GSM World Focus Online asked him to assess the opportunities and challenges for the region, and specifically for those states, formerly part of the Soviet Union, which are now being targeted by Russian operators.

For Guney, there is no doubt that the growth potential of the mobile markets in Central Asia remains very high and that this region is attractive for potential investors. "This was confirmed by the recent acquisitions of mobile companies in the region by mainly Russian operators, he points out.

Why is this? One important reason appears to be that in this part of Central Asia there is an overall average penetration of a mere two per cent and a high density of population. A further reason for the attractiveness of these markets is that fixed line penetration is only about five to eight per cent.

Kazakhstan is an exception, however, enjoying much higher penetration - which Informa's World Cellular Information Service estimated at 15.5 per cent in December and Guney now puts at over 17 per cent - and lower density of population. It also has fixed line penetration of 15 per cent and is the only one of these countries where mobile penetration has overtaken that of fixed. However, as Guney points out: In the rest of the countries, it has yet to happen - but it should only be a matter of when and not if.

Among other promising areas in the region, he singles out Uzbekistan, the most populous of the Central Asian countries with over 26 million people, five GSM operators, two per cent mobile penetration and about seven per cent fixed line penetration. "However, says Guney, analysts expect mobile penetration in this country to reach about seven to ten per cent by end 2006, which implies about 1.8 to 2.6 million subscribers.

Not surprisingly, the country has been a target for acquisitions. MTS of Russia has 74 per cent of shares in the largest GSM operator Uzdunrobita. A consortium including the Germanos Group and Guney's own EBRD has 100 per cent of shares in the second largest GSM operator, Unitel, and Alfa Telecom of Russia has 100 per cent of Buztel and 70 per cent of Uzmacom.

Russian operators have also been active elsewhere, notes Guney. In Kazakhstan, Vimpelcom recently acquired 100 per cent of the second GSM operator KaR-Tel. "This market, says Guney, - is special due to a significantly higher GDP per capita compared to neighbouring Central Asian countries, only two GSM operators on the market and a gradually liberalising telecoms market. It is also the only one in the region to provide GPRS and EDGE technology-based services to subscribers". He adds: "Analysts expect that this market is approaching its "hockey stick" growth period, comparable to Russian rates of growth".

In stark contrast, Turkmenistan and Kyrgyzstan have only one GSM operator each. MTS now owns Barash Communications in Turkmenistan. However, the acquisition of BITEL in Kyrgyzstan by Alfa Telecom has not been yet confirmed. Reiterating his earlier point, Guney notes: "As both of these countries have low mobile penetration as well as fixed line penetration, they represent good growth potential for mobile telephony.

All of which sounds encouraging, but, he points out, "I see three main challenges: regulatory, macroeconomic, and financial.

The regulatory environments in all of these countries are far from perfect, he explains, and, although some progress has been made in the past few years, the absence of an independent regulator sometimes causes uncertainty and lack of clarity, leading to what he refers to as "un-businesslike decisions". More specifically, "issues related to licensing and interconnection are the major points slowing foreign direct investment and need to be addressed," he says.

More predictably, and as outlined in our overview (below), there are macroeconomic challenges relating to the overall economic development and slow growth of disposable incomes. With the possible exception of Kazakhstan, this is one of the significant reasons for low penetration levels in the region.

Raising financing to develop the networks is another challenge. Attracting long-term financing in many countries of the region is sometimes complicated and very costly due to high commercial as well as sovereign risks involved.

But Guney remains optimistic and, he points out, his company's track record backs his view. "The EBRD has been at the vanguard of pushing financing in these countries and attempting to attract other commercial institutions," he says.

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