Study of Afghan Telecom Industry

Study of Afghan Telecom Industry (MNOs, ISPs) Rahima Baharustani May 213 Research, Planning & Policy Directorate, AISA

Study of Afghan Telecom Industry 213 Disclaimer: Views of the author expressed in this report do not necessarily reflect the official position of Afghanistan Investment Support Agency. Note: Exchange rate of 1$=5 AFN has been considered throughout the report. II

Study of Afghan Telecom Industry 213 Acknowledgments This study was researched and written by Afghanistan investment support agency, which was authored by Rahima Baharustani. I would like to express my deepest appreciation to higher management of AISA, particularly Mr. Wafiullah Iftekhar CEO/President of AISA, and Mr. Junaidullah Shahrani, Research Policy and Planning Director for their continuous encouragement, tremendous support and help. In addition, I would like to thank the participant of survey Mr. Ahmad Zaki, and Dr. Fazel Rabi, who willingly shared their precious time during the process of interviewing. Furthermore, I acknowledge all key informants who helped us in providing the required information. III

Study of Afghan Telecom Industry 213 Table of Contents ACKNOWLEDGMENTS...III TABLE OF CONTENTS...IV EXECUTIVE SUMMARY...VI CHAPTER: 1. INTRODUCTION...1 SAMPLE AND METHODOLOGY...1 CHAPTER: 2.TELECOM SECTOR...3 AFGHAN TELECOMMUNICATION AND REGULATORY AGENCY (ATRA)...4 IMPORT OF ICT GOODS...5 INVESTMENT IN TELECOM SECTOR...5 REVENUE GENERATED BY TELECOM SECTOR...7 JOB CREATION...8 CHAPTER: 3.MOBILE NETWORK PROVIDERS...9 RULES AND REGULATIONS...9 PRODUCTION...1 ACCOUNTABILITY...1 COMPETITION...11 CHAPTER: 4.DEMAND SIDE (DETAILED FINDINGS OF SURVEY)... 12 FACTORS FOR BUYING SIMS...12 QUALITY...13 AFFORDABILITY...14 FIXED AND MOBILE DIGITAL PHONES EXPANSION...14 CHAPTER: 5. INTERNET SERVICE PROVIDERS... 15 PRODUCTION...18 JOB OPPORTUNITIES BY ISPS...19 COMPETITION...2 FUTURE PLAN OF ISPS...21 CHAPTER: 6. DEMAND SIDE (KEY FINDINGS)... 22 AFFORDABILITY...24 QUALITY...25 COMPARISON...27 SWOT ANALYSIS OF ISPS...28 CHAPTER: 7.GROWTH AVENUES... 29 OPPORTUNITIES IN MNOS...29 OPPORTUNITIES IN ISPS...3 PROBLEMS AND CHALLENGES... 31 IV

Study of Afghan Telecom Industry 213 PROBLEMS AND CHALLENGES FACED BY MNOS...31 PROBLEMS AND CHALLENGES FACED BY ISPS...31 PROBLEMS AND CHALLENGES FACED BY USERS...31 RECOMMENDATIONS... 32 RECOMMENDATIONS BY MNOS:...32 RECOMMENDATION BY ISPS:...32 RECOMMENDATIONS BY TELECOM SERVICE USERS:...33 CONCLUSION... 34 ACRONYMS... 35 SOURCES CONSULTED:... 36 APPENDICES... 37 APPENDIX A:...37 APPENDIX B:...42 APPENDIX C:...44 V

Study of Afghan Telecom Industry 213 Executive Summary Introduction of new technology in communication has become important part of daily life, facilitating easy, fast, and reliable communication all over the world. Telecommunications apply to social and economic benefits, healthcare, education, digital economy, businesses, and in creation of new jobs. All these are potential opportunities that can benefit telecommunication infrastructure. Afghanistan telecom sector after years of conflict has made tremendous growth as to fulfill the demand of customers. Telecom industry in Afghanistan has contributed more to country s GDP. First MNO started its operation in October 1998 during Taliban, followed by Roshan mobile network operator who generated more revenue by attracting customers at an extraordinary rate. Currently, 88 percent of afghan population has access to mobile phones. Similarly, number of internet users increased since 22, previously price of internet was too high and now has reduced to almost 92 percent. Prior to 25 internet was not available via satellite so the prices were high, afterwards, by usage of satellite prices has reduced and by completion of fiber optic prices will further decrease and would provide internet facilities in all over country. This report is based on sample survey of 1 telecom companies, all located in Kabul city, some of them having branches in other major cities of country. By surveying these companies we came to know that among the biggest problems that these companies face are: discrimination by regulators as well as high tax rate on ISPs, which might result in closing of some of ISPs businesses. Furthermore, 185 telecom service users surveyed to inquire quality of telecom services as well as know about their level of satisfaction from telecom services that they avail. Survey results indicated that majority of customers complained of high calling rates, signal and coverage problems. At the end we came to know that market for mobile network operators has saturated and there in no place to new MNO to enter market, but still opportunities are there in the form of investment in new technology by existing MNOs to increase network coverage as well as reduce prices by offering wide variety of new value added services. ISPs, cover only 2 percent of Afghan population, further investment is needed in this area as to increase internet facilities to remaining 8 percent. Survey results show that there is place for a local or foreign company with large amount of investment that could bring new technology and offer internet facilities both in urban and rural areas. VI

