a nationwide GSM mobile license
in January 2003, and is owned (51%) by AKFED, the development arm of
the Aga Khan Development Network (AKDN), (36.75%) by Monaco Telecom
International (MTI) and (12.25%) by MTC.
Afghan Telecom was formerly the telephone operations of the Ministry
of Communications. It was established as a corporation in September
2005 and is in the process of being fully privatized during the
course of 2006. Afghan Telecom completed the Government
Communications Network (GCN) during 2005 (using donor money) to
provide essential connectivity among government offices in each of
the 34 provincial capitals. It also commenced deployment of the
District Communications Network (DCN) with donor money with a
limited point of presence in each of the roughly 350 districts via
VSAT.
Areeba Afghanistan
is the latest entrant, owned by
Investcom (Lebanon). On 15 October 2005, Areeba was awarded a
nationwide mobile (GSM) license, with the commercial launch date set
for 15 April 2006.
Etisalat
is presently being considered for the award of the fifth and final
nationwide GSM license.
Regulations and liberalization
On
18 December 2005, President Karzai signed the new Telecom Law into
effect. The law establishes an independent sector regulator, to be
called Afghanistan Telecom Regulatory Authority (ATRA). ATRA will
consist of a five-member board appointed by the cabinet. ATRA has
the complete range of regulatory powers, including licensing,
numbering, frequency management, interconnection, consumer
protection and monitoring & enforcement.
ATRA will be guided by the Ministry of Communication’s Telecom &
Internet Policy (3 July 2003), which sets forth a very comprehensive
and pro-competitive approach towards market liberalization to
accelerate the widespread availability of affordable access to
telecom services on a nationwide basis.
Based on this policy, the government has already issued two
nationwide mobile (GSM) licenses (in July 2003) and completed an
international competitive tender for two (2) additional mobile (GSM)
licenses in October 2005.
In
addition, in December 2005, the regulator completed an international
competitive tender for additional Local Fixed Service Provider (LFSP)
Licenses that will provide wireless local loop (WLL) to rural and
underserved areas of the country.
As
of 10 January 2006, the policy allows licensed mobile service
providers to also offer fixed services and vice versa. The first
licensee in this category will be Afghan Telecom, formerly the
telephone operations within the Ministry of Communications,
established as a company in September 2005 (100% government-owned).
ATRA will soon conduct a public consultation on formally adopting an
Unified Services License regime by the end of 2006.
Privatization and licensing
In
September 2005, the telephone operations of the MoC were transferred
to a newly created company, Afghan Telecom, that is 100% owned by
the government. The government is actively engaged to fully
privatize this company.
The MoC also holds a 20% stake in the first mobile (GSM) licensee,
AWCC, and is also actively seeking to dispose of this stake.
All other telecom services are licensed pursuant to the Telecom Law
by ATRA.
Revenue and conduct of contribution in basic services
The MoC collects 2.5% of the net
revenues of all licensed service providers for a Telecom
Development Fund (TDF) to
increase penetration in the rural and un-served areas. ATRA is in
the process of developing procedures and policies to use these funds
efficiently and effectively. Also, the MoC is working on a plan to
provide subsidized telecom services to the public education sector
and other social services and for disabled and poor people.
The majority of GSM Services users utilize pre-paid scratch cards,
while the majority of internet usage is by NGOs and private
companies that pay monthly subscription fees.
The government has adopted a modern tax regime and therefore revenue
sharing is not required. Various tax laws were promulgated in 2005,
including Business Receipts Tax (a precursor to Value Added Tax) and
Income Tax.
Facilities-based
licensees
Most licenses issued to date have been facilities based, although
bandwidth resale is allowed and is prevalent among ISPs.
Competitive landscape in basic telephony
At
the present time there is no competition in the basic telephony
market. The Policy foresees the awarding of two additional national
(fixed-line telephony) service licenses, but it is unlikely to be
implemented until after 2006. Meanwhile, at least four (4) LFSP
licensees will commence operations in early 2006 to address rural
and under served parts of the country. It is expected that the LFSP
licensees will deploy at least 100,000 new access lines by the end
of 2006.
ATRA will launch a public consultation on the TDF early in 2006. It
is also expected that TDF will subsidize basic telephony projects in
rural and un-served areas.
MOBILE
COMMUNICATIONS
Mobile
communications market
The mobile communications market is currently experiencing
competition between the two (2) licensed GSM operators, Roshan (TDCA)
and AWCC (Afghan Wireless Communications Company), and the satellite
services Service Provider for Thuraya. An international competitive
tender for two (2) additional nationwide mobile (GSM) licenses has
just concluded and the first new licensee will have its commercial
launch by April 2006.
As
of 10 January 2006, fixed service licensees are allowed to provide
full mobility (CDMA).
Market structure
and trends
Mobile is by far the preferred choice by most users. The two mobile
licensees are the largest investors of private capital, make the
largest tax contribution to the ordinary budget of the government of
Afghanistan, are the largest employers and provide training and
well-paid jobs to hundreds of Afghans.
Afghan Telecom has also substantially increased fixed penetration,
achieving close to a ten-fold increase in its users. Essentially
all new users are via wireless local loop (WLL) utilizing CDMA. Up
until 10 January 2006, WLL was required to have limited mobility up
to 3 kilometers, but now full mobility is allowed.
Analysis of
revenues, usage and adoption
Mobile penetration has gone from zero at the end of 2002 to 500,000
by the end of 2004 and close to one million at the close of 2005.
Services are mostly being offered on a prepaid basis, while some
postpaid customers exist in the corporate market. ARPU (Average
Revenues Per User) were initially fairly high but are expected to
decrease, as penetration increases.
Overview of mobile
data service and adoption
Mobile data services are currently not being offered and SMS is
apparently being discontinued due to lack of market response. Most
ISPs offer broadband connectivity to the business market, through
point-to-point wireless connections. However, Afghan Telecom has
recently rolled out dial-up internet connectivity with modest
success and CDMA-based WiFi connectivity that appears much more
promising. Other licensees have also indicated interest in offering
WiFi and WiMax.
Adoption forecasts
by technology
No
official statement has been made by mobile operators as to
technological innovations slated for introduction yet, but it is
assumed that the offering of roaming by both operators will
introduce competition in this sector and reduce tariffs.
Market structure
Up
until now, it appears that most data communications is internal and
among private enterprises and NGOs (including various United Nations
operations).
However, the MOC has recently created an ICT department devoted to
promoting the sector. The initial focus will be on the creation of
an ICT Council, consisting of the Ministries with the highest level
of requirement and infrastructure. The first electronic government
(eGov) project was deployed during 2005 and is a real-time treasury
application to facilitate the budget process. A second initiative
focusing on procurement will likely follow in 2006. In truth, most
Ministries have been very slow to adopt ICT, most due to the lack of
trained personnel.
The MoC commenced framing legislation to facilitate the broader
adoption of ICT. The draft law incorporates the UNCITRAL electronic
commerce (eCommerce) and digital signatures model law, reflects the
CyberSecurity and CyberCrime standards set by the Council of Europe
and adopts the key elements of the information society service
(electronic communications) directives of the European Union.
Revenue trends
At
present, revenue information specifically pertaining to data
communications (or ICT) segment is not officially collected or
available.
Last
updated on 15/03 /2007 |
