Since it was liberalised in the early 1990s, Mongolia’s telecommunications sector has grown rapidly. As of the first half of 2014 the four major mobile operators – MobiCom, Unitel, Skytel and G-Mobile – reported more than 4.3m registered users in total, according to the country’s telecoms regulatory agency, the Communications Regulatory Commission of Mongolia (CRC). This figure is considerably higher than the population at the end of 2014 – estimated at 3m by the National Statistical Office of Mongolia – which means many residents own more than one SIM card or mobile phone.
Indeed, according to CRC data, mobile penetration in the country reached 140% at the end of 2013, up from around 116% at the end of 2012. The number of mobile subscribers increased 24.6% over the course of 2013, but the pace slowed in the first half of 2014, with subscriptions up just 2.1%. The increases have facilitated rapid technological improvements across all four mobile operators, as well as steadily rising competition. Each operator has invested heavily in mobile data services in recent years, which are widely considered to be the future of telecoms in Mongolia.
At the same time, most players have worked to expand their coverage of rural areas with 2G service, in order to ensure that the country’s substantial rural population has access to telecoms services (see analysis). Given the high levels of investment in the industry, most local players are broadly optimistic about the future.
With the high mobile penetration rate, subscriber growth is widely expected to slow or plateau in the coming years. This will likely contribute to a continued decline in average revenue per user (ARPU), which has fallen from around $20 per month in 2007 to less than $10 in 2013. Many operators have cut prices dramatically in recent years to attract customers as the market nears saturation, and this has had a negative impact on sector profitability.
Despite these issues, operators have continued to invest in new technology in Mongolia. Indeed, expanding 3G and 4G long-term evolution (LTE) services is regarded as the most promising means of boosting ARPUs in the coming years. Smart phones and, consequently, data services, have become increasingly popular throughout Mongolia in the past two to three years, with the growth largely focused in urban areas. As of the first half of 2014, 34% of mobile users subscribed to a 3G data plan, up from 26.4% in 2013 and 15% at the end of 2012, for example.
The government has taken on a key role in this area, introducing a number of large-scale, long-term development plans aimed at ensuring steady improvements in both the reach and the quality of national telecoms networks. At the same time, the introduction of new low-cost smartphone handsets from a variety of suppliers in the near future is expected to contribute considerably to data growth. Finally, all four mobile operators have announced plans to continue to invest in infrastructure in the short- and medium-term future. With all of these developments in mind, most local players agree that the future looks bright.
Fixed-line telecoms services in Mongolia were provided solely by the government until the fall of the Soviet Union in 1989. Beginning in the early 1990s the country’s nascent democratic government introduced a series of new laws aimed at liberalising and privatising the telecoms sector. MobiCom, a jointly owned Mongolian-Japanese operator, won a government tender to build the country’s first mobile network in 1995. Skytel, Mongolia’s second mobile operator, was established in 1999 as a joint venture between investors from Mongolia and South Korea.
The government’s Communications Act of 2001 resulted in the establishment of the CRC, which has a mandate to simultaneously regulate and encourage development in the areas of telecoms, ICT and postal services. Since the establishment of the regulator, two more mobile operators have set up shop in Mongolia, namely Unitel and G-Mobile, the third and fourth mobile service providers in the country, launched in 2005 and 2007, respectively. Since 1995 the fixed-line market has been controlled almost entirely by Mongolia Telecom, a state-controlled company.
As in many other countries around the world, fixedline subscription rates have fallen rapidly as mobile subscriptions have picked up. This trend is particularly evident in Mongolia, due in large part to the fact that many residents are nomadic. Mobile voice services have been available across the country since at least 2008, according to data from the CRC, and as of late 2014 each of the four leading mobile operators offered 3G services of various sorts in and around Ulaanbaatar, with a few providing 3G coverage further afield as well. In general, Mongolia’s mobile market is somewhat stratified, with MobiCom, the oldest and largest operator, accounting for nearly 44% of total subscribers.
Oversight & Regulation
In a market with only a handful of highly competitive service providers and steadily falling prices, the CRC is seen as playing an increasingly important role. Under the Regulatory Strategy Action Plan (RSAP) for the period 2013-15, the regulator has laid out a variety of goals, including updating all regulatory procedures in line with international best practices, which involves shifting most licensing services online, for example; streamlining development and other business-creation regulations in an effort to promote competition; shoring up Mongolia’s telecoms and ICT security, both digitally and in relation to physical infrastructure; and boosting the quality of telecoms services in order to better serve Mongolians.
The RSAP was developed in conjunction with and in support of a variety of medium- and long-term developments strategies put in place by the current government, including its 2012-16 Action Plan, the 2012 E-Governance initiative; the National Broadband Programme (2011-15); the 2010 National Programme for Information Security; and the 2010 National Programme to Transition Radio and Television Broadcasting to the Digital System, among others.
The Mobile Market
As of the first half of 2014 there were 4.3m mobile subscribers in Mongolia in total, up nearly 27% from 3.41m at the end of 2012 and more than double the 1.76m subscribers recorded at the end of 2008, according to data from the CRC. This growth is in line with trends over the past decade or so. The number of mobile subscribers in the country grew by almost 48% in 2008, for example, and then the pace declines steadily, dropping to nearly 28% in 2009, 12% in 2010 and 17% in 2011, according to data from the CRC, before registering another significant increase of 24.6% in 2013.