Chapter: 1. Introduction Study of Afghan Telecom Industry 213 Since the existence of human life, human s need arose for communication. In early days, communication was difficult due to lack of proper communication means, uncertainty, and time consumption, so need for efficient means of communication arose. Innovation in new means of technology has made communication easier. Today, use of various means of telecommunication became an integrated part of society. Industrial revolution in information technology has removed geographical borders and distances and made the world into a global village, by fast and reasonable communication all over the world. In today s world, no life can be imagined without telecommunication as it became the important part of each and every society. In every sector of economy, telecommunication plays unavoidable role. In early stages of development telecommunication means are considered to be too expensive and confined to rich people, but revolution in this sector made all the means available at lesser cost to middle and low class people, who play vital role in the growth of economy. Information and communication technology has improved condition of Afghanistan socially, and economically. Afghanistan s telecommunication has had advancement in the past decade which is considered a big achievement despite problems and challenges. Achievements in this sector are but not limited to development of information and communication technology, extension of fiber optic cable, increase in government revenues, employment opportunities and many more. Sample and Methodology This report is based on sample survey of 1 telecom companies and 185 service users, making total of 195.Survey started in mid March 213 and ended in mid May 213. This study both has quantitative and qualitative aspect. Study of telecom consists of three surveys, which assessed both suppliers of telecom operators and the users (demand side) of provided by telecom operators. The quantitative survey include 1 telecom companies in Kabul, all are registered, to have assessment of telecom industry particularly of MNOs and ISPs operating in Afghanistan, find out new investment opportunities that could contribute more to growth of this sector, furthermore, to pinpoint problems and challenge and have recommendations to correct these problems and challenges that are ahead. The purpose of qualitative survey was to have assessment of users of telecom services and inquire customer s satisfaction (quality) from the services that they avail from telecom operators, to know features that current services lacks, future perspective of their products and services, and possibilities of future demand to avail new telecom products and services. Surveyed customers related to different categories of life such as: students, teachers, shopkeepers, businessman, and employee of both governmental and nongovernmental 1

Study of Afghan Telecom Industry 213 organizations. Majority of surveyed customers had bachelors degree (59) and working 8 hours per day with median salary of 15, AFN ($3) per month. The survey was conducted in seven major cities of Afghanistan namely: Balkh, Herat, Kabul, Kandahar, Khost,Kunduz, and Nangarhar. Best effort was made to get the required information form telecom companies/individuals, however, certain companies/individuals did not respond with certain questions. Moreover, constraints faced during survey were: First of all, due to security issues and shortage of funding, survey conducted in areas where AISA have offices in regional areas. Secondly, due to shortage of time. Thirdly, lack of awareness and due to high illiteracy rate certain individuals who lived in remote areas could not respond accurately. 2

Study of Afghan Telecom Industry 213 Chapter: 2.Telecom Sector Decades of bitter war destroyed Afghanistan s infrastructure. People in Afghanistan faced problems while communicating with each other s especially while making international calls, limited public phone booths were available in Kabul city for which people used to wait for long hours to use phone. While others used to go to neighboring countries to make an international call. Now, Afghanistan telecom sector has shown tremendous growth over last decade as compared to some of neighbor countries. Telecom sector contributed more to the GDP of economy and brought revenue to government in the form of tax payment by individual companies as well as revenue to their self, and created job opportunities which ended in high living standards, and economic & social development. By passage of each year revenue of this sector has increased showing increase in demand for telecom products and services. Afghan telecom services can be divided predominantly into basic, mobile and internet services. Postal services, media (television, radio services), technical assistance to make electronic identity cards, digital television, introduction of electronic government, and planned to launch satellite. Growth of this sector mostly came from MNOs and ISP as compared to other mentioned areas of telecom. Currently, there are total of 5 MNO operators in Afghanistan, facilitating over 88 percent of afghan population almost in every part of the country. Number of ISPs has increased since 22, with facilities provided to limited population (2 percent). There are 49 ISPs operating in major cities of Afghanistan. 3

Graph: 1. Different areas of telecom Study of Afghan Telecom Industry 213 MNOs ISP Postal services Radio Digital TV Source: ministry of information and communication Ministry of communication and information technology is the governing body in communication and IT sector to create grounds that could ensure effective and efficient development of telecommunication in the country. MCIT is responsible to ensure provision of best services with reasonable prices, increase the application of telecom and IT system in socioeconomic development of country. Reason for growth of telecom sector is: Afghan telecom sector has been booming for last couple of years, it s because of increase in level of education and increase in earning power to avail telecom services, other reasons are: Free market Digital business, provides communication line across world Quick and easy communication Need of each sector for advanced technology, provides more facilities People demand/ expectations Afghan telecommunication and regulatory agency (ATRA) ATRA, afghan telecommunication regulatory agency is the regulatory agency for this industry, the regulatory environment within telecommunication sector in Afghanistan has been developed over the past decade. ATRA currently work within framework of the MCIT independently to regulate functions related to telecommunication sector. ATRA is working to implement international best practices in Afghanistan so that the telecom sector of Afghanistan could compete with international level. ATRA has the responsibility of issuing licenses to telecommunication and IT companies, and control and supervise telecom companies. ATRA is committed to bring new and advanced technology to better facilitate telecom companies, and individual users. To increase telecommunication services and coverage areas, ARTA has increased the installation of base transceiver station as following diagram shows increase in BTS. 4

Graph: 2. Increase in number of BTS since 23 6 5 4 3 2 1 Study of Afghan Telecom Industry 213 Base Transceiver Stations (23-12) 22 23 24 25 26 27 28 29 21 211 212 Source: Ministry of communication and information technology Import of ICT goods Afghanistan imports ICT goods because, currently, Afghanistan is not in the position to produce these technological tools and equipments by itself. ICT equipments that are mostly imported from other companies are computer related equipment, electronic components, and other information and communication technology goods. Excluding software tools. Total ICT goods import for the year 28 was.5 percent,.3 percent in 29 and.4 percent for the year 21 (according to World Bank) data for recent years was NA. Investment in Telecom sector Following graph shows investment in telecom projects along with private participation. These projects include operation and management contracts, green field projects, and divestitures, excluding investment in movable assets and small projects. Total investment in telecom sector with participation of private sector. 5

Study of Afghan Telecom Industry 213 Graph: 3. Total Investment in Telecom (Amount in USD) 6 5 4 3 2 1 Investment in Telecom Sector 22 23 24 25 26 27 28 29 21 211 Source: World Bank Statistics Private investment Investment by private sector in telecom has reached 1.9 million dollars by 212 with average annual growth of 8.1 percent since 22. Denoting interest of private investors in telecom sector over past decade. Graph: 4. Cumulative investment by private sector (22-212) 25 2 15 1 5 Cumulative Investment (million USD) 22 23 24 25 26 27 28 29 21 211 212 Source: Ministry of communication and information technology 6

