ASTEL: Strategy for sustained growth
Vladimir Breusov, President of ASTEL JSC – one of the leaders of the domestic telecommunications sector, shares his vision of telecommunications market development in Kazakhstan and the company’s anti-crisis strategy with our magazine.
What results were achieved in telecommunications sector in the year 2009?
In my opinion, industry of telecommunications was pretty much prepared for the crisis, due to the fact that it is been a long time already for highly competitive environment in the sector - and in one way or another, the competition took place. There is a national operator, there are large companies, but there is an opportunity for the development of new initiatives. A speculative bubble has emerged in the property market as well as in the financial sector, while the players at the telecommunications market have always been offering their products and services on the basis of real demand and real customers. It is clear, that telecommunications market, in principle, could not avoid the influence of the global crisis as well as all the other sectors of the economy - because telecommunications are a part of the system.
Devaluation of national currency by 25% as well had influenced the market very much, since the resources for satellite communication are purchased from foreign companies-operators, respectively, the payment is made in foreign currency: Euro and USD. The necessary telecommunications equipment is also being produced abroad, so the business of the operators had to bear additional costs in terms of cost of services and network development. In addition, 95% of ASTEL’s clients - are local companies, that pay for the services in the local currency. Since 2002 we do have mechanisms for compensation of currency leaps provided in our agreements and contracts, and we could cast our accounts applying the indexation factor. But, realizing that the crisis has affected everyone and unscheduled jump in the cost of services provided to our customers would bring the client into a difficult situation, we refrained from doing so.
Despite such costs, according to preliminary data as of the year 2009, we expect increase of our income in KZT by 10% (relative to 2008).
How would you assess the proportion and the segment of telecommunications market in which ASTEL today?
The question of which part of the market we have is rather complicated, as there is no objective and comprehensive statistics available, and every company assesses its own work on the basis of some of secondary factors. It is also necessary to specify which segment of telecommunications market we are talking about? If we are talking about those areas in which ASTEL has worked during all the years of its existence, I can say that in our estimates, we have 30-40%. This is, first and foremost, corporate networks and access to the Internet for corporate customers. Plus full range of services within this segment - long-distance and international communications, data transmission, telemetry, video surveillance, video conferencing and so on.
In the pre-crisis years, the domestic telecommunications market could have been regarded as settled by about 95%, when each company occupied it’s know niche. But now the structure began to change. Those same banks most affected by the crisis, in the past established new branch offices, front offices, they needed new channels, but now they strenuously save money. We were not affected by the cost optimization of the banks too much, but other operators who were really affected now actively try to restore their revenues, trying to enter those niches of the bussines, where previously they were not represented.
What measures ASTEL take to meet these objective and market phenomena?
First, we try every possible way to strengthen relationships with existing partners, with telecommunications companies with which we have complementary services. This is well-established, mutually beneficial cooperation to help in solution of many problems. Secondly, we develop innovative services. Such efforts are primarily concerned not so much to earn money but more to provide a service that customers may not be worth nothing or very little, but will allow us to retain our customer base.
Here is a typical example: in many provincial cities, despite the fact that most companies were downsizing, we have increased the number of employees. To assist our clients in the regions we employed well trained system administrators. This initiative was based on the following principle: in the first place all the client applications, for which the client gets communication services, should work. What was the traditional approach of Technical Support for the Client? The Client calls and says: "I have something not working." And he gets the answer: "We can now check! We have - everything working. With this formal approach, many problems that the client has remain unresolved.
We believe that if you want to be on the market adequately, then the client should not receive impersonal "communication services", but to work with what he needs at this time. We selected system administrators, and put the main task to them: to create local area networks within the client's optimal conditions for its application through the provided channels of communication. In fact, this is a very serious problem; we carefully and with great deliberation selected people. As you know, the lack of truly qualified specialists, especially in the regions is enormous. All of our systems administrators have been trained in Almaty, they were told about the principles of the company, techniques and technologies were as well introduced to them. The program has markedly reduced the number of failures, complaints from the client, reduced time for troubleshooting which are inevitable with traditional way of work.
