Positive News in Fixed-Line Sector as Arminco Prepares to Launch Svc

World Markets Research Centre
Global Insight
March 10, 2009

Further Positive News in Armenian Fixed-Line Sector as Arminco
Prepares to Launch Services

by Michael Lacquiere

Momentum is building for competition in Armenia’s fixed-line sphere.

Armenian internet service provider (ISP) Arminco has indicated that it
is ready to begin offering fixed-line communications services by the
end of May 2009, reports ARKA. Company director Andranik Alexanyan has
indicated that technical preparation has been completed and that
services will be rendered as soon as interconnection issues have been
settled with incumbent Armentel. Alexanyan pointed out that Arminco
was able to prepare for entry into the fixed-line market as it had
anticipated receiving number capacity for the last year.

IHS Global Insight Perspective
Significance
Arminco has followed Cornet in indicating that it has plans in place
for the imminent launch of fixed-line communication services.

Implications
Arminco is one of eight operators to have recently been granted
numbering capacity and codes for the provision of services. This is
likely to be positive for the sector, particularly for subscribers.

Outlook
The fresh competition is bad news for Armentel in terms of subscriber
share, but it will nevertheless benefit from interconnection fees as
each of the eight alternatives will be connected to its network.

Outlook and Implications

Increased Competition Beneficial for Fixed-Line Sector: Arminco was
one of eight operators to receive number capacity and a public network
code, facilitating the provision of fixed-line services, from the
national Public Services Regulatory Commission (PSRC) on 25 February
(see Armenia: 26 February 2009: ). The other operators were iCON
Communications, Comstar unit Cornet-AM, Bionet, Complex Dzoraghbyur,
Hi-Tech Gateway, Inc, Softlink, Web and Comstar unit Cornet, which
last week indicated that it also has plans to launch fixed-line
services in the coming months (see Armenia: 6 March 2009: ). The
entrance of these operators is likely to be positive for the
fixed-line sector, with subscribers obviously in line to benefit from
the reduced pricing that competition naturally brings. Fixed-line
subscriber growth has been modest in recent years, with penetration
only just over 20% and subscribers leaning towards mobile telephony
for voice services. While IHS Global Insight does not expect
fixed-line telephony to now become the main mode of voice telephony,
the increased competition ought to stimulate notable uptake in 2009.

Arminco to Draw on Established Internet Subscriber Base: Arminco has
been offering internet services since 1992 and currently provides
speeds of up to 1 Gbps along a fibre-optic network, as well as xDSL,
Wi-Fi and dial-up services. It has not yet specified its pricing
policy for fixed-line communication services, but anticipates that it
will be able to offer both fixed-line and mobile calls domestically
and internationally, and is also optimistic that its existing base of
internet subscribers will help it to establish itself quickly in the
fixed-line market.

Armentel Faces Competition But Will Benefit from Interconnection: The
news is less positive for Armentel, with eight different competitors
looking to churn its customers. In October 2007, Armentel renounced
its monopoly of various telephony spheres, including the local,
intercity and telephony markets, the leased-line market, the
international transit and satellite services market, the public mobile
communication market, the IP telephony market, and the broadband
video-transmission services market. Since then, it has retained a de
facto monopoly of the fixed-line sphere. It now appears that this is
to finally end, given the imminent deadlines for service launches
suggested by Arminco and Cornet. However, as the networks of each of
the eight operators will be connected to that of Armentel, the
operator stands to benefit from interconnection fees, serving as a
reminder that it still dominates fixed-line infrastructure in the
company.

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