Study of Afghan Telecom Industry 213 Graph: 5. Comparison of Total investment with neighboring countries 5,,, 4,5,, 4,,, 3,5,, 3,,, 2,5,, 2,,, 1,5,, 1,,, 5,, Total Investment in Telecom Sector 22 23 24 25 26 27 28 29 21 211 Afghanistan Pakistan Bangladesh Tajikistan Turkemistan Source: World Bank Revenue Generated by telecom sector As mentioned earlier, information and communication technology has made large part of government revenue. Revenue of telecom sector was 167.33 million dollars, which made 1 percents of government revenues in 21. Graph: 6. Total revenue generated by MNOs 2 15 Telecom Sector Revenue (million USD) 1 5 Telecom Sector Revenue (million USD) 22 23 24 25 26 27 28 29 21 211 Source: Ministry of communication and information technology 7

Study of Afghan Telecom Industry 213 Job creation This sector has created job opportunities for large amount of people as just for the year 21 created total of 1 jobs, both hiring directly and indirectly. Direct jobs of 2 professionally working in MNOs and ISPs, while remaining 8 were employed indirectly. 8

Study of Afghan Telecom Industry 213 Chapter: 3.Mobile Network Providers First mobile network operator in Afghanistan started its operation in year 1998 with more than $5 million, while security condition was severe in the country. Since then many improvement have been seen in MNOs, products and services of mobile network operators have improved along with decrease in overall prices. Survey covered local, JV and foreign MNOs, who covered almost all provinces of the country. As compared to ten years back products and services of MNOS have improved, currently, MNOs provide all GSM services including VAS services, leased line services, prepaid & post paid data services, and digital telephones. Each mobile network operator is trying to provide unique services as to boost their sales by attracting more customers. According to survey 3 percent of staff who work in these companies was experts with 2-5 percent of the staff being females. Rules and Regulations Rules and regulations of government regarding telecom industry is considered to be, 33 percent very effective, 34 percent less effective and 33 percent did not respond. Support and supervision of government is considered to be an important factor in success of any business, when companies were asked regarding support and supervision of regulatory agencies, 33 percent stated that support and supervision to be highly supportive, while 34 percent considered it to be less supportive. 9

Study of Afghan Telecom Industry 213 Majority (67 percent)of companies observe telecommunication law to be effective, but stated that it further needs to be revised since it cannot fulfill some of current issues, and stressed on proper implementation of law on all companies equally. Production Operators undertake to offer quality services by bringing new technology and offer variety of services with cheap prices as to attract more customers. From current situation it seems that in near future prices may further decrease. 33 percent of companies observed increasing trend of overall sale of their products and services, while 34 percent decreasing trend, on the other hand, 33 percent did not respond. Mobile users in 21 increased by 8.2% as compared to previous year, which resulted to make approximately 16.33 million people. Graph: 7. Trend of mobile phone users (for period of 22-212) 25 Phone Users (million) 2 15 1 5 22 23 24 25 26 27 28 29 21 211 212 Source: Ministry of communication and information technology MNOs market their products and services through SMS, TV, radio, retail, road show and bill boards. During survey we came to know that some people are being disturbed by marketing through SMS and asked companies to use other means of marketing rather marketing through SMS. Accountability To get cure many ill of MNOs, that harms customers ATRA has created strict environment so that no operator could violate the law. In case of violation of law ATRA fines Mobile network operators as in the year 1389 ATRA fined 13.64 million AFN due to poor 1

Study of Afghan Telecom Industry 213 service quality. ATRA just controls interconnection rates and does not control prices offered by individual operators, as they have kept market free. Competition There is tough competition going on among mobile companies as everyone is trying to get largest share of market for their selves. Intense competition has resulted in reduction of cost over past decade. Competition in market has resulted in price reductions to buy sim cards and avail other telecom services. Prices of Sims provided by private companies which were 15 ($ 3) in 1381, has reduced to 5-5 AFN ($ 1-$1) depending on the type and features provided by companies, showing reduction of 99 to 9 percent since 23. Local calls per minute charged 18 AFN (36 cents) in 1385 (26) which has now reduced to 7-1 AFN (.14-.2 cents). Similarly, international call rates have reduced from 1 AFN ($2) to 5 AFN ($.1). In view point of regulators current MNOs can fulfill need of afghan citizens and there is no need for new company to enter the market, market is saturated. 11

Study of Afghan Telecom Industry 213 Chapter: 4.Demand side (Detailed Findings of survey) Random sample of 185 customers was chosen with median age of 26 and median salary of 15 AFN ($ 3) Majority of surveyed entity used more than one sim as just 38 percent had just one sim. Large number of surveyed individuals stated that they are using more than one sim to reduce cost, and sometimes due to signal and coverage problems, poor customer service, get benefit of different packages, and use different sims one for calling and other for using internet. Graph: 8. Number of Sims used by surveyed individuals 6 5 4 3 2 1 Number of SIMs 1 2 3 4 5 6 no response Source: Mobile network users In Afghanistan due to low socio economic condition most of population use cell phones which don t support internet connection, this is the reason that majority (71 percent) of MNOs customers use mobile just for calling. Factors for buying Sims Before buying sim the factors that are mainly considered in Afghanistan are: More facilities Free messages Less charges Coverage and signal Quality of voice with reasonable cost Registration of sim Fast connection and active network Good customer service 12

Study of Afghan Telecom Industry 213 Quality Network accessibility and coverage differs across country which affect quality of MNOs. In response to question regarding quality of mobile network, 1 percent rated excellent, 31 percent good, 29 percent average, 13 percent poor, and 15 percent stated that the quality is too poor. Moreover, 2 percent declared voice quality to be excellent, 34 percent good, 47 percent average, 11 percent poor, and 5 percent abysmal. 2 percent of surveyed individuals rated speed of mobile excellent, 5 percent good, 24 percent average, 47 percent poor, and finally 4 percent abysmal. Due to poor signal, network coverage, and high rates 37 percent of individuals changed their Mobile networks, while 63 percent stated that they have not changed yet, but have more than one sims. Reasons for changing their mobile networks was lack of satisfaction from mobile network operators, to find out better alternative in terms of fast connectivity and better customer services with less cost, better coverage and less cost. 29 percent stated that the biggest cause of their dissatisfaction from MNO is high cost and prices,24 percent due to unfair charges, and 22 percent was dissatisfied because of dropped calls/lack of signal/lack of coverage, other causes of dissatisfaction is mentioned in graph below. Graph: 9. Causes of dissatisfaction from Mobile network operators Causes of Dissatisfaction Dropped calls/lack of signal/lack of coverage Unfair charges Problems with roaming (poor reception, overlapping areas) Poor customer service Cost/Price/Too expensive Dropped messages/messages arrive late Other Source: responded by surveyed customers 5 1 15 2 25 3 35 13

