03-1
Strategic review

Telecommunications market analysis

According to the analytical company called IDC, the world market of telecommunications services and paid TV services in 2017 grew by 1.7%, and its volume in monetary terms amounted to 1.67 trillion dollars. The largest segment of the market is mobile communications, its share of total revenue accounts for 52%, and in the period from 2017 to 2021, the mobile category will grow by an average of 2% per year. According to the analysts, the growth factors that will help offset the drop in costs for voice communications and SMS messages included the increase of mobile traffic volume and the spread of M2M services.

Worldwide Spending on Telecommunications and Pay TV Services (US$ Billions)

The second most important segment is the fixed-line services that will provide about 21% of total revenue in 2017. The average annual growth rate (CAGR) in this direction is expected to be 4% for the next five years. The growing demand for high-speed communication contributes to the positive dynamics here.

With regard to fixed telephony services, revenues from them will fall annually by 6% per year over the next five years. By 2021, this segment will account for less than 10% of total revenue in the telecom and TV services market, as IDC believes.

Telecommunications market of Kazakhstan (KZT bln.)

+4.9%
684,30
677,70
710,90
2015
2016
2017

According to the Statistics Committee of the Ministry of National Economy of the Republic of Kazakhstan, the volume of the telecommunications market in 2017 amounted to 710.9 billion tenge. After the decline in the telecommunications market in 2016, the market grew by 4.9%.

Revenues from long-distance and international telephony services in 2017 amounted to KZT 30 billion, which is 11.3% less than in 2016. As for the local telephone communication services, the revenues amounted to KZT40.9 billion (by 6.5% less). However, a noticeable increase in revenues is observed from the Internet - KZT 228.6 billion, the growth to the previous year is by 10.7%; from mobile communication services - KZT 223.4 billion (1% less).

Structure of revenues from communication services in Kazakhstan (January-December 2017)

Structure of revenues from communication services in Kazakhstan (January-December 2017)
  • 31.09
    Cellular communication
  • 32.16
    Internet
  • 18.01
    Other communication services
  • 5.76
    Local telephony
  • 4.23
    Intercity telephone
  • 4.16
    Data transmission
  • 4.59
    Programs distribution

Classical telecommunication services penetration density

Name Number In relation to November 2017
Number of fixed telephone lines 3697,3 thousand units -0,4%
Number of cellular subscribers 26473 thousand units +0,05%
Number of fixed Internet subscribers 2597,9 thousand units +0,01%

Telecommunications market by segments

Fixed Telephony

Fixed telephone communication is gradually disappearing: the number of world subscribers in the period from 2005 to 2016 declined from 1.243 billion to 1.013 billion. The traffic moves to mobile networks and VoIP services (Skype, WhatsApp, etc.). According to GSMA Intelligence, the total number of mobile subscribers in the world has already exceeded 4.7 billion, and by the end of the decade will reach 5.6 billion. According to the International Telecommunication Union (ITU), 7 billion people (95% of the world's population) live in the cellular networks coverage areas.

In Kazakhstan, the segment of fixed telephony also demonstrates negative dynamics. The number of fixed telephone lines in 2017 was 3.7 million units, which is 5% lower than in 2016. Also, there is a decrease in total revenue due to a decrease in the volume of consumption of long-distance and international communication services. The decrease is caused by increase in the share of mobile and SIP-telephony.

Fixed Internet and Mobile Communications market

Mobile connections using broadband access technology (broadband access, 3G and 4G) are available to 84% of the world's population. The reach of rapidly developing LTE networks is approaching 4 billion people (53% of the world's population). Internet access is enjoyed by almost every second Earth inhabitant (47%), but only every seventh in the least developed countries. From a financial point of view, mobile broadband services are more affordable than fixed-line services. By the end of 2015, the cost of mobile Internet on average in the world totaled 5.5% of GNI per capita, which corresponds to the recommended ITU level. Tariff plans for fixed access are on average twice as expensive.

In January-December 2017, the volume of Internet communication services in Kazakhstan reached KZT 228.6 billion - by 10.7% more than in the same period of the last year. The largest volume was in Almaty (128.3 billion tenge +11.2% per year) and Astana (39.9 billion tenge, immediately + 20.5% for the year).

Internet penetration in Kazakhstan is one of the key development priorities. Thus, on December 12, 2017, the government of the Republic of Kazakhstan approved the "Digital Kazakhstan" State Program. The main mission of the program is to improve the quality of life of residents and the competitiveness of the country's economy, through the use and development of digital technologies.

The program is planned for two vectors of development: "Digitalization of the existing economy" in the medium term and "Creating a digital industry of the future" in the long term. The 120 planned events of the program will form the basis of the digital sector as a new branch of the economy and will be implemented in five directions as follows: Economy Digitalization, Transition to a Digital State, Realization of the Silk Road, Development of Human Capital and Creation of an Innovative Ecosystem.

