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Armenia Readies Third Mobile Licence Tender

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  • Armenia Readies Third Mobile Licence Tender

    ARMENIA READIES THIRD MOBILE LICENCE TENDER

    Business Monitor International
    Emerging Europe Telecommunications Insights
    August 1, 2008

    The Public Services Regulatory Commission (PSRC) of Armenia is reported
    to have approved the mechanism for tendering the country's third mobile
    network operator licence. It is expected that the selection process
    will take more than four months to complete, according to a report
    posted on the news portal Armenialiberty. Candidates will be expected
    to offer a minimum of EUR10mn for the nationwide GSM 900/1800 licence
    and invest at least EUR200mn in the initial stages of network rollout.

    The aim is to increase competition in the sector as well as raise
    mobile penetration in a country that is poorly served by fixed-line
    infrastructure and has only limited mobile phone availability at
    present. The government also hopes that the country's two existing
    operators will reduce their tariffs and raise the quality and range
    of the services they offer in the new competitive environment.

    Previously, it had been reported by the newspaper Panorama that
    the Armenian authorities were keen to award the licence to Russian
    operator, MegaFon; the suggestion that the results of the auction
    had already been decided in advance caused us some concern. While
    BMI welcomes the prospect of a new operator in Armenia, potential
    investors in the mobile and other sectors (such as broadband) may have
    been deterred from entering the country if they felt that government
    influence over the telecoms market remained a significant potential
    constraint to growth.

    Third Licence Could Tempt MegaFon Armenia: Cellular Market Shares By
    Operator, Q108 Telecoms2_20080718 Source: BMI Research

    The Armenian mobile market is shared by just two operators. The
    largest of these is VivaCell, a company that is majority-owned by
    Mobile TeleSystems (MTS), Russia's largest mobile operator. It had
    1.42mn subscribers at the end of March 2008, which would give it an
    approximate 73.2% market share. Incumbent fixed-line operator ArmenTel
    accounted for a further 520,000 active subscribers at that time;
    this would give it a market share of 26.8%. ArmenTel is controlled
    by Russia's second largest mobile operator, Vimpel Communications.

    In 2007, VivaCell and ArmenTel were awarded 3G UMTS licences, which
    they seem likely to exploit as quickly as possible to improve their
    customer retention schemes. 3G is also seen as useful in selling a
    broader range of value-added services and premium rate content. As
    yet, it is not known whether the third licensee will also be offered
    access to 3G spectrum.
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