Study of Afghan Telecom Industry 213 Affordability Prices and calling rates have reduced tremendously since 23, but still 29 percent of surveyed individuals observed prices to be highly expensive, majority (51 percent) expensive, and 3% reasonable. According to surveyed individuals the MNOs who have good network coverage/signal but rates are highly expensive. Fixed and mobile digital phones expansion Landline phones are available in major cities as proper infrastructure is not available to connect remote areas. Up to end of 212 there were 917 landlines all over the country. Ministry of telecom has planned to increase landlines all over country. Fund for this project would be provided by development budget. In Afghanistan there is more trend of using mobile phones as compared to landline phones, 53 percent of surveyed individuals stated that they don t use landline and prefer mobile phones, while other 44 percent used landline. Landline is used mostly in offices and according to informal source digital landlines has failed in Afghanistan as there is less demand for it. 14

Study of Afghan Telecom Industry 213 Chapter: 5. Internet Service Providers In Afghanistan for the first time internet services was provided in 22, currently there are 49 active players in this industry mostly operating in major cities of Afghanistan, facilitating 2 percent of afghan population which is making 5 million people including all foreigners (according to MCIT). ISP provide following products and services: Fiber backbone, DSL, CDMA, dial up, Wifi, Wimax and microwave VSAT services Data/IP services VSAT is usually offered for large entities, wireless for medium and hotspot for universities. Apart from mentioned services some companies offer other products and services such as: making towers and giving them to telecom companies at rent. Internet prices/charges has reduced tremendously since 22, price of 1 MB internet per month in 22 was 25, AFN ($5), which has now reduced to 485 AFN ($97) per month, showing 98 percent decrease. Graph: 1. Price of internet (over period of 22-213) 6 5 4 3 2 1 Internet Price of 1MB/Month 22 24 26 28 21 211 212 213 Source: MCIT By reduction of prices number of internet users has increased from 1 in 22 to more than 2 million users in 213. 15

Graph: 11. Increasing trend of Internet services users Study of Afghan Telecom Industry 213 Internet Users 3 25 2 15 1 5 22 24 26 28 21 211 212 213 Source: MCIT Majority of surveyed ISPs operate and have branches in large cities of Afghanistan such as: Balkh, Herat, Nangarhar, Kunduz, and Kabul. ISP services are mostly provided by private sector, private players have witnessed growth due to introducing of new technologies and strong impetus. The quality and penetration of these services have undergone changes. Sample included internet service providers operating in Kabul. Most (87%) of ISP had well established businesses in providing internet facilities while 13 percent of them newly got the license of ISP and are on their primary stages of providing internet facilities, while previously they provided ICT services. 57 percent of surveyed companies operate as private local company, 29 percent foreign and 14 percent local. 5 percent of surveyed companies declared their investment to be remained same as it was at first year, 33 percent witnessed average increase of 65 percent, while remaining17 percent declared their investment to be decreased. ISPs price their services based on operative expenses plus mark up, prices are negotiable, and they wave certain amount for their valued customers. To expand businesses, firms usually reinvests portion of their revenue. In response to reinvesting the revenue received from sales, 57 percent of surveyed companies stated that they invest on average 62 percent of revenue obtained from sales. People who mostly use internet belong to category of youth either in offices or at home. 16

Study of Afghan Telecom Industry 213 Graph: 12. Internet mostly used by: Individuals Household Ministries/Government agencies NGOs Source: Internet service providers 29 percent of companies witnessed rules and regulations of government to be effective, 43 percent less effective, and 28 percent did not respond. Graph: 13. Effectiveness of Rules and Regulations Effective 29% No response 28% Less effective 43% Source: Internet service providers 17

Study of Afghan Telecom Industry 213 Graph: 14 Effectiveness of Telecom Law 29% 28% 29% 14% Very effective Effective Less effective Not effective no response Source: Internet Service Providers 28 percent of companies said that support and supervision of regulatory agency to be highly supportive, 29 percent supportive, 29 less supportive, and 14 percent did not respond. Production Large number of firms operating in this area declared that their performance since establishment of their business has been good and growing each year as there is more demand for internet services, while 14 percent of firms stated that they had poor performance due to challenges and problems ahead. In response to providing internet services, 6 percent of ISPs stated that the number of services at current year increased on average of 88 percent as compared to services distributed at first year. Majority of ISPs (43 percent) observed more demand for their products and services in market, 28 percent observed less demand, and remaining percentage of firms did not respond. 18

Study of Afghan Telecom Industry 213 Graph: 15. Demand for ISP Products/Services No response 29% Increasing demand 43% Decreasing demand 28% Source: Internet Service Providers Job opportunities by ISPs ISPs usually have fewer work forces as people hired directly are less in number but have created more job opportunities indirectly. As shown in graph majority of ISPs have 1 to 99 staff it s because majority of ISPs have fewer branches usually 1 to 4 branches in major cities. Out of this number on average 49 percent of these staff are professionals. Previously, more foreigners were involved in each and every area of the economy, but nowadays every business is trying to hire local staff as to create more job opportunities for local citizens, as witnessed in telecom industry number of foreign staff has decreased gradually. Surveyed companies (5 percent) stated that previously they had more foreign staff who worked in technical areas, but now foreign staff has decreased, while remaining 5 percent stated that they have no foreigner staff. In Afghanistan females has less participation in technical positions, as in telecom industry less participation of females has been noticed, on average 25 females were hired by these companies. 19

Study of Afghan Telecom Industry 213 Graph: 16. Number of Workers Employed by Internet Service Providers 3.5 3 2.5 2 1.5 1.5 Number of Workers Employed 1-99 1-5 more than 5 Source: Internet Service Providers Competition Tough competition is going on in market among internet service providers, which sometime cause companies to forgo profit to keep their customers. 71 percent of surveyed firms observed competition to be tough, and healthy, 15 percent stated that competition is unfair due discrimination in giving facilities by regulatory agencies. Remaining percentage did not respond. Graph: 17. Factors Hampering ISP Businesses Factors Hampering ISP businesses Closing of NGOs Insufficient demand for product Airport problems Shortage of land High tax rate Short of skilled labor Lack of coordination Security issues 5 1 15 2 25 3 35 Source; Internet Service Providers 2

