Executive summary
Mobile broadband penetration in Armenia approaching 40%Coming into 2016 the Armenian telecom market represented another developing market that is very busy trying to put an effective national telecommunications service in place. With its relatively small population (3.2 million) and a GDP per capita of around US$3,500 in 2015, it does not offer a hugely lucrative market opportunity. However, the government and the operators have been systematically building telecom networks and offering services. By end-2015 the mobile penetration was about 120% and the mobile subscriber market was continuing to grow, with an annual growth rate of around 5%. On the back of the mobile networks an effective mobile broadband offering has quickly sprung up. By early 2016 the number of mobile broadband subscribers represented about one third of the total mobile subscriber base. In the meantime, the fixed-line market has been shrinking or at least levelling off at around a relatively high 18% penetration. At the same time, fixed broadband provided a solid base for internet access with 10% penetration; this was underpinning a reasonably high household broadband penetration by end-2015.
The local telecom market has had its difficult times. After a run of strong growth in mobile subscribers in particular, the market in Armenia experienced a major slowdown triggered by the Global Financial Crisis (GFC) back in 2009. Demand for telecom services in Armenia plummeted as the most damaging impact of the GFC hit the country in that year and mobile subscriber growth was negligible. Since then, there has been some strong overall recovery, although growth has been somewhat erratic.
The telecommunications sector in Armenia has certainly been experiencing a rollercoaster ride over the last two decades. The sector slipped into decline following the collapse of the former Soviet Union back in the 1990s, with the fixed-line teledensity falling markedly. This was partly as a consequence of the prevailing socio-economic instability within the region, but more significant a factor was that the country initially failed to embrace any vigorous reform in the telecom sector. Despite steadily improving economic conditions as the country underwent economic reform, the telecoms sector was initially slow to respond.
Eventually the telecom market started to be transformed. In the opening up of the mobile market, the government made a controversial decision in choosing a second mobile operator without transparent and competitive bidding; Karabakh Telecom (K-Telecom), a little-known Lebanese-owned company, was officially awarded a licence to operate a GSM network in Armenia. K-Telecom launched its VivaCell service in 2005. The Public Services Regulatory Commission (PSRC), the country’s telecom regulator, awarded a third mobile licence - to Orange Armenia. The newly licensed operator, 100% owned by France Telecom (Orange), launched a mobile service in 2009. Ucom, a fixed-line and internet service provider, was granted the country’s fourth mobile licence by the PSRC in 2013. The Orange Group then sold 100% of Orange Armenia to local service provider Ucom in 2015, the deal being duly approved by the PSRC.
The launch of 3G services by both ArmenTel and K-Telecom back in 2008 and then Orange Armenia in 2009 gave the mobile sector a major lift; new generation services have since formed the basis of a much healthier market with stronger ARPU being reported by the operators. By late 2011 a 4G service had been launched by VivaCell-MTS and it has continued to expand this service. ArmenTel/Beeline launched its 4G offering in 2014.
An important, and indeed very positive, regulatory development in the mobile market has been the launch of Mobile Number Portability in 2013/2014, with good cooperation by the operators a feature of its introduction.
Key developments:

Armenia’s mobile market, after a period of erratic growth, was on a positive growth path by 2015;
the mobile segment in particular has benefitted from increased competition;
Armenia has achieved 100% geographic coverage with its mobile services, according to the PSRC;
fixed-line growth in Armenia has been sluggish since 2009, actually running flat or going negative with no upturn in sight;
growing internet awareness in the country has seen a strong growth in internet users;
internet user penetration passed the 51% milestone in 2015;
as internet take up accelerates, broadband services have been booming, with both fixed and mobile broadband expanding quickly;
by end-2015 fixed broadband penetration was 10% and mobile broadband 37%;
slightly more than one in three households had fixed broadband connections by end-2015;
the government is planning to roll out a National Broadband Network (NBN), although the timetable remained unclear;
Mobile Number Portability (MNP) has been introduced with the operators setting up a joint enterprise to manage it;
the Orange Group have sold 100% of Orange Armenia to local service provider Ucom, the deal having been approved by the PSRC;
VivaCell-MTS was expanding its 4G presence nationally reaching almost 50% coverage by early 2016;
moving quickly into the fibre-based broadband market, Ucom had claimed an estimated 90% of the FttH market by 2015.Companies mentioned in this report
ArmenTel, ArmenTel (Beeline), Orange, Orange Armenia, Ucom, GNC-Alfa, VivaCell-MTS, MTS, Sistema, Rostelecom, VimpelCom, TeliaSonera.