Business consultancy project

Research Background.

The worldwide trend in the mobile telecom industry impacted Azerbaijan Telecom Market as well. The wireless telecom has entered to Azerbaijan Telecom industry in the Y 1994, and the considerable penetration started from the beginning of the 2000s` by the expanded coverage to 99% of the residential area of the country. Previously the market share was divided between 2 MNOs: Azercell Telecom LLC and Bakcell LLC, however, the aggressive competition started with the emergence of the third operator - Azerfon
LLC, the network coverage expansion reached 100%, and market penetration reached 111%. Generally, the market share has been divided among three players, whereas, the last emerged company Naxtel LLC serves in the Nakhchivan Autonomous Republic only.
All three operators are intensively applying the different pricing strategies for customer attraction. Customer acquisition and retention are vital principles for all operators, and each operator is using different efforts to take the market share of competitors. However, the hectic competition deteriorates the market conditions as the gap between operators is being eliminated, and mobile operators are expressing the revenue decline.
Despite the aggressive competition, Azercell Telecom LLC is keeping the dominant position in Azerbaijan Mobile Telecom Industry. Today Azercell is a market leader with 42.88% market share and more than 4,500 million subscribers. Azercell was established as the first GSM operator in Azerbaijan in January 1996, and at the end of the same year, the commercial launch has realized. In 1998, as one of the rare mobile operators over the world, Azercell firstly launched prepaid system (SimSim). (Azercell LLC, 2019)
Even though Azercell has entered as a second wireless telecom operator to Azerbaijan Telecom Market, the company within short of the period became a market leader. At the beginning of 2000s` Azercell acquired almost 80% of the total market share. The network coverage reached 99.8% of the total country`s residential area and 80% of the territory of Azerbaijan (except 20% of the occupied territories). Azercell has spent more than 1 billion USD for the development of the highly superior network coverage and the deployment of the wireless telecom innovative solutions in the Azerbaijan telecom market. Azercell tries to entice the attention of the customers by covering all slice of society with various segmented offers and campaigns. Despite the development of new network capabilities enable the favorable conditions for the company, but due to the aggressive competition, sustaining the stable market share is becoming a difficult task. Compared with previous decade the market share of Azercell decreased by 10%. Simultaneously the market share reduction made a negative influence on the revenue streams. The particular reduction occurred in the voice and SMS service indicators. The voice service is used to be the main revenue source but compared to previous years voice, and SMS revenue is incrementally declining and the compound annual growth rate(CAGR) in the last four years expressed the negative outcome. The voice revenue declined by 2%, whereas SMS revenue declined by 20%.
In contrast with traditional revenue generators, Data revenue shows the positive results in all indicators the average revenue per user (ARPU) and the total revenue CAGR rate in the last four years constitute 16% and 25% increase. Simultaneously with the increase of Data revenue, the Value-Added Service (VAS) also expresses the upward trend. The Data consumption growth inculcates the positive changes in VAS usage, whereas these two streams are positively intertwined.

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