Mobile usage statistics reflect the fact that an increasing percentage of Mongolia’s population has moved into the capital city in recent years. As of the end of 2013 some 54% of mobile subscribers lived in Ulaanbaatar, according to the CRC. MobiCom was the country’s largest mobile service provider in 2014, with 39.5% of the overall mobile market. Unitel was in second place, with 35.5% of the market, followed by Skytel, with 13.8% and G-Mobile, with 11.9%. In the same period the great majority of mobile subscribers in Mongolia were prepaid 2G GSM customers. Post-paid mobile packages accounted for just 11% of total subscriptions in 2013, for example, and 2G GSM services made up around 50% of total subscriptions. Both Skytel and G-Mobile, which together account for just over a quarter of the market, operate CDMA networks, while MobiCom and Unitel operate GSM networks. As of the end of 2013 there were around 1.12m 3G subscribers in Mongolia, up by more than 100% from just over 500,000 at the end of 2012 and just 68,593 at the end of 2009, though 3G subscribers declined in market share to 26.2% in the first half of 2014, from 26.3% in 2013.
With more Mongolians expected to move into the middle class in the coming years, and given falling prices of smartphone handsets, the number of 3G subscribers in the country is expected to grow.
Mongolia’s dominant mobile operator, which was established in mid-March 1996, is a joint venture between the local conglomerate NewCom Group; and two Japanese firms, namely the Sumitomo Corporation and the KDDI Corporation. Since then Mobicom has benefitted substantially from its first-mover advantage. The mobile telecoms segment has remained Mobicom’s primary business line over the years.
Today the company is the largest telecoms firm in the country by a considerable degree, boasting almost 39.5% of total mobile subscribers as of mid-2014. As of the end of 2013 the company handled almost 47% of the total call load within the mobile segment. In 2009 Mobicom became one of the first local operators to launch high-speed 3G mobile data services in Mongolia, and in 2013 it became the nation’s first mobile operator to launch nationwide 3G services. Today it is widely considered to be a market leader in the area of 3G service provision, though the CRC does not release data on this segment. Mobicom also owns and operates Mongolia’s second-largest domestic fibre-optic cable network, for example, after the government’s own network. With 7342 km of fibre-optic cable in the Ulaanbaatar area, Mobicom provides a variety of commercial ICT services in the capital city.
Unitel, Mongolia’s second-largest mobile operator, was established in December 2005 as a joint venture between a handful of Mongolian and South Korean shareholders. The firm has been wholly owned by Mongolia’s largest company – the conglomerate MCS Holding – since late 2010, when MCS bought out Unitel’s South Korean shareholders, making the operator the sole 100% Mongolian-owned GSM mobile services provider. According to data from the CRC, as of mid-2014 Unitel controlled around 35.5% of the mobile market, up considerably from around 29% at the end of 2013, 31.4% at the end of 2012 and just 16% at the end of 2007. Unitel has implemented a variety of service upgrades and undertaken a series of major corresponding marketing campaigns in recent years, which has contributed to the firm’s move to second place in the mobile segment (overtaking Skytel) in 2012. Unitel has also been active in acquiring video and other types of mobile content for local consumers.
Skytel, meanwhile, had just under 14% of the market at as of mid-2014, according to CRC data, down from 15.9% in 2013 and 17.2% in 2012. The company was established in 1999 by a consortium of Mongolian and South Korean firms. Finally, G-Mobile, the fourth-largest mobile operator, was launched in 2007. The company’s licence from the CRC was issued with the requirement that it work to boost rural telecoms coverage in the country. Since then G-Mobile has expanded rapidly on the back of a raft of low-cost services aimed at attracting new mobile subscribers. The firm, which had over 11% of total mobile subscriptions as of mid-2014, offers services throughout Mongolia. G-Mobile has been rolling out high-speed 3G services since late 2013. Like Unitel, G-Mobile has focused on building partnerships with content providers and other technology firms around the world. In 2013 the company became an official partner of both Facebook and Nokia, for example.
In general, mobile tariffs have dropped dramatically over the past five years. As of the end of 2013 in-network pre-paid tariffs averaged MNT60 ($0.04) across all four mobile carriers, down considerably from MNT114 ($0.07) in 2006 and MNT220 ($0.13) in 1999, for example. In an effort to pull in more revenues, the operators have invested heavily in data services in recent years. Over the previous five years the number of internet users in Mongolia has increased rapidly, from around 106,000 in 2009 to more than 841,000 at the end of 2013, according to the CRC.
The majority of the country’s internet users – an estimated 78%, based on government data – access the web on a mobile handset, utilising one of several mobile data technologies, including 3G, EDGE or GPRS, among others. Considering that less than half of the population currently has access to the internet – and provided that the price of smartphones continues to drop for the foreseeable future – the four mobile operators are expecting to see continued growth in data services and revenues for years to come.
As mobile subscriptions have jumped, fixed-line telephone subscriptions have remained nearly constant. As of mid-2014 there were 211,360 landline phones in Mongolia, according to the CRC, up from 193,000 in 2010 and 185,000 in 2008. The move upwards has been attributed to commercial users. Telecom Mongolia, the state-controlled operator, accounted for around 42.4% of fixed-line subscriptions as of 2013, while Univision – which, like Unitel, is owned by MCS Holding – accounted for 31.2%.
Given the growth potential in the data segment, local players are looking forward to rising revenues. Indeed, Mongolia’s nascent ICT industry – which overlaps considerably with the telecoms sector – is in the early stages of what many local firms expect to be a period of considerable innovation and expansion.
While the number of internet users in Mongolia has risen quickly in recent years, many Mongolians have yet to buy into the segment. Efforts to boost awareness about the uses and benefits of the internet and data services more generally remain a challenge for providers, but the market is widely seen as a major upcoming growth opportunity (see IT overview). With this in mind, and given the rapid uptake of 2G services in recent years, the telecoms sector’s overall economic contribution is poised for a period of significant growth. The government’s ongoing telecoms development programmes are expected to be a major contributor to this expansion.
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