Instability in the Caucasus a worry for Euro telcos, but TeliaSonera emerges a winner
One of the arts of history is to enable current events to be more clearly understood. The crisis in the Caucasus may immediately be due to a number of sparks landing on dry timbers, among them the ongoing regional nationalism and Georgia’s aspirations to join NATO (77% of Georgians voted in favour of joining the organisation in a January 2008 referendum). That Russia should take exception to the encroachment of NATO in Stalin’s homeland can be appreciated if taken in a longer term view: Russian territorial growth has always been to the south, given that Europe and the Ottoman Empire offered a steady bulwark westward. Eighteenth century policy makers saw rich soil in the Caucasus and the Crimea, together with access to the Bosphorus and a tempting route to British India via Afghanistan.
Among the first Europeans to penetrate Russia were the Swedes. They have long been involved in Russian commerce: Swedish traders founded Novgorod and Kiev, and today a Swedish telco is in the van of European operators looking to the less mature and potentially rich markets of Eastern Europe and Eurasia.
For the last two years TeliaSonera has been busy expanding its presence in Turkey and Russia, as well as across Eastern Europe and Eurasia: in July 2007 it acquired MCT, a US-based company with stakes in GSM operators in Uzbekistan (Coscom), Tajikistan (Indigo-Tajikistan) and Afghanistan (Roshan). TeliaSonera’s 2007 restructuring saw its business operations move from the country-based organisation into four business areas, focused on the growth in mobility and broadband services in its eastern markets. One of these business areas, Eurasia, incorporates operations in Russia and Turkey as well as in Kazakhstan, Azerbaijan, Uzbekistan, Tajikistan, Georgia and Moldova. In February this year TeliaSonera announced plans to consolidate its position in Latvia, Azerbaijan and Moldova and make fresh acquisitions in the region. TeliaSonera owns 49% of Latvia’s fixed-line operator Lattelecom as well as the mobile operator LMT.
As any executive in the oil and gas business can testify, doing business in these markets can be hazardous. Since 2005 TeliaSonera has been involved in acrimonious legal disputes with Cukurova Group concerning the purchase of the latter’s stake in Turkcell, while it has also repeatedly been in the courts concerning the Russian mobile phone operator MegaFon (in which it holds a 41% stake). The details can be lost in a mire of complex share ownership, dishonoured contracts and deals gone bad.
Nevertheless, in the first half of 2008 TeliaSonera saw its revenue in the region grow 23% year-on-year. The company invested more than two billion kronor in network infrastructure in the same period to help secure future growth. Positive figures such as these were doubtless in the minds of France Telecom’s executives when they initially bid for the company, before pulling out in June. France Telecom’s proposed entry to this lucrative market was based on it piggybacking on TeliaSonera’s experience in the region. While recent events have helped dissuade other operators to venture into these markets, TeliaSonera, confident that it can weather the regional storms and facing little competitive pressure from the major European players, shows every sign of being a sound investment.
For more information on these developments, see separate reports:
- Russia - Key Statistics and Telecommunications Market;
- Georgia - Telecoms Market Overview, Statistics & Forecasts;
- Azerbaijan - Telecoms Market Overview, Statistics & Forecasts;
- Uzbekistan - Telecoms Market Overview, Statistics & Forecasts;
- Turkmenistan - Telecoms Market Overview & Statistics;
- Tajikistan - Telecoms Market Overview & Statistics;
- Kazakhstan - Telecoms Market Overview, Statistics & Forecasts;
- Kyrgyzstan - Telecoms Market Overview & Statistics;
- Sweden - Key Statistics, Telecom Market & Regulatory Overviews.
