Identifier
Created
Classification
Origin
06DUSHANBE673
2006-04-12 10:15:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Dushanbe
Cable title:  

TAJIKISTAN'S TELECOM SECTOR: PROMISING, BUT NOT

Tags:  PGOV ECON EINV EINT SOCI CH IR TI 
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UNCLAS SECTION 01 OF 03 DUSHANBE 000673 

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SENSITIVE
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STATE FOR SCA/CEN, EB, S/P

E.O. 12958: N/A
TAGS: PGOV ECON EINV EINT SOCI CH IR TI
SUBJECT: TAJIKISTAN'S TELECOM SECTOR: PROMISING, BUT NOT
TROUBLE-FREE

DUSHANBE 00000673 001.2 OF 003


(U) Sensitive but unclassified. Please handle accordingly. Not
for public Internet.

UNCLAS SECTION 01 OF 03 DUSHANBE 000673

SIPDIS

SENSITIVE
SIPDIS

STATE FOR SCA/CEN, EB, S/P

E.O. 12958: N/A
TAGS: PGOV ECON EINV EINT SOCI CH IR TI
SUBJECT: TAJIKISTAN'S TELECOM SECTOR: PROMISING, BUT NOT
TROUBLE-FREE

DUSHANBE 00000673 001.2 OF 003


(U) Sensitive but unclassified. Please handle accordingly. Not
for public Internet.


1. (SBU) SUMMARY: Tajikistan's mobile and Internet
telecommunications market is one of the most dynamic and
competitive sectors of the economy. The mobile sector could
grow 10-20 percent monthly since only 5% of the market currently
have cell phones. Internet growth also will increase with the
completion of fiber optic lines. The upcoming privatization of
state-run Tajik Telecom, which controls the digital fixed-line
network and routes most international calls, is prompting some
government officials to reassert control over the entire sector.
Private mobile companies have temporarily stalled the Ministry
of Communication's attempt to establish a single gateway, but
the lack of a truly independent regulatory body is troublesome.
The United States can play a private and public role in
providing the mobile and internet market with hardware and
software, aiding regulatory reform, and advocating for
transparency leading up to Tajik Telecom's privatization. END
SUMMARY.

DYNAMIC SECTOR IN MOBILE, INTERNET SERVICES


2. (U) Liberal licensing policy, comparatively low market
entrance costs, and low penetration rates in both the mobile and
fixed-line telecom market drive growth in Tajikistan's telecom
sector. Although cellular subscriber rates are increasing on
average 10-20 percent per month is between 10 and 20 percent,
only five percent of the population had mobile phones as of
March 2006. Customs duty on telecommunications equipment rarely
exceeds 15 percent. In the past year most mobile operators
leapfrogged and introduced 3G and Next Generation advanced
wireless networks -- in addition to providing standard Global
System for Mobile Communications (GSM.)


3. (SBU) Competition is robust among the 10 mobile providers
servicing 400,000-500,000 Tajik subscribers as of March 2006.
Of the top four companies, Babilon Mobile has 200,000

subscribers, Indigo Somoncom has 80,000, Indigo Tajikistan has
70,000, and Mobil Lines of Tajikistan (MLT) has 70,000. Indigo
Somoncon provides northern Tajikistan with cell service, and its
sister company Indigo Tajikistan covers the south. Indigo is
owned 40 percent by American MCT Corporation and 60 percent by
the Aga Khan Foundation. Indigo Tajikistan had a $4 million
profit in 2004 and close to $7 million profit in 2005; its
average monthly customer bill was $20. Babilon Mobile also has
some undisclosed private American investment, according to its
chairman, and its goal is to increase its subscribers to 350,000
by the end of the year.


4. (U) Internet access growth is expected to increase
substantially when the country is fully integrated into the
Trans-Asia-Europe (TAE) fiber optic highway, potentially as soon
as the end of 2006. Currently, 12 Internet service providers
exist -- 10 commercial and two government -- and the
government's goal is to have at least one computer in every
secondary school classroom by 2007. Babilon Telecommunications
(the parent company of Babilon Mobile) has pushed hard to expand
Internet access by opening more than 50 internet cafes
throughout the country. Its next step is to push for users to
become subscribers. Most Tajiks use the over 400 internet cafes
to make cheap, but low quality phone calls over the Internet or
to play networking games, according to the local Civil
Initiative on Internet Policy Director.


DUSHANBE 00000673 002.2 OF 003


TAJIK TELECOM CONTROLS FIXED-LINE, INTERNATIONAL MARKET


5. (U) State-run Tajik Telecom controls the fixed-line market in
the country. During 2003-2005, it upgraded from obsolete analog
to digital equipment provided by China's Zhong Xing
Telecommunication Equipment (ZTE) company and Iranian Parstel.
Communications quality since has dramatically improved. A large
part of the network modernization was funded by a 2001 $13
million loan from the European Bank for Reconstruction and
Development, which Tajik Telecom begins paying back October

2006. Tajik Telecom is slated to be privatized in 2007 under
the national privatization plan. The company has 300,000
fixed-line subscribers.


