RESEARCH AND MARKETS: ARMENTEL IS GRANTED THE EXCLUSIVE RIGHT TO PROVIDE ALL TELECOMMUNICATIONS SERVICES IN ARMENIA UNTIL 2013

Reuters
Mon Oct 12, 2009 12:30pm EDT

DUBLIN--(Business Wire)-- Research and Markets
(http://www.researchandmarkets.com/researc h/ee407f/armenia_telecoms)
has announced the addition of the "Armenia - Telecoms, Mobile &
Internet" report to their offering.

The Armenia - Telecoms, Mobile & Internet report includes all research
data and analysis on this country. Covering trends and developments
in telecommunications, mobile, internet, broadband, infrastructure
and regulation.

The telecommunications sector in Armenia went into decline following
the collapse of the former Soviet Union. Fixed-line teledensity fell
by around 2% partly due to the prevailing socio-economic instability
in the region triggered by the collapse of the Soviet Union. But more
significant a factor was that the country had failed to embrace any
vigorous reform in the telecom sector.

With steadily improving economic conditions, the telecoms sector has
nevertheless been slow to respond. In the 2006/07 period positive
signs were emerging for the sector, however; despite fixed line
expansion continuing to be flat, mobile subscriber numbers were
increasing by around 75% annually for a number of years, helped no
doubt by the introduction of competition into the mobile market in
2005. Growth in mobiles had slowed to 30% annually coming into 2009
as the faltering Armenian economy started to have a negative effect
on the telecom market.

Armenia's progress to a more competitive market has been
slow. ArmenTel, the country's national telecom provider, was 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. The
one segment of the market initially exempt from this monopoly was
Internet services.

Greek company Hell ted US$142.5 million in 1998 for a 90% equity
stake in ArmenTel. The remaining 10% was retained by the Government of
Armenia. OTE agreed to develop and expand the telecom infrastructure in
Armenia, including the digitisation of the Public Switched Telephone
Network. OTE also agreed to invest US$300 million in the country's
telecommunications network by 2003, of which US$100 million was to
be invested in ArmenTel.

However, amid growing dissatisfaction over the performance of the
country's telecoms network, in November 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 to operate 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.

OTE put its 90% equity in ArmenTel up for sale in June 2006,
offered to the market through a bidding process. Russian operator
VimpelCom was the successful bidder, finally acquiring the stake in
November 2006. VimpelCom finalised the deal in April 2007 acquiring
the remaining 10% of the shares of ArmenTel from the Government of
Armenia to raise its equity holding in the company to 100%.

In December 2007 the Public Services Regulatory Commission (PSRC)
said that the government of Armenia planned to award a third mobile
licence in 2008 based on the GSM 900/1800 standard. There was to
be a call for an international tender with bidding for the licence
which was due to start in May 2008 and ablished by the government,
would oversee the process. Orange Armenia was awarded a 15-year mobile
operator licence in November 2008. The newly licensed operator was 100%
owned by France Telecom (Orange).

Key Highlights:

* By December 2008 mobile penetration in Georgia had reached 85%,
having increased more than fivefold in just three years; * In late
2008 and into 2009, however, the mobile market was showing signs
of stalling, as the country's faltering economy impacted on the
telecom sector; * On the positive front, a third mobile licence had
been issued and the new player Orange Armenia had already invested
heavily in its network and was aiming for a launch late in 2009;
* It was also encouraging that ArmenTel had launched its 3G mobile
service in October 2008 and had signed up almost 20,000 subscribers
by March 2009; * Fixed-line growth in Armenia was slow; with still
only 67% of the network digital by mid-2009, the big challenge facing
ArmenTel was to complete the digitalisation program; * While there is
a growing Internet awareness in the country, the Internet segment of
the market remains sluggish, with user penetration down around 6% in
early 2009; * 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; it is hoped the progress being made in
telecom sector reform would not suffer as a consequence of troubles
in the wider economy.

Report's Stats:

* Armenia - key telecom parameters - 2008 - 2009 * Category: 2008
- 2009 (e) * Fixed-line services: * Total number of subscribers:
650,000 - 675,000 * Annual growth: 4% - 4% * Fixed-line penetration
(population): 21% - 22% * Internet: * Total number of subscribers:
1120,000 - 127,000 * Annual growth: 7% - 6% * Internet subscriber
penetration (population): 4% - 4% * Mobile services: * Total number
of subscribers (million): 2.56 - 2.90 * Annual growth: 37% - 14% *
Mobile pen.