Demonopolization of communications and the Internet: myth or reality?
(Prepared by the The National Association for Communication and Digitalization)
May 28, 2022
Recently, in Kazakhstan, there was a lot of talk about the demonopolization of the telecommunication industry, the development of competition and the attraction of new investors. A special Commission has even created to propose new methods of fighting monopolies. The new Commission held several meetings, where all market participants “got it”; at one of them, Kazakhtelecom especially “fell”
Recall that today Internet access services are carried out using fixed and wireless communication technologies. Taking into account availability, cost and quality parameters, the Internet access service market is divided into two main types: fixed (wired) Internet and wireless Internet.
At one of the last meetings, B. Musin, the Minister of Digital Development, Innovation and Aerospace Industry delivered a report.
The head of the department noted a number of organizational and legislative measures for the demonopolization of the telecommunication industry.
The issue of the occupied share of fixed and mobile communication in the country was considered. In particular, it was noted that Kazakhtelecom JSC is a monopolist in the telecommunication service market with a share of over 80% in the fixed-line communication market and over 60% in the mobile communication market. As B. Musin noted, a significant position in the telecommunication market allowed the group of Kazakhtelecom JSC companies to take a significant share in other related markets.
Now, as you know, in the mobile communication market, services are provided by:
– “Kcell” JSC (with the “Kcell” and “Activ”trademarks ),
– “Mobile Telecom – Service” LLP (with the “Tele2” and “Altel” trademarks),
– “KaR-Tel” LLP (with the “Beeline” and “IZI” trademarks ).
Taking into account the fact that Kcell JSC and Mobile Telecom-Service LLP belong to Kazakhtelecom, it turns out that only two real companies are represented on the mobile communication market in Kazakhstan, which have acquired a variety of various profitable “signs” during all this time .
All these companies have appropriate licenses for the provision of such services, which were issued by the decision of the Interdepartmental Commission on Radio Frequencies.
By the way, this Commission recently ceased to exist by the Government Decree of April 29, 2022, which was also headed by the Head of the Government. What this commission has been doing all these years is not clear, since, according to our information, the last time it held a meeting when there was the distribution of radio frequencies for the 4G format, although during all this time there were those who wanted to become full-fledged participants in this industry, since this direction very profitable, as indicated by the following figures.
In general, for the whole of 2021, Kazakhstani telecom operators earned more than 1.12 trillion tenge, and the volume of the telecommunication market, according to the Bureau of National statistics, increased by 12.9% compared to the same period of the previous year. Telecom operators earned 405.1 billion tenge (20.1% more than in 2020) and 251.1 billion tenge (7.2% more than in 2020) from Internet services and cellular services, respectively .
In January-March 2022, communication services were provided in the amount of 253.4 billion tenge, which in comparable prices is 6.4% more than in January-March 2021. 104.6 billion tenge (11.5% more) and 59.6 billion tenge (0.4% less) were also earned from Internet and cellular services, respectively.
For example, Kcell JSC in the 1st quarter of 2022 received record revenue, and also increased its gross margin from 33% to 36%, which had a positive impact on net profit.
Thus, net sales amounted to 50.9 billion tenge (+15.6%) income from the sale of services – 39.8 billion tenge (+11.2%). EBITDA, excluding non-recurring expenses, amounted to 21.6 billion tenge (11.6%). The EBITDA margin was 42.6% (44.1). Operating profit, excluding non-recurring expenses, amounted to 14.3 billion tenge (+21.9%). Net financing costs – 1.7 billion tenge (-22.4%). At the same time, net profit amounted to 9.2 billion tenge (29.1%).
We believe that if other companies were public, then we could see positive indicators for them as well.
The National Association for Communication and Digitalization has prepared special proposals in the form of comments on the initiatives of relevant state bodies responsible for the development of the industry itself and competition, which you can read in our next issue.