Study of Afghan Telecom Industry 213 Future plan of ISPs ISPs are planning to expand internet services all over the country with reasonable prices by establishing branches, Upgrade Wimax infrastructure in cities and provinces. Soon O3B would be launched which is a global satellite service provider that is deploying a next generation satellite network which combines the reach of satellite with speed of fiber which is called O3B. 21

Chapter: 6. Demand side (Key Findings) Random sample of 93 internet users were chosen out of which 69 percent stated that they use internet mostly in office, and only 8 percent of surveyed customers used internet at home. Cable modem which is comparatively reasonable is mostly used by individuals 54 percent followed by DSL, dial up and 3G provided by MNOs. Graph: 18. Type of internet mostly used Study of Afghan Telecom Industry 213 Types of Internet Dial up 13% 3G 8% DSL 25% Cable modem 54% Source: internet service users In today s world internet has become major part of each and everyone s life, it can be used for many purposes, according to our survey, people in Afghanistan mostly use internet for work/business (21 percent) and education (21 percent),followed by communication with others (2 percent) and gathering information for personal use. 22

Study of Afghan Telecom Industry 213 Graph: 19. Purpose of using internet for: Usage of internet Other 5% Wasting time 1% Gathering information for personal use 18% Work/business 21% Shopping/gathering product information 5% Communication with others 2% Entertainment 9% Education 21% Source: internet service users When asked regarding usage of internet per day, 3 percent used up to one hour, 2 percent one to 3 hours, 19 percent 3-5 hours and 17 percent used more than 5 hours. Graph: 2. Usage of internet per day Usage of Internet per Day 17% 14% 3% Up to one hour One to 3 hours 3 to 5 hours 19% 2% More than 5 hours No response Source: internet service users 23

Study of Afghan Telecom Industry 213 Affordability 44 percent of respondents observed internet prices to be highly expensive, 29 percent expensive, while 13 percent stated it s reasonable. Graph: 21. Internet service prices Internet Charges 44% 14% 13% 29% Reasonable Expensive Highly expensive No response Source: internet users Almost one in three respondents (35 percent) paid 1-15 AFN ($2-$3), followed by 25 percent who paid less than 5 AFN ($1), and 22 percent paid more than 15 AFN ($3), while 18% did not respond. Graph: 22. Internet users pay for internet services per month Paying for Internet per month 35% 25% 22% 18% Less than 5 1-15 More than 15 Not responded Source: internet service users 24

Study of Afghan Telecom Industry 213 Quality More respondents (37 percent) declared that it takes lots of time to load web page, 28 percent stated that it takes little time, and 19 percent was satisfied and said web page loaded in few seconds. Graph:23. Time for loading web page Time for Loading Web Page 37% 16% 19% 28% In few seconds Takes little time Takes lots of time Not responded Source: Internet users In response to a question regarding not having high speed internet, 44 percent of respondents stated that it costs too much to have high speed internet,16 percent stated non availability of high speed internet in area, 11 percent stated that they have internet at office so that they can use it there. 25

Study of Afghan Telecom Industry 213 Graph: 24. Reasons for not having high speed internet Reason for not Having High Speed Internet Did not respond Telephone lines cant support connection Don t use it enough to justify cost Don t want/need to use internet Not available in area Can use internet at work Costs too much 5% 4% 7% 11% 13% 16% 44% Source: Internet users Majority of surveyed individuals (47 percents) stated that web page is slow to load, 2 percents faced problem of loading errors/couldn t open page, 8 percent stated that web page not optimized for mobile phones, while 3 percent did not face any of the mentioned problems. 39 percent of internet users stated that since there is no other option so they will recommend others to use internet service which they used, 35 percent stated that they will not recommend others, remaining 26 percent did not respond. Graph: 25. Problems while using Internet Not responded Other I havent experienced any of these problems Loading errors/couldn t open page Web page not optimized for mobile phones Web page slow to load % 5% 1% 15% 2% 25% 3% 35% 4% 45% 5% Source: Internet users 26

Study of Afghan Telecom Industry 213 Cheap and reasonable internet would be available by completion of fiber optic project. Fiber optic is a ring around Afghanistan. Fiber optic would be a big achievement for Afghanistan, the installation of the fiber optic started in 27 and its work is in progress which will connect all Afghanistan to its neighboring countries.8 percent of internet cost would be decreased by completion of this project Comparison Business differences are there among countries in region. Despite many problems and challenges which exist in the country, Afghanistan is still in the position to compete with certain countries in the region as ISPs in Afghanistan can compete with certain neighboring countries and it s much advanced as compared to them. Following graph shows that Afghanistan is much better in region than Turkmenistan as well as from Uzbekistan and in some cases better than Tajikistan. Secure servers are servers using encryption technology in Internet transactions. In Afghanistan one in per 1 million is secure internet servers, using encryption technology in internet transactions, better than Turkmenistan. Graph: 28.Secure Internet servers (per 1 million people) 25 2 15 1 5 23 24 25 26 27 28 29 21 211 Afghanistan Bangladesh Pakistan Tajikistan Turkmenistan Source: Word Bank 27

Study of Afghan Telecom Industry 213 SWOT analysis of ISPs Strength Limitations More growth due to higher demand by citizens Fiber optic ring across country which will provide cheap internet Experienced, clear objective World view Good government Policies Control of policy with foreigner professional Limited connectivity in most provinces Lack of coordination Security as could not expand the fiber optic to all provinces of the country Not proper planning of other organizations Electricity Not proper infrastructure Public awareness Policy of other sectors Opportunities Threats Sell more to existing customers by lowering prices Penetration, Convert strong brand value into opportunity easy Simple offers to its subscribers, Security issues Unhealthy competition in certain areas Discrimination by regulators Close of certain NGOs Familiarizing people with new technology Expansion of ISPs in areas where required 28