As a result of the measures taken within the framework of the project, in addition to the growth of labor productivity by sectors of the economy, it is planned to increase the share of electronic commerce in total retail trade by 2022 to 2.6%; to create up to 300 thousand new jobs due to digitization; to increase in the share of Internet users to 82%, and the level of digital literacy of the population to 83%.

According to preliminary estimates, the direct effect of economy digitalization by 2025 will create an additional value of 1.7-2.2 trillion tenge.

ICT services market

Information and communication technologies are a set of methods, production processes and software and hardware means integrated for the purpose of information collection, processing, storage, distribution, selection and use in the interests of the user.

In January 2018, the report of the analytical company Gartner highlighted the fact that world expenses for information technology (IT) in 2017 increased by 3.8% and exceeded $ 3.5 trillion.

The growth of world IT expenditures in 2017 was observed in all directions, but experts registered the greatest increase in the category of corporate software, where expenses increased by 8.9%, reaching $ 355 billion.

Another distinguishing segment was the devices, where progress was fixed for the first time over the past two years. In 2017, $ 667 billion was spent for the purchase of computers, smartphones and other devices, which is 5.7% more than in 2016. As Gartner believed, the impact of new smartphones iPhone 8 and iPhone X on the global IT market last year was minimal.

Traditionally, the most extensive IT category in terms of costs were communications services, which in 2017 accounted for about $ 1.39 trillion. The second most important area was IT services ($933 billion), and the lowest expenses were recorded in the data center equipment segment ($178 billion).

The Kazakhstan IT market is associated with the absence of a clear classification of the name of works/services and a kind of reporting parameters mix from various sources, which to some extent makes it difficult to conduct research in this area. In this regard, a variety of information was subject to study: statistical data on the ICT market, the results of IT budgeting from statistical data, ready-made marketing reports and the results of purchases.

Total amount of services provided in the field of ICT of the RoK, 2017 is 1 063 billion tenge.

  • 21
    Internet; 228.6
  • 12
    Other communication services; 128
  • 4
    Local telephony; 40,9
  • 3
    Intercity telephone; 30,1
  • 3
    Data transmission; 29,5
  • 3
    Programs distribution; 32,7
  • 26
    Hardware; 275,4
  • 3
    Software; 33,6
  • 4
    Services; 40,9
  • 21
    Cellular communication; 223,4

As the dynamics of costs for the IT sector shows, 2017 showed an increase of 29.83% compared to the previous year 2016, although it did not reach the level of the indicator of 2015.

It is worth noting that such an increase was achieved due to EXPO-2017.

Costs for ITs, 2017 by regions of the RoK

  • 1
    Akmola Region; 3 365,9
  • 2
    Aktobe Region; 5 683,7
  • 1
    Almaty Region; 4 244,8
  • 4
    Atyrau Region; 1 3464,1
  • 4
    West Kazakhstan Region; 15 164,3
  • 1
    Zhambyl Region; 2 191,8
  • 2
    Karaganda Region; 7 730,9
  • 1
    Kostanay Region; 3 200,3
  • 1
    Kyzylorda Region; 3 290,5
  • 3
    Mangystau Region, 11 639,9
  • 2
    South Kazakhstan Region; 6 253,8
  • 4
    Pavlodar Region; 13 687,6
  • 1
    North Kazakhstan Region, 2 447,2
  • 4
    East Kazakhstan Region; 13 376,9
  • 21
    The city of Astana; 71 930,2
  • 49
    The city of Almaty; 172 271,6

According to IDC, the IT market of 2014 fell by 8%. In 2015 - by 30%. In 2016, IDC expected the fall by 7.7%. Compared to 2013, that is, the year when the last growth for the IT market was recorded, it decreased by almost 41%. Meanwhile, according to IDC forecasts, which the company gave in late 2016, the IT market in Kazakhstan in 2017 could grow by 10%. Over 2017, the volume of computer programming services, as well as consulting and other similar services in the sector, amounted to more than 160 billion tenge, which is 14.2% more than a year ago*.

More than 86% of IT services were provided in capitals: 51.7% in Almaty (83 billion tenge, + 15% per year), and 34.6% in Astana (55.6 billion tenge, immediately by +25.7 % a year).

Based on survey results:

  1. Market participants noted the growth of the IT market on average by 10-15%.
  2. Orientation of state bodies to a service model.
  3. "Digital Kazakhstan" program is another driver of ICT sector development.
  4. Trends in the development of the IT sector show a positive trend for the demand raising, and accordingly to the budgets of costs.

Competitive analysis

The main players of Kazakh telecommunications market besides Transtelecom JSC are Kazakhtelecom JSC, Beeline group of companies, Kcell JSC, KazTransCom JSC and Astel JSC.

