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RUEKJCS/SECDEF WASHINGTON DC
RUEHKO/AMEMBASSY TOKYO 1300
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RUEKJCS/JOINT STAFF WASHDC
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RUEHML/AMEMBASSY MANILA 0038
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RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEHDBU/AMEMBASSY DUSHANBE 8392

UNCLAS SECTION 01 OF 03 DUSHANBE 000673 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EB, S/P 
 
E.O. 12958: N/A 
TAGS: PGOV ECON EINV EINT SOCI CH IR TI
SUBJECT: TAJIKISTAN'S TELECOM SECTOR: PROMISING, BUT NOT 
TROUBLE-FREE 
 
DUSHANBE 00000673  001.2 OF 003 
 
 
(U) Sensitive but unclassified.  Please handle accordingly.  Not 
for public Internet. 
 
¶1. (SBU) SUMMARY:  Tajikistan's mobile and Internet 
telecommunications market is one of the most dynamic and 
competitive sectors of the economy.  The mobile sector could 
grow 10-20 percent monthly since only 5% of the market currently 
have cell phones.  Internet growth also will increase with the 
completion of fiber optic lines.  The upcoming privatization of 
state-run Tajik Telecom, which controls the digital fixed-line 
network and routes most international calls, is prompting some 
government officials to reassert control over the entire sector. 
 Private mobile companies have temporarily stalled the Ministry 
of Communication's attempt to establish a single gateway, but 
the lack of a truly independent regulatory body is troublesome. 
The United States can play a private and public role in 
providing the mobile and internet market with hardware and 
software, aiding regulatory reform, and advocating for 
transparency leading up to Tajik Telecom's privatization.  END 
SUMMARY. 
 
DYNAMIC SECTOR IN MOBILE, INTERNET SERVICES 
 
¶2. (U) Liberal licensing policy, comparatively low market 
entrance costs, and low penetration rates in both the mobile and 
fixed-line telecom market drive growth in Tajikistan's telecom 
sector.  Although cellular subscriber rates are increasing on 
average 10-20 percent per month is between 10 and 20 percent, 
only five percent of the population had mobile phones as of 
March 2006.  Customs duty on telecommunications equipment rarely 
exceeds 15 percent.  In the past year most mobile operators 
leapfrogged and introduced 3G and Next Generation advanced 
wireless networks -- in addition to providing standard Global 
System for Mobile Communications (GSM.) 
 
¶3. (SBU) Competition is robust among the 10 mobile providers 
servicing 400,000-500,000 Tajik subscribers as of March 2006. 
Of the top four companies,  Babilon Mobile has 200,000 
subscribers, Indigo Somoncom has 80,000, Indigo Tajikistan has 
70,000, and Mobil Lines of Tajikistan (MLT) has 70,000.  Indigo 
Somoncon provides northern Tajikistan with cell service, and its 
sister company Indigo Tajikistan covers the south.  Indigo is 
owned 40 percent by American MCT Corporation and 60 percent by 
the Aga Khan Foundation.  Indigo Tajikistan had a $4 million 
profit in 2004 and close to $7 million profit in 2005; its 
average monthly customer bill was $20.  Babilon Mobile also has 
some undisclosed private American investment, according to its 
chairman, and its goal is to increase its subscribers to 350,000 
by the end of the year. 
 
¶4. (U) Internet access growth is expected to increase 
substantially when the country is fully integrated into the 
Trans-Asia-Europe (TAE) fiber optic highway, potentially as soon 
as the end of 2006.  Currently, 12 Internet service providers 
exist -- 10 commercial and two government -- and the 
government's goal is to have at least one computer in every 
secondary school classroom by 2007.  Babilon Telecommunications 
(the parent company of Babilon Mobile) has pushed hard to expand 
Internet access by opening more than 50 internet cafes 
throughout the country.  Its next step is to push for users to 
become subscribers.  Most Tajiks use the over 400 internet cafes 
to make cheap, but low quality phone calls over the Internet or 
to play networking games, according to the local Civil 
Initiative on Internet Policy Director. 
 
 
DUSHANBE 00000673  002.2 OF 003 
 
 
TAJIK TELECOM CONTROLS FIXED-LINE, INTERNATIONAL MARKET 
 
¶5. (U) State-run Tajik Telecom controls the fixed-line market in 
the country.  During 2003-2005, it upgraded from obsolete analog 
to digital equipment provided by China's Zhong Xing 
Telecommunication Equipment (ZTE) company and Iranian Parstel. 
Communications quality since has dramatically improved.  A large 
part of the network modernization was funded by a 2001 $13 
million loan from the European Bank for Reconstruction and 
Development, which Tajik Telecom begins paying back October 
¶2006.  Tajik Telecom is slated to be privatized in 2007 under 
the national privatization plan.  The company has 300,000 
fixed-line subscribers. 
 
