Executive summary

With the most damaging effects of the Global Financial Crisis hitting Armenia in 2009, demand for telecom services in the country plummeted. Mobile subscriber growth was negligible (around 2%) for the year. Coming into 2010, an improved national economy was expected to see a modest recovery in the mobile market, but the annual growth rate was likely to remain at ¡®single digit' levels in the short term at least.

The telecommunications sector in Armenia has experienced a rollercoaster ride over the last two decades. The sector slipped into decline following the collapse of the former Soviet Union in the 1990s, with the fixed-line teledensity falling markedly. This was partly as a consequence of the prevailing socio-economic instability within the region, but more significant a factor was that the country initially failed to embrace any vigorous reform in the telecom sector. Despite steadily improving economic conditions as the country underwent economic reform, the telecoms sector was slow to respond.

In the last few years more positive signs have been evident, however; whilst these positive signs have not translated into any fixed-line growth, with that segment of the market continuing to be flat, much more encouraging has been the mobile segment, with subscriber numbers increasing by around 75% annually for a number of consecutive years. The growth in mobiles was no doubt boosted by the introduction of competition into the market in 2005. Expansion in the mobile market slowed dramatically in 2009 as the faltering Armenian economy started to have a serious negative effect on the local telecom market. As a consequence, there was a major question over how the market would perform in the short to medium term.
Armenia's path to a more competitive market has been slow. This had a lot to do with ArmenTel, the country's national telecom provider, which had been granted the exclusive right to provide all telecommunications services in Armenia, including public switched telephony services and mobile telephony, until 2013. As a consequence of this monopoly, no other company was able to provide international satellite services either. The one segment of the market initially exempt from this monopoly was Internet services.

However, amid growing dissatisfaction over the performance of the country's telecoms network, by 2004 the government was under increasing pressure to do something about the ArmenTel monopoly. It reached a compromise agreement with ArmenTel to end its exclusive rights to provide a range of services, including GSM mobile services, satellite and mobile radio communications services in exchange for various other concessions, including the stipulation that only one alternative mobile operator would be allowed in Armenia until 2009. ArmenTel was to also retain sole rights to Internet telephony and the use of fibre optic cables.

The government subsequently made a controversial decision to choose Armenia's second mobile operator without transparent and competitive bidding; Karabakh Telecom (KT), a little-known Lebanese-owned company, was officially awarded a licence to operate a GSM network in Armenia.

In late 2007 the Public Services Regulatory Commission (PSRC), the country's telecom regulator, announced that the government was proceeding with plans to award a third mobile licence in 2008 based on the GSM 900/1800 standard. The outcome of the subsequent bidding process was that Orange Armenia was awarded a 15-year mobile operator licence late in 2008. The newly licensed operator was 100% owned by France Telecom (Orange). It launched a mobile service in the fourth quarter of 2009.

Note: Absence of official reliable statistics means that where necessary estimates have been included.
Key highlights:

Growth in the country's mobile market seriously stalled in 2009, as the faltering national economy impacted on the telecom sector. This slowdown in the mobile sector looked to be continuing into 2010;
By the end of 2009 mobile penetration in Armenia had passed the 80% milestone, subscriber numbers having increased more than fivefold in just three years;
There were around 2.6 million mobile subscribers in the country coming into 2010;
Despite the slowing in growth, on a positive note a third mobile licence had been issued to new player Orange Armenia and the service was launched late in 2009. By January 2010 it had already signed up 200,000 subscribers;
It was also encouraging that ArmenTel had launched its 3G mobile service, although initial take up was modest;
Fixed-line growth in Armenia remained relatively flat; with still only 67% of the network digital by 2009, the big challenge facing ArmenTel was to complete the national digitalisation program;
While there is a growing Internet awareness in the country, the Internet segment of the market remains sluggish, with user penetration sitting below 7% by early 2010;
Broadband Internet development has also been poor; the advent of wireless broadband/WiMAX service offerings in 2008/09 could allow for faster expansion, however;
Armenia's economy experienced a serious setback in 2008/09, as the ripple effect of the Global Financial Crisis (GFC) moved around the world.Armenia-Key telecom parameters-2009--2010
Category2009(e)2010(e)
Fixed-line services:
Total number of subscribers630,000640,000
Annual growth1%2%
Fixed-line penetration (population)20%21%
Internet:
Total number of subscribers1120,000125,000
Annual growth3%4%
Internet subscriber penetration (population)4%4%
Mobile services:
Total number of subscribers (million)2.652.75
Annual growth2%4%
Mobile penetration (population)80%83%

This report provides an overview of the trends and developments in the telecommunications markets in Armenia. Subjects covered include:

Key statistics;
Market and industry overviews;
Major operators (mobile and fixed)
Regulatory environment;
Infrastructure;
Mobile market;
Internet market, including broadband.

Table of Contents

1. Executive summary
2. Key statistics
2.1 Country overview
3. Telecommunications market
3.1 Overview of Armenia's telecom market
4. Regulatory environment
4.1 Telecommunications Law 1998
4.2 Foreign investment
4.3 ArmenTel monopoly
4.3.1 Structure
4.3.2 Legal challenge
4.3.3 Ending of monopoly
4.4 Regulatory developments
4.4.1 2009
4.4.2 2008
4.4.3 2007
4.5 Membership of World Trade Organization (WTO)
5. Fixed-network operators in Armenia
5.1 ArmenTel
6. Telecommunications infrastructure
6.1 National
6.2 International
7. Internet market
7.1 Overview
7.1.1 Internet statistics
7.2 Broadband services
7.2.1 Digital Subscriber Line (DSL)
7.2.2 Wireless broadband
7.3 VoIP
7.4 ISP market
7.4.1 Arminco Global Telecommunications
7.4.2 Web Ltd (WEB.AM)
7.4.3 Armenian Datacom Company (ADC)
8. Mobile communications
8.1 Overview of Armenia's mobile market
8.1.1 Mobile statistics
8.2 Major mobile operators
8.2.1 ArmenTel (Beeline)
8.2.2 K-Telecom (VivaCell)
8.2.3 Orange Armenia
9. Related reports
Table 1-Country statistics Armenia-2009
Table 2-Telephone network statistics-2009
Table 3-Internet user statistics-2009
Table 4-Mobile statistics-September 2009
Table 5-National telecommunications authorities
Table 6-Fixed lines in service and teledensity-1991-2011
Table 7-Internet users-1994-2011
Table 8-Internet subscribers-2000-2010
Table 9-Broadband subscribers-2003-2010
Table 10-Internet bandwidth capacity-2001-2007
Table 11-Mobile subscribers-1996-2011
Table 12-Mobile operators, subscribers and annual change-March 2009
Table 13-3G mobile subscribers-2008-2009
Table 14-Mobile operators by share of total mobile market-2009
Table 15-ArmenTel (Beeline) mobile subscribers-2007-2009
Table 16-ArmenTel (Beeline)-mobile subscribers and ARPU-2008-2009
Table 17-K-Telecom (VivaCell) mobile subscribers-2007-2009
Table 18-Orange Armenia-mobile subscribers-2009-2010