6. (U) Tajik Telecom's monopoly of much of the telecom sector
hinders efficient operation for most mobile operators. Almost
all mobile operators are required to route their international
calls through Tajik Telecom, because making separate
international phone calls requires a government license. In
February, only cellular operators affiliated with Tajik Telecom
and Babilon Mobile were granted this license. Indigo Tajikistan
is still waiting for its application to be approved. Moreover,
Tajik Telecom does not pay for its outgoing calls to local
mobile providers, but still charges the mobile providers for all
incoming calls to Tajik Telecom. This violates "Calling Party
Pays" (CPP) telecom community standards. Legislation is pending
to force Tajik Telecom to begin paying.

GOVERNMENT INTERFERENCE INCREASING


7. (SBU) Interest in getting a larger share of the telecom pie
for some government officials is growing within the industry.
The Ministry of Communications unilaterally announced in
February the installation of a single unified gateway for all
mobile and Internet communications. The Ministry publicly
claimed that routing all communications traffic through one
switch would improve the quality, accurately assess usage fees
by all users, and capture "gray" traffic that circumvents the
system. Ministry officials also said the unified gateway would
help the country's national security committee and interior
services better monitor telephone and internet traffic.
Minister Zuvaidov himself publicly advocated the single gateway.


8. (SBU) Prompt public outcry from mobile and Internet operators
-- as well as the deputy of Parliament -- appears to have
stalled this initiative. The operators observed that a unified
gateway would degrade the quality of calls by going through
another node and raise the service cost to consumers, and they
appealed to Tajikistan's anti-monopoly committee. How Tajik
Telecom would prioritize each company's traffic also was
questionable. Moreover, government officials could not respond
adequately to the question of what would happen if the gateway
broke down, which effectively would bring down all
communications in the country. As of March, the Ministry of
Communication has agreed to re-examine its proposal in a larger
committee with representatives from other government ministries
and the private sector. Zuvaidov gave an interview,
acknowledging the need for more examination, and later told
PolOff they would consider having a commercial gateway in
addition to the state-controlled.


9. (SBU) It is troubling that Tajikistan does not have a truly
independent telecom regulatory entity. In 2004, the
Communications Regulation Agency (CRA) was created within the
Ministry of Communications. The CRA relies on the Ministry for

DUSHANBE 00000673 003.2 OF 003


its budget. In a meeting with PolOff March 30, the symbiotic
connection to the Ministry was obvious in CRA Director Anvar
Mamajanov's advocacy for the unified gateway. A March 31
meeting with First Deputy Minister of Communications Beg Zuhurov
confirmed the lack of understanding of how regulation needed to
be transparent and independent of the government. Subsequent
private meetings with the heads of Babilon, Indigo Tajikistan,
and Indigo Somoncon indicated that key officials at Tajik
Telecom and the Ministry of Communications almost had succeeded
in quickly pushing this initiative through (the decree
reportedly was awaiting President Rahmonov's signature) as a
fait accompli.

POLITICS OF PRIVITAZATION


10. (SBU) There is a large degree of cynicism that the gateway
concept is solely related to Tajik Telecom's privatization. In
a March 1 meeting with EmbOffs, the administrative head of Tajik
Telecom, Dr. Jafar Rustamov, said that he will "make Tajik
Telecom as big and tasty a pie as possible," but it is up to the
government to decide how much of that pie they want to sell.
(If just a one-cent surcharge per minute on routing all current
traffic through a unified gateway were imposed, for example,
that would be almost $5,000 extra per minute going to Tajik
Telecom, if all mobile users were using the system.) The EBRD
is growingly increasingly frustrated with the Ministry of
Communication stalling regulatory reform, and believes that
vested interests are driving telecom policy leading up to Tajik
Telecom's privatization. In addition, the Minister of
Communication appears to be able to act with impunity in the
government -- hence the unilateral implementation of the Chinese
ZTE-supplied router and quick move to initiate the unified
gateway policy. Moreover, ZTE and the Huawei Corporation have
won the tenders for upgrading Tajik Telecom's network and
clearly have good connections in both the Ministry of
Communications and Tajik Telecom.


11. (SBU) COMMENT: Communications is a key part of the
Secretary Rice's Infrastructure Integration Initiative for

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Greater Central Asia. Although the Chinese dominate supplies to
Tajik Telecom with communications hardware, U.S. investment has
created a more transparent environment in the mobile and
Internet market. There is a private and public role for the
United States to play in providing the mobile and internet
markets with hardware and software, aiding regulatory reform,
and advocating for transparency leading up to Tajik Telecom's
privatization. END COMMENT.
HOAGLAND