To understand the scale of innovation, I say that today we have about two and a half thousand satellite stations throughout Kazakhstan. In addition, there are terrestrial channels and the telephone connection in the regions. Without false modesty I can say, that technical support - one of the strongest sides of ASTEL.
Does the Company plan introduction of any innovations in access to the Internet?
It is worth saying that due to lowering of the prices in the sector of Internet service providers, the significant competitive advantages have those companies, which have their own external terrestrial channels and external gateways. I think that by the summer of the year 2010, we will also have our own channel, as now we are constructing a fiber optic line to the border with China and hope to get good prices on traffic. Accordingly, this investment will greatly reduce the cost of our Internet services.
In addition, we try to ensure that the services, for which customers are paying us, were filled with maximum content. For example, we developed a new service called "Business Internet". Just before the New Year, it was officially completed and is now is delivered in operation. The essence of the "Business Internet" is that on our website we have installed carrier-grade equipment, due to which we can provide security services and which operates in online mode. Connecting the client to this equipment, the company can actually locate 98% of the threats - to weed out any viruses, remove spam.
The access to sites with undesirable content, social networks and so on can be blocked if necessary. When the client is connect to this service, the administration client can forget about overpaying for the traffic, which is often spent on downloading of the movies and music, use the channels of communication for the development of their business. An important point: for our clients who connected to the "Business Internet" service cost for access to the Internet did not increase.
It is known that a large segment of your clients is traditionally represented by the state enterprises.
Yes, this is true. Our major client is, for example, "Kazpost" - we have built a satellite and terrestrial networks for this company. Other major consumers of our services - are the Ministry of the Interior, the Ministry of the Defense, Financial Police, the Customs Committee, and National Testing Center of the Ministry of Education. With all of them we have long time partnerships. For example, for the Ministry of the Interior, we began provision of e-mail service in 1997 on the basis of the network X.25, even before the time when the Internet was available in Kazakhstan. Thus, we started from scratch, and now, if we compare the stages of our collaboration, the various telecommunications services provided today for MIA are the matter of our pride. Videoconferencing at the highest level, a single numbering plan with a short digit dialing inside the offices, provision of posts "Rubezh" on the roads, satellite communications - the scale of development simply incomparable.
A good example of mutually beneficial partnership is - our relationship with Transtelecom JSC and with the national operator Kazakhtelecom. We take channels from Transtelecom, including the Internet but for them we have built a satellite network, installed HUBs, together we have trained professionals and currently provide technical support and organize laying of fiber optics network in the places difficult for access. Our cooperation with DKP of Kazakhtelecom has acquired an interesting shape - under the existing legislation, we have created a consortium and jointly participated in the tender for public procurement, we won it and now we work together. In general, our company provides specialized services for 50-60% of the state sector.
Is this possible to make a forecast for the industry as a whole, as well as to highlight the upcoming plans of ASTEL?
In principle, with regard to our client, now is not so much of a question of connecting of the new station, but this is how to support and update the stations already installed. Application tasks and databases are being developed, new standards are being introduced, and new technologies, channels and equipment are required. It is an endless spiral, which goes up, requiring financial and intellectual investment. Plans for 2010 are rather optimistic, although in a constantly changing market the situation is extremely mobile. With the additional opportunities and threats the strategy had to be revised every six months, but we do not plan to lay the growth rates of less than 15%.
I think, even though the crisis will slightly postpone making profit proceeding from the capacity that we have already created in the infrastructure it will effectively offset the impact of the crisis. Very interesting processes are happening in the industry, it is possible that some merges, integration and enlargement will happen pretty soon; it is possible that major players from Russia, China and India will enter the market. As to our own plans, we have set of projects ready for implementation, mainly in the field of telephony, digital TV has great prospects, and in this sphere we have certain achievements and knowledge. I am sure, if the economical situation is favorable and stable, all these projects will be implemented.