Business consultancy project

Mobile Network Operator Market

The mobile telecom industry of Azerbaijan is shared among four players: Azercell LLC, Bakcell LLC, Azerfon LLC and the last emerged mobile operator Naxtel LLC, which serves only in the area of Nakhichevan Autonomous Republic.
The Mobile Telecom market of Azerbaijan has passed through an intense development and maintained the fast-growing business segment in the local telecommunication industry. The cellular communication entered the Azerbaijan telecommunication market in 1994. However, the coverage expansion the development of the whole infrastructure occurred later after the development of the macroeconomic conditions and political stability in the country. (Economic Reforms, 2018)
In the second stage of economic reforms, after Y 1996 the adoption of the state programs for the integration of the business environment in the country and the acceptance of sustainable industry-related law encouraged the mobile network operators` integration. The market liberalization and the emergence of the second MNO in the telecom landscape in Y 1996 reinforced the advancement of the mobile telecom infrastructure through the deployment of the new hardware systems and building the Base stations across the residential areas of the country. The yearly based total investment to the development of the telecommunication was around 214 million AZN on average for the period 2005-2017, and the considerable portion of this amount was allocated for the development of the mobile network infrastructure. (Accelerating growth of high-speed internet services in Azerbaijan, 2014), (The State Statistical Comittee of the Republic of Azerbaijan, 2018)
The expansion of the cellular network through the whole territory of Azerbaijan was very challenging as Azerbaijan has diversified geographical landscape, including the high mountains, wetlands, and desserts areas. Mobile operators had made an enormous investment by allocating the substantial amount for the progress of the physical and human capital through implementing new technologies and development of the knowledgeable working forces. Starting from Y 1996 the mobile coverage was dispersed over the country, and the aggressive expansion happened in the Y 2009 with the entrance of the 3rd operator and the complete coverage of the residential area completed in the Y 2016 by reaching the full 100% coverage. The hectic competition among three players intensified the modernization and growth of the industry and constituted the availability of high-quality services. (stat.gov.az, 2018), (Accelerating Growth of Hgh-Speed Internet Services in Azerbaijan, 2014)
Figure.3 Percentage of the population living in the area covered by cellular network.

The dispersion of the mobile coverage to the rural areas of the country fortified the mobile operators' position, and the number of subscribers started to grow up gradually and the substantial share of year on year trend happened from 2005 to 2007 when the annual average growth for three years was 46%. (stat.gov.az, 2018)
Figure.4The number of total Mobile Network subscribers in thousands

Overall, the mobile communication market was lucrative and had an opportunity for the further development like the implementation of the mobile broadband, the realization of the different pricing strategy and dispersion the service to all market segments made the mobile communication the commodity service, and the usage of the service increased proportionally with the price reduction.

Figure.5 Mobile subscriber and Mobile tariff changes

In the meantime, the modernization and extension of the mobile services positively influenced the financial indicators of the mobile operators who made a significant contribution to the country economy. The total income from mobile communication for Y 2017 made 857 million AZN, which contained 62% of the total telecommunication revenue. Since the Year 2000, the mobile telephone communication income has made half of the total communication revenue and even reached 74% share and after that fluctuated around the percentage of 62-70%. However, starting from Y 2015, the revenue of mobile communication expressed the small decline. The economic situation of the country in Y 2015, as any industry segment has impacted the mobile communication sector as well. (stat.gov.az, 2018)

Table.2 The share of mobile communication income from total communication services.