KAZAKHTELECOM IN FAVORABLE TELECOMMUNICATIONS DEAL.

Germany’s Siemens and Kazakhstan’s state telecommunications company, Kazakhtelecom, have agreed to build a unified telecommunications system in Kazakhstan. The construction of a 9,666 kilometer-long optic fiber ring will cost US$200 million over the next four years. On August 28 the partners signed a deal on the first branch, which links Shymkent, Qyzl-Orda, Aqtobe, Atyrau and Russia. This Western line will cost US$38.5 million, of which Siemens will put up 85 percent and Kazakhtelecom 15 percent. (Russian agencies and Reuter, August 28 )

This is potentially good news for Kazakhstan’s telephone system, one of the region’s most poorly provided. As recently as 1994 there were only 13.8 lines per 100 inhabitants. Ninety percent of Kazakhtelecom’s equipment is obsolete and breakdowns are frequent. Siemens will provide a service center, equipment and personnel training.

The contract also comes at a good time for Kazakhtelecom. The attraction of strategic investors to Kazakhtelecom has been piecemeal. An attempt to sell 49 percent of its shares to Germany’s Deutsche Telekom failed, as did a management contract with Australia’s Telstra. (EIU Country Profile, 1988-89, p. 25) Finally, Daewoo (South Korea) sold its 40 percent share this year. Currently, the principal shareholders in Kazakhtelecom are the government (50 percent) and Kazakhstan’s leading commercial bank, Kazkommertsbank (40 percent in alliance with Chase Manhattan Bank and several other investors). The government has promised to float four percent of its Kazakhtelecom shares by the year-end. When Kazkommertsbank purchased the shares from Daewoo it pledged to honor the South Korean company’s former obligations. These included US$1 billion-worth of investment in the telecommunications sector. Local analysts now speculate whether Siemens will assume part of these obligations.–SC

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