Strong growth in Georgia’s telecom sector despite uncertainties

Georgia is continuing to build itself into a modern economy despite the troubled times it has had with its neighbour Russia, according to Research & Markets. The country has been able to overcome the severe setback suffered in 2009 following the onset of the Global Financial Crisis, and its telecom sector has followed the trend of its overall economy, becoming progressively healthier. At the same time, rising telecom revenues have seen a corresponding and significant increase in investment in infrastructure.

The year 2003 proved to be both a political and economic turning point for Georgia, with the so-called Rose Revolution seeing a reforming administration take control of government; at the same time, the influence of the telecom sector on the potential development of the country’s other economic sectors was starting to increase dramatically. Since 2003, telecommunications has become one of the fastest growing sectors in the Georgian economy. The share of telecommunications in the country’s GDP has reached around 7%, a significant increase over levels achieved in the recent past.

The mobile segment of the market in particular has been booming. Coming into 2012, mobile penetration had passed 100%, subscriber numbers having increased sevenfold since 2003. MagtiCom was awarded Georgia’s first 3G licence in 2005, followed by a further two licences 3G in 2006. Mobile communication systems have become increasingly important for Georgia since the fixed-line networks in many parts of the country remained outdated (particularly in rural and remote areas) and the mobile network represented the only means of communication, especially as mobile coverage has now been provided for virtually the whole of Georgia.

An encouraging feature of the telecom market in Georgia is the high level of internet usage; there was an estimated user penetration of around 35% into 2012. However, internet subscriptions have been lagging somewhat behind the user numbers in relative terms. Nevertheless the gap is being bridged quickly, with fixed broadband internet having achieved considerable market presence in the last few years. Broadband now comprises some 80% of all fixed internet subscriptions.

Even before the Rose Revolution in 2003 and the reforms that took place following that, positive regulatory developments had already commenced. These reforms included the establishment of an independent telecom regulator, the Georgian National Communications Commission (GNCC) in 2000. Although the privatisation of fixed-line operators Sakartvelos Telekomi and Sakartvelos Elektrokavshiri was commenced in 2001, the process suffered multiple delays. Sakartvelos Elektrokavshiri was finally privatised in 2006, having changed its name to United Telecom. Sakartvelos Telekomi was also eventually privatised changing its name to Georgia Telecom. Competition had arrived for all segments of the telecoms market, including for fixed-line voice services. Georgia has more than 320 licensed and operational service providers and network operators.

In the meantime Georgia’s ongoing tension with Russia continues to provide a level of uncertainty for the country and the future direction of its social and economic development. Despite this the economic outlook continues to be positive. In a telling report considering the timing, the World Bank ranked Georgia in 2009 as the 15th easiest economy in the world in which to do business (up from 21st in 2008). Into 2011 the country was basically maintaining its ranking, holding 16th place in that year’s World Bank survey.

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