Kazakhtelecom JSC is a leader in the telecommunications market of the country and covers all the main target markets for consumers of information and communications services.

The company provides telephony services (including ISDN), data transmission networks, broadband Internet access, IPTV, hosting, SIP telephony, video meetings, telegraph and intellectual communications.

The Company has a wide coverage of the population of Kazakhstan with communication services (over 70% of households), a developed network of retail outlets and customer service, and a recognizable brand the credibility of which can be defined as stable. Kazakhtelecom is also a major player in the market of operator services and is represented on the cellular communication market by Altel brand (in partnership with Tele2).

QazCloud LLP is a joint service company, which seeks to provide IT services to the group of companies of Sovereign Wealth Fund Samruk-Kazyna JSC, where Kazakhtelecom JSC has 49% of shares and Samruk-Kazyna Business Service JSC - 51% shares.

Prospective plans of Kazakhtelecom JSC are directed to the development of IT products of the company, the development of financial technologies, Internet portals and mobile applications.

This is confirmed by the acquisition of the Chocomart online hypermarket whereby Kazakhtelecom JSC plans to enter new markets and increase the company's revenues using the existing customer base.

The grant received from the National Agency for Technological Development (NATD) in the amount of 497 million tenge will be aimed at creating a digital platform for business: an Internet portal and a mobile application with a wide range of digital services.

In the fourth quarter of 2018, Kazakhtelecom JSC plans to enter IPO on the IFCS exchange, and applied to the Committee for Regulation of Natural Monopolies, Competition Protection and Consumer Rights for acquisition of a 75% stake in Kcell.

Kcell and Beeline companies are mobile operators and occupy the second and third places in terms of market share from the total revenue of telecommunications services, respectively. Beeline also offers services to operators, broadband Internet access services and pay-TV.

Prospective plans of Beeline is the development IoT (Internet of things) on the basis of LORA Wan technology. In 2018, a television service for corporate customers was offered, which allows users to use television services without the expense of traffic to the client, and develops the direction of financial technologies, a new product - Beeline bank card was designed for this purpose.

The three companies listed above together account for about 80% of the share of the telecommunications market in the Republic of Kazakhstan.

KazTransCom JSC is a communication operator providing a wide range of services in the field of telecommunications and information technologies mainly for the oil and gas industry. The Company owns its own terrestrial network infrastructure for more than seven thousand kilometers, as well as more than 300 satellite stations.

The main activity of Astel JSC is the provision of telecommunications services on the basis of Kaznet's own network, the construction of corporate data and voice networks, as well as additional services (from network design and equipment delivery to commissioning and training of the customer's personnel).

Structure of the telecommunication market of the Republic of Kazakhstan in 2016 for operators, market share

JSC "Transtelecom" occupies 4% of the market share in the segment of fixed telephony.

Structure of the telecommunication market of the Republic of Kazakhstan in 2016 for operators, market share
  • 31
    Kazkhtelecom JSC CG
  • 22
    Ksell JSC
  • 16
    Beeline CG
  • 13
    Mobile Telecom Service LLP
  • 4
    "Transtelecom" JSC
  • 2
    KazTransCom JSC
  • 3
    Alma TV
  • 3
    ASTEL JSC
  • 1
    Otau TV
  • 7
    Other regional operators
Source: Estimated figures according to the Committee on Statistics of the Republic of Kazakhstan http://www.stat.gov.kz
Competitors Transtelecom JSC Kazkhtelecom JSC KazTransCom JSC Kap Technology LLP Alma Telecom.
Kazakhstan JSC"
Kazteleport JSC KaR-Tel LLP
(Beeline)
Astel JSC "IT-Grand" LLP Softline Trade LLP
Intercity/interstate communication services + + + + + + +
Local telephony + + + + + + +
Internet + + + + + + + +
Satellite communication + + + + + +
Rent (FOL) + + + +
Intern. transit + + +
IP Telephony + + + + + + +
Service Desk +
Networking Service + + + +
Videoconferencing + + + + +
Cloud + + + + + + +
Datacenter + + + + + +
EDMS + + +
Certification Authority +
Electronic archive +
Maintenance and Implementation of IS + +
Contact Center +
Sale of equipment and software + + + + + +
Information Security + + + + +
CRM systems + + + +
Video monitoring + + + + +
IT consulting/audit + + + + +
IT Outsourcing + + + + +
TV + + + +
Cellular communication + + +
Competitors Transtelecom JSC Kazkhtelecom JSC KazTransCom JSC Kap Technology LLP Alma Telecom.
Kazakhstan JSC"
Kazteleport JSC KaR-Tel LLP
(Beeline)
Astel JSC "IT-Grand" LLP Softline Trade LLP
  • key areas in business;
  • service provides;
  • the service is not provided.