Chapter: 7.Growth Avenues Study of Afghan Telecom Industry 213 Telecom is one of fastest growing sector of afghan economy. There are many reasons why to invest in Afghanistan telecom sector. Growing economy. More growth in telecom sector as compared to some of neighboring countries. More revenue Cheap labor Liberal foreign investment regime Offering high rates of return Large untapped potential in afghan economy, untapped market More demand Low telecom penetration In both MNOs and ISPs investment opportunities are there in areas of technology and expansion of their services. Opportunities in MNOs Market for MNOs, is believed to be saturated up to some extent while there are more opportunities still exists as to increase network coverage to remote areas and provide advanced quality services used in daily life as 3G/LTE can evolve the data market and mobile money can change the banking system. MNOs have fully responded to demand by afghan economy by covering 88 percent of afghan population almost in all provinces of country. MNOs provide almost all value added services based on need of afghan economy. However, existing MNOs can invest in areas of using new technology and equipments to increase voice quality, speed of connectivity, and strong signal and coverage. Furthermore, there is demand for innovation in services offered by MNOs in the form of: CPP (calling party pays), there is need for this since in certain remote areas due to unavailability of top up cards or other means of getting credit this can be helpful. Introduction of advertisement portal to sell and purchase property, home appliances, cars and etc. Payments (secure transactions) via mobile network without GPRS or internet connections, inside and outside country Paying utility bills and billing inquiries Checking account balance and fund transfer to other bank account and interbank funds transfer 29

Study of Afghan Telecom Industry 213 Opportunities in ISPs Investment opportunities are there with large untapped potential to the country s increasing population, currently only 2 percent of afghan population has access to internet facilities. As per need of afghan population it is considered that the demand for internet services will continue to increase in future by reduction of its cost. There is need that the regulatory agency must make uniform practices to become fully digitized which will ultimately help increase the consumption of internet. Expanding coverage to all provinces of the country Centers for providing internet facilities More investment in terms of bringing advanced technology so that internet could be accessible to all with cheaper rates and quality services, this requires large investment at first and then will result in higher return. Address instruction through mobile internet Bring new advanced technology to make it hub Sell more to existing customers by lowering prices Penetration Simple and easy offers to its subscribers Familiarizing people with new technology Focus on rural areas Introduction of new technology as to control ones home and shops by a single chip. This new technology is called next-generation network (NGN), which is a packet based and uses IP to transport the various types of traffic (voice, video, data and signaling) Furthermore, ISPs should focus on growth of market in strategic areas, such as cloud communication and vertical industries. Evolution of MNOs provides ongoing opportunities for handset/device manufacturers and other equipment manufacturers that could support internet. 3

Problems and Challenges Study of Afghan Telecom Industry 213 Majority of telecom companies stated that security as most operators expansion strategy getting hampered, and shortage of skilled labor is mostly hampering their investment activities, other factors that are causing problems are listed below: Problems and challenges faced by MNOs. High tax structure Lack of proper supervision Deceptive advertisement by other MNOs Illiterate customers to adopt new technological services Electricity shortage High opex puts operators limited options Over regulation, barriers on entry Outdated technology Bureaucracy and discrimination by regulators Tariff regulation by ATRA Problems and challenges faced by ISPs Less support from government Prices of net cafes must be controlled Government policy is not according to current market situation Unhealthy competition 1 percent BRT is too expensive on ISPs and unfair since 1 % is charged on both GSM and ISPs although GSM companies are providing variety of services ISP services are not Secure as data can be viewed by foreigners No control on illegal sim boxes Lack of professionalism in government agencies Problems and challenges faced by users Majority of surveyed individuals had problem with the prices, they declared calling prices both for national and international to be too expensive, furthermore, lack of signal and coverage in most areas and sudden disconnections. 31

Study of Afghan Telecom Industry 213 Recommendations Recommendations by MNOs, ISPs, and individual users are listed below respectively: Recommendations by MNOs: Equally implementation of rules, regulation on each company Coordination must be there among MNOs Provide uniform technology opportunities to all operators Review telecom policy according to current market situation Bilateral service agreements Regulators should control prices as same prices must be charged by every company Government should have proper control over MNOs, so that to get rid of fake advertisements/deceiving people. Actuality of advertisement must be traced Government must play its role so as to get rid of bureaucracy and corruption in telecom sector to better serve people Government should encourage more investment and increase competitions among current companies Spread awareness on usage of mobile and internet services, reduce rates and better facilitate people Security must be provided to MNOs to get rid of signal problems during night time AISA must trace hiring of foreigners as it must be reduced day by day Recommendation by ISPs: Lots of effort is needed to advance ISP in the country as first of all current policy of ISP must be revised Government should put more effort to ensure security of ISPs, this would re-enforce the investors to better improve industry Install more towers in mountainous areas to have good signal and coverage even in remote areas M-commerce, M-health-banking must be implemented in all organizations BRT tax must be reduced from 1 percent to 5-2 percent Government should support both MNOs and ISPs equally, no ISPs can provide voice services, but MNOs provide ISP services which is considered unfair by companies Commission by AISA to solve issues of investors, free of bureaucracy and corruption Ministry of telecom must control and supervise companies properly during probationary period as either to put penalty or terminate license if could not provide ISP quality services Ministry of telecom to control all ISPs and make them provide excellent facilities Foreigners must be hired to train locals It would be more beneficial if Afghan telecom operate as a wholesaler rather retailer 32

Study of Afghan Telecom Industry 213 AISA must supervise companies on yearly basis Spread awareness of using fiber backbone services Paving the path and protect via a standardized method Recommendations by Telecom service users: Companies must reduce Prices of both national and international calls. Calling charges must be per seconds Offer different packages for different categories of people Quality of voice call must be improved New companies must enter market with advanced technology as to provide better facilities No sim card must be sold unless registered, moreover, sim card prices must be increased to get rid of teasing/bothering. MNOs must increase their coverage and should start to operate in remote areas so as to cover all provinces Products and services must be according to international standard Must keep privacy, as no one should have access/view to others call history Provide quality services with reasonable prices, durability and reliability Fast connectivity Good customer services Proper utilization of tools and equipments government and companies Attention must be paid to DSL cables since it s too weak. License must be issued based on quality of company s services Strict control must be there to ban immoral sites Government should encourage more investment Improve services and get rid of fake advertisements 33