¶6. (U) Tajik Telecom's monopoly of much of the telecom sector 
hinders efficient operation for most mobile operators.  Almost 
all mobile operators are required to route their international 
calls through Tajik Telecom, because making separate 
international phone calls requires a government license.  In 
February, only cellular operators affiliated with Tajik Telecom 
and Babilon Mobile were granted this license.  Indigo Tajikistan 
is still waiting for its application to be approved.  Moreover, 
Tajik Telecom does not pay for its outgoing calls to local 
mobile providers, but still charges the mobile providers for all 
incoming calls to Tajik Telecom.  This violates "Calling Party 
Pays" (CPP) telecom community standards.  Legislation is pending 
to force Tajik Telecom to begin paying. 
 
GOVERNMENT INTERFERENCE INCREASING 
 
¶7. (SBU)  Interest in getting a larger share of the telecom pie 
for some government officials is growing within the industry. 
The Ministry of Communications unilaterally announced in 
February the installation of a single unified gateway for all 
mobile and Internet communications.  The Ministry publicly 
claimed that routing all communications traffic through one 
switch would improve the quality, accurately assess usage fees 
by all users, and capture "gray" traffic that circumvents the 
system.  Ministry officials also said the unified gateway would 
help the country's national security committee and interior 
services better monitor telephone and internet traffic. 
Minister Zuvaidov himself publicly advocated the single gateway. 
 
¶8. (SBU) Prompt public outcry from mobile and Internet operators 
-- as well as the deputy of Parliament -- appears to have 
stalled this initiative.  The operators observed that a unified 
gateway would degrade the quality of calls by going through 
another node and raise the service cost to consumers, and they 
appealed to Tajikistan's anti-monopoly committee.  How Tajik 
Telecom would prioritize each company's traffic also was 
questionable.  Moreover, government officials could not respond 
adequately to the question of what would happen if the gateway 
broke down, which effectively would bring down all 
communications in the country.  As of March, the Ministry of 
Communication has agreed to re-examine its proposal in a larger 
committee with representatives from other government ministries 
and the private sector.  Zuvaidov gave an interview, 
acknowledging the need for more examination, and later told 
PolOff they would consider having a commercial gateway in 
addition to the state-controlled. 
 
¶9. (SBU) It is troubling that Tajikistan does not have a truly 
independent telecom regulatory entity.  In 2004, the 
Communications Regulation Agency (CRA) was created within the 
Ministry of Communications.  The CRA relies on the Ministry for 
 
DUSHANBE 00000673  003.2 OF 003 
 
 
its budget.  In a meeting with PolOff March 30, the symbiotic 
connection to the Ministry was obvious in CRA Director Anvar 
Mamajanov's advocacy for the unified gateway.  A March 31 
meeting with First Deputy Minister of Communications Beg Zuhurov 
confirmed the lack of understanding of how regulation needed to 
be transparent and independent of the government.  Subsequent 
private meetings with the heads of Babilon, Indigo Tajikistan, 
and Indigo Somoncon indicated that key officials at Tajik 
Telecom and the Ministry of Communications almost had succeeded 
in quickly pushing this initiative through (the decree 
reportedly was awaiting President Rahmonov's signature) as a 
fait accompli. 
 
POLITICS OF PRIVITAZATION 
 
¶10. (SBU) There is a large degree of cynicism that the gateway 
concept is solely related to Tajik Telecom's privatization.  In 
a March 1 meeting with EmbOffs, the administrative head of Tajik 
Telecom, Dr. Jafar Rustamov, said that he will "make Tajik 
Telecom as big and tasty a pie as possible," but it is up to the 
government to decide how much of that pie they want to sell. 
(If just a one-cent surcharge per minute on routing all current 
traffic through a unified gateway were imposed, for example, 
that would be almost $5,000 extra per minute going to Tajik 
Telecom, if all mobile users were using the system.)  The EBRD 
is growingly increasingly frustrated with the Ministry of 
Communication stalling regulatory reform, and believes that 
vested interests are driving telecom policy leading up to Tajik 
Telecom's privatization.  In addition, the Minister of 
Communication appears to be able to act with impunity in the 
government -- hence the unilateral implementation of the Chinese 
ZTE-supplied router and quick move to initiate the unified 
gateway policy.  Moreover, ZTE and the Huawei Corporation have 
won the tenders for upgrading Tajik Telecom's network and 
clearly have good connections in both the Ministry of 
Communications and Tajik Telecom. 
 
¶11. (SBU) COMMENT:  Communications is a key part of the 
Secretary Rice's Infrastructure Integration Initiative for 
 
SIPDIS 
Greater Central Asia.  Although the Chinese dominate supplies to 
Tajik Telecom with communications hardware, U.S. investment has 
created a more transparent environment in the mobile and 
Internet market.  There is a private and public role for the 
United States to play in providing the mobile and internet 
markets with hardware and software, aiding regulatory reform, 
and advocating for transparency leading up to Tajik Telecom's 
privatization.  END COMMENT. 
HOAGLAND