Nation's telephone giant, Aztelecom, prepares for privatization
Opportunities for American investors could be abundant

As the single largest national operator for the country's telephone system, Aztelecom Industrial Union -- better known as Aztelecom -- has the crucial responsibility for delivering telecommunications services to most of the country. Though other companies serve the city of Baku and the Autonomous Republic of Nakhchevan, Aztelecom is the key to linking the nation together and to the world at large.

“Ever since independence, the telecommunications industry has been the backbone of our development,” says Aztelecom’s General Director Nazim Djafarov. "The role of telecommunications in developing the country is very large."

With the job of extending telephone services to even the most remote parts of Azerbaijan now nearly completed, and having successfully connected Azerbaijan to the world through international telephone channels, Djafarov is currently preparing Aztelecom for privatization.

"Since independence, oil companies, banks, and other establishments have added their heavy communications needs. The old network simply couldn't carry the load," notes Aztelecom's second-ranking officer, Deputy Director Razi Tagiyev.

To handle these ever growing requirements, the company has completely replaced obsolete Soviet technology with modern equipment, cables, satellites and international radio relay systems. Thus far, some 35 percent of Aztelecom's equipment is digital, and Aztelecom continues to grow at a dizzying pace to meet Azerbaijan's demand for telephone service. The company’s staff has expanded to some 6,300 employees, who operate about 60 telecom centers throughout the nation, while maintaining 431,000 subscriber lines.

Last year, Aztelecom added some 350 miles of fiber optic cable, and established service to another 27 urban centers. The company also continues to upgrade original network equipment and digitalize the country's telephone network.

Overall, Aztelecom plans to bring service to about 750 urban settlements and build exchanges to support that service. To date, more than half of the exchanges have been established, and the company expects to complete the remaining 250 by early 2002.

The company has also expanded exponentially in providing international service. Under the Soviets, Azerbaijan's sole telephone link to the wider world consisted of just two lines, and all calls out of Azerbaijan had to be routed over these two lines.

"Our first move after independence was to establish international channels to Turkey," Djafarov recalls, "and the second was to establish them to the United States. Then we established channels to other countries."

By 1995 Aztelecom had installed 6,500 lines all over the country for domestic long distance, plus an additional 1,920 lines for international calls. The country marked that milestone as a great event. Yet consumer demand soon eclipsed even that capacity.

The completion of Alcatel-Teletash's ‘System 12’ in early 2001 now means that some 30,000 Azerbaijanis can place long distance or international calls at any one time.

Aztelecom now boasts a direct link to AT&T, with a capacity of 512 kilobytes per second, a line to WorldCom with 512 kilobytes per second capacity, and a line to MCI with 15 channels. In addition, Aztelecom now has 60 channels to Germany, 15 to Italy, 165 to Turkey, and 60 channels to Iran, as well as direct links to eight CIS countries.

Azerbaijan is now part of the TAE cable system (Trans-Asia-Europe Fiber Optic Line) extending from Shanghai to Germany, which includes 22 Asian and European countries.

"Aztelecom is '100 percent innovative' and offers all the start of the art telecommunication services," Tagiyev notes proudly. Data processing capabilities are being expanded as well, and other foreign companies have added new projects, such as Alcatel-Teletash's "System 12" and a new project code-named ‘The Released World’ is to be made ready for the 2002 market.

Seven cities throughout Azerbaijan have been selected as sites for data processing joint investment. Besides organizing these data processing centers, private companies will be asked to provide for ISDN and CATEL, and provide fixed telephone and wireless subscriber services.

Moreover, the company is testing circuits for broadband networking and Internet services in different sites, and exploring the introduction of ATM technology.

President Heydar Aliyev has decreed that Aztelecom is to be privatized soon, an historic transformation which company is now preparing to undertake.

Both Djafarov and Tagiyev continue to stress their keen interest in a suitable U.S. corporate participation in their company's privatization. "As the general director, I pay special attention to the United States," Djafarov says. "We need U.S. investment and technical support. We highly appreciate what has been done through our involvement with U.S. firms to date, and we look forward to more."

Tagiyev says that foreign investors looking at Azerbaijan’s data processing industry should aim at using 50 percent locally manufactured equipment and local staff. Prospective investors should provide technical credits and state the tender amount for a specific project. Winning companies will install their own equipment, to be initially used on a joint basis.

As a final important point, Aztelecom director Djafarov says that Section 907 of the U.S. ‘Freedom Support Act’ is truly hurting American-Azeri relations." To illustrate his point he explains how he had personally been affected by it.

"In 1996, the U.S. State Department organized and even paid attendees' costs to attend an economic seminar in Riga. I was proud to be chosen to participate in this, and represent Azerbaijan. Then the State Department said that because of 907, no one from Azerbaijan could participate! It was an obvious and visible affront!"