Study of Afghan Telecom Industry 213 Conclusion Telecom sector in one of the fastest growing sector of afghan economy, which added more revenue to the treasury of government as well as provided easy communication and created job opportunities of more than 1,. Mobile operators have dominated telecom industry, there are 5 active players most of them foreign owned businesses which has provided facilities to 88 percent of afghan population. Tough competition is going on among MNOs which has resulted in price reductions over past decade as every MNO is trying to get larger share of market by offering fewer prices. MNOs are free to set prices of products and services, ATRA is just interfering in interconnection rates. It is concluded that market has saturated and there is no place for any other MNOs to enter the market. However, there are certain problems with current operators such as: high calling rates, disconnections, lack of signal and coverage, but still people are satisfied with their network and sometime use more than one sims to reduce the possibilities of these problems. More work is needed in MNOs to bring their products and services according to international level. CDMA is almost failed in Afghanistan as majority of surveyed individuals said that Mobile networks are good as compared to CDMA. The other important area of telecom is ISPs, currently there are 49 ISPs operating mostly in Kabul and other major provinces of the county. Currently prices of internet is considered to be too expensive by surveyed individuals soon by completion of fiber optic project internet accessibility of internet would be increased with reduced prices. Survey results show that in Afghanistan youths mostly use mobile and internet services, while landline is mostly used by offices and houses respectively. Previously, internet prices were too expensive but by the passage of time it has reduced and as per necessities internet must be accessible to all people at reasonable prices so that everyone could avail internet facilities. Market is not saturated, there is place for new businesses with large investment to enter market as currently only 2 percent of afghan population has access to internet. Higher demand for internet requires more investment in this sector, regulators should give license to those who could provide quality services and dissolve license of those who can t compete. Discrimination is a big problem that some of companies are facing and stated that it s a big hurdle in development of this sector. Users faced problems of high cost, weak or no coverage, poor customer service, and low speed are the problems they mostly face. Further they recommended that telecom companies must introduce new internet technologies, Network expansion to ensure vast connectivity, better quality of services, technology, and bringing new innovations in value added services. 34

Study of Afghan Telecom Industry 213 Acronyms AISA ARPU ATRA BTS GPRS ICT ISPs JV LTE MCIT MNOs NGN OPEX SIM VAS VSAT Afghanistan investment support agency Average revenue per user Afghanistan telecommunication regulatory agency Base Transceiver Stations General Packet radio service Information and communication technology Internet service providers Joint venture Long term evolution Ministry of communication and information technology Mobile network operators Next generation network Operating cost Subscriber identity module Value added services Very small aperture technology 35

Study of Afghan Telecom Industry 213 Sources Consulted: Ministry of communication and information website: http://mcit.gov.af Central statistical organization: http://cso.gov.af/en/page/718 World bank statistics: http://data.worldbank.org/indicator Network dynamics associations LLC-April 23,24, report on: Afghan telecom brief, published in New Delhi, India Primary data obtained from telecom companies, and telecom service users 36

Study of Afghan Telecom Industry 213 Appendices Appendix A: Table: 1. List of MNOs in Afghanistan: NO Name Date of establishment Type of Company 1 AWCC ctober 28,1998 JV Address Darul- Aman,Kabul Logo 2 Roshan 23 Foreign owned Wazir Akbar Khan,Kabul 3 MTN July 25 Shahre- Naw,Kabul 4 Afghan telecom April,26 Public Mohammad jan Khan watt 5 Etisalat August 27 Foreign owned Share- Naw,Kabul Source: Ministry of communication and information technology Table: 2. List of internet service providers No. Name Type of License Email 1 Insta Telecom National admin_kbl@instatelecom.com 2 Neda Telecom National info@neda.af,samim@neda.af 3 Sarferaz Bahader Local mustafa.smdi@gmail.com,mustafa.samadi@gmail.com 4 K B I National info-kabul@kbimpuls.com 5 CereTechs National mina@ceretechs.com 6 New Dunia National shafi@newdunia.com, info@newdunia.com 7 IO Global National karim_kamil_7@hotmail.com, akarim@io- 37

Study of Afghan Telecom Industry 213 8 RANA Technologies global.com National fghafoor@ranatech.com 9 Multinet National nasrullah@multinet.af, hashmattullah@multinet.af 1 Liwal National liwal@liwal.com, info@liwal.com 11 Afghan Wireless National v.rattanpal@tsiglobe.com 12 Atlas Telecom National riyadh.adely@sky-stream.com, farshid.ghyasi@gmail.com 13 Ariana Network Service National aziz.popal@afghanemail.net 14 Pactect National gharghasht@kbl.pactect.net, rwahlber@pactect.net 15 AFSAT National sales@afsat.net 16 Streamlink National shah_shiraz@hotmail.com 17 Afghan ICT Solution National fareed@afghanictsolution.com 18 MTN National mnaseri@mtn.com.af 19 NETZONE National haidary@netzone.af, saifi@netzone.af 2 Asix National m.zahir@asix-af.com, support@asix-af.com 21 Universal Telecom Service National feroz@universalservices.af 22 Wizocom National a.javed@nashita-ict.com, y.samsor@nashita-ict.com 23 ALPHAWAVES Local sultan.ahmad@alpha-waves.net 24 Etisalat National skhalid@etisalat.af 25 Melat Networks National nadeem@melatnetworks.com, tnoori@gsi.com.af 26 STAN Telecom National fayyaz@stantelecom.af 27 ARIASAT LTD National baktash.azizi@aria-sat.com 28 ACG National ghani@acgtelasia.com 29 Quality Net National jalalzai2@gmail.com, amarkhil@zamindargroup.com 3 Wasel Telecom National kholmi@waseltelecom.com, info@wasel.af 31 Afghan Cyber National president@afghancyber.com 32 Global Entourage National info@gec-af.com, sales@gec-af.com 33 Connect Telecom National latif@connecttelecom.com 34 AfghanYar Technology National habib_peerzada@yahoo.com 35 CastGlobe National khalid.scg@gmail.com, ksatari@castglobe.me 36 Giganor National sales@giganor.com 37 Kayenat Technology National ceo@kayenat.net, support@kayenat.net 38

