ARMENTEL LAUNCHES ARMENIA’S FIRST 3G NETWORK
by Michael Lacquiere

Global Insight
October 1, 2008

The roll-out of 3G services in Armenia is further indication of the
market’s growing maturity.

Armentel has become the first operator to offer 3G in Armenia,
launching the service in the capital Yerevan. It will offer 3G services
to both post-paid and prepaid subscribers. The data-transmission cost
of the service will be included in tariffs for GPRS packages. Services
available to subscribers include video calls and full internet
access. Armentel, fully owned by Russia’s VimpelCom, had 655,000 mobile
subscribers at the end of the first half of 2008. Rival operator
K-Telecom, owned by VimpelCom’s Russian rival Mobile TeleSystems
(MTS), had 1.49 million subscribers at that time. A third mobile
licence is scheduled for tender before the end of the year.

Global Insight Perspective Significance: The smaller operator within
Armenia’s mobile duopoly has become the pioneer of 3G services in
the country, launching in the capital Yerevan.

Implications The move is unlikely to alter the dynamics of the mobile
market, given that rival operator K-Telecom is itself lining up a 3G
launch before the end of the year.

Outlook The roll-out of 3G services and the imminent tender of a
third national GSM licence are indicative of the growing maturity
of the Armenian mobile sector, notable amongst the emerging,
high-growth-potential markets of neighbouring Eurasian countries.

Outlook and Implications

Armentel’s 3G Launch Unlikely to Change Market Dynamics:By pioneering
3G services in Armenia, Armentel has struck a small blow against
its rival, but it is unlikely to be massively significant as
K-Telecom is itself planning to launch 3G services before the end of
2008. K-Telecom, which operates under the "Vivacell" brand, entered
the Armenian mobile market after Armentel, in July 2005, but has
since usurped Armentel and now dominates the sector. Both companies
were awarded 3G licences in October 2007, and by launching first
Armentel will hope that it can claw back some ground by tapping into
the country’s organic growth potential and possibly even churning
customers from K-Telecom. Given the current gap between the two
operators in terms of market share, and K-Telecom’s imminent 3G launch,
however, it is unlikely that Armentel’s announcement will massively
alter Armenia’s mobile market dynamics.

Further Indication of Growing Maturity of Armenian Mobile Sector:The
launch of 3G services by Armentel, coupled with the likely emulation
of this feat by K-Telecom, is a further indication of the growing
maturity of the Armenian mobile market. The sector has benefited
from the arrival over the last two years of Russian giants MTS and
VimpelCom, and the investments they have brought. Uptake levels have
soared, and penetration at the end of 2007 was 57%, with Global Insight
estimating that this figure will increase further to a very healthy 78%
by the end of 2008. The country’s Public Services Regulatory Commission
(PSRC) has indicated that a tender for a third GSM licence will take
place in 2008, and the entrance of another operator will positively
benefit the market, acting as a natural buffer on tariff prices (see
Armenia: 30 July 2008). While many of the telecoms sectors of Eurasia
are notable as emerging markets with high growth potential, Armenia
is developing into one of the better-developed, more mature markets.