Study of Afghan Telecom Industry 213 38 IDIL National idilpr@idilpr.com.tr 39 Arian Technologies National sohrab@itltd.com.af 4 Witel National abdullah_yasini@hotmail.com Telecommunications 41 Arian Afghan Network 42 Afnet Local info@afnet.com National farhad@smfgroup.net, farhad_barsaat@hotmail.com 43 TiiTACS National info@tiitacs.com, tiitacs@yahoo.com 44 Kandahar Jillani Local ceo@jelani-group.com, www.jelani-group.com 45 Giganet Local www.gignt.com Unique Atlantic 46 Telecommunication Ltd National irajabi@uais.af 47 San Technology National sadat@stis.af, www.stis.af 48 Empower IT Services National Harif@networkinv.com 49 Safa Telecom National info@safa-telecom.com Source: Ministry of communication and information technology Table: 3. Internet users (per 1 people) 22 23 24 25 26 27 28 29 21 211 Afghanistan..1.1 1.1 1.9 1.8 1.7 3.2 3.7 4.6 Bangladesh.1.2.2.2 1. 1.8 2.5 3.1 3.7 5. China 4.6 6.2 7.3 8.5 1.6 16. 22.7 29. 34.4 38.4 India 1.5 1.7 2. 2.4 2.8 4. 4.4 5.1 7.5 1.1 Iran 4.6 6.9 7.5 8.1 8.8 9.5 1.2 11.1 16. 21. Kazakhstan 1.7 2. 2.7 3. 3.3 4. 11. 17.9 31. 44. Pakistan 2.6 5. 6.2 6.3 6.5 6.8 7. 7.5 8. 9. Tajikistan.1.1.1.3 3.8 7.2 8.8 1.1 11.6 13. Turkmenistan.3.4.8 1. 1.3 1.4 1.8 2. 3. 5. Source: World Bank Table: 4. Fixed broadband Internet subscribers 23 24 25 26 2 7 Afghanista n Banglades h China 11,2 24,939,63 39 28 29 21 211 2 22 5 5 5 1 15 37,35, 5,853, 43,71 66,41 4, 5 55 6 65 82,879, 13,978, 126,337, 156,487,

19, 1 India 14,362 235, Iran 18,7 Kazakhsta n Study of Afghan Telecom Industry 213 1,348, 2,3, 3,13, 1, 2, 998 1,997 2,996 3,5 27,3 7 Pakistan 14,6 26,611 45,15 3 5,28, 7,745,71 1,99, 12,83, 3, 4, 962,25 1,772,8 67 66,818 577,2 1,426,8 1,215,7 148,47 32,829 531,787 737,778 Tajikistan 1 3645 3,658 4,4 4,7 5,2 Turkmenis 75 465 723 1,1 tan Source: World Bank Table: 5. Secure Internet servers 23 24 25 26 27 28 29 21 211 Afghanista 1 1 1 2 6 6 9 2 22 n Bangladesh 1 3 3 3 6 15 29 47 96 China 182 293 426 588 9 1238 1579 2569 326 India 825 1121 1462 1796 261 3545 Iran 2 24 55 76 Kazakhstan 31 52 85 15 Pakistan 89 15 169 197 Tajikistan 2 3 4 Turkmenist 1 1 1 an Source: World Bank Afghanis tan Banglad esh Table: 6. Investment in telecoms with private participation (current US$) 22 23 24 25 26 27 28 29 21 211 7,, 69, 156, 171, 555,4 24,, 185,, 6,, 7,, 5,1,,, 1,, 6,9, 25,, China 1,43,, India 5,8,4, 2,7 9,7, 42,, 473,, 1,14,, 3,71, 22, Iran 5,, 34,, Kazakhs tan 5,66 5,75, 35,, 115,, 139,, 275,7, 484, 5, 1,113,, 6,823,2, 635,2, 1,348,8, 8,168,25, 221,, 876,1, 896,, 9,933,8, 372,, 7,829,8, 52,5, 494,, 2,335,3, 4,147,, 82,, 483,, 486,, 514,4, 1,62,6, 596,3, 596,3, 952,7, 4

Study of Afghan Telecom Industry 213 Pakistan 17,, 24,, Tajikista n Turkmen istan Source: World Bank 1,683, 5, 4,36 4,7, 2,473,, 16,3, 2,74,5, 2,255,5, 1,266,5, 11,, 68,, 61,4, 31,8, 58,, 52,, 365,7, 371,5, 56,, 49,4, 44,4, Table: 7. Telecom Statistics for year 212 March June September December MNO 5 5 5 5 Landline operators 1 1 1 1 ISPs 44 44 44 49 including 2 wimax operators GSM subscribers 18,111,451 18,644,71 19,723,114 19,52,813 CDMA subscriber 221,276 15,874 159,717 164,443 Landlines 83,94 86,482 88,455 9,17 Telephone Penetration 66% 7% 72% 72% Investment (in billion 1,815 1,841,736,347.52 1,921,26,661.8 1,922. USD) Mobile Telecom base 4,539 4,67 4,853 5,5 station Population coverage Over 88.6% Over 88% Over 88% Over 88% Source: Ministry of communication and information technology 41

Study of Afghan Telecom Industry 213 Appendix B: Graph: 1. Inbound Internet Traffic (mbps) Inbound Internet Traffic (mbps) 9 8 7 6 5 4 3 2 1 22 24 26 28 21 212 213 Source: Afghanistan Telecommunication and regulatory agency Graph: 2. Internet users (per 1 people) 4 35 3 25 2 15 1 5 22 23 24 25 26 27 28 29 21 211 Turkmenistan Tajikistan Pakistan Bangladesh Afghanistan Source: Word Bank 42

Study of Afghan Telecom Industry 213 Graph: 3. Fixed broadband Internet subscribers 8 7 6 5 4 3 2 1 Afghanistan Bangladesh Pakistan Tajikistan Turkmenistan 23 24 25 26 27 28 29 21 211 Source: Word Bank 43

Study of Afghan Telecom Industry 213 Appendix C: Procedure for obtaining license of the telecom equipment import and sale: 1. The applicant shall submit their application to the ATRA before obtaining license. 2. The applicant shall submit copy of the company CEO or Deputy s ID card, copy of the AISA or Ministry of Commerce business license, and bank statement to the Legal Affairs and Licensing Department of the ATRA. 3. For registration of license, the applicant shall receive a tariff with amount of 5 Afghani from the ATRA relevant section and pay the mentioned amount to Da Afghanistan Bank. 4. The applicant shall make and submit their business plan in line with the required information of the Legal Affairs and Licensing Department of the ATRA. 5. The business plan is evaluated by the designated committee of the ATRA. 6. After evaluation of the business plan, it is proposed to the ATRA Board whether to issue or not license to the requesting company. 7. After approval of the ATRA Board, the company is obliged to pay the annual license fee (5 Afghani) as well as the annual regulatory fee (5 Afghani) in order to obtain the license. Map of mobile telephone coverage in Afghanistan 44