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Wednesday, July 6, 2011

Mongolia Briefing is a magazine and daily news service about doing business in Mongolia. We cover topics relating to the Mongolian economy, the market in Mongolia, foreign direct investment and Mongolian law and tax. It is written in-house by the foreign investment professionals at Dezan Shira & Associates

Mongolia’s IT Sector Continues to See Rapid Growth

Mar. 21 – Mongolia’s internet sector is considered to be one of the most rapidly expanding sectors in the country, according to market research conducted by local Frontier Securities.

The number of internet subscribers in the country increased 10-fold from 2006 to 2009 – from around 10,000 to over 100,000. Estimates grew to 199,000 subscribers by the end of 2010 due in part to falling costs as the market expands.

According to Frontier Securities data, the wholesale price connection has dropped from US$3,250 per 1 Mbps in 2004 to US$80 in 2011.

Furthermore, there were 46 computers per 1,000 Mongolians in 2007, according to statistics from the Information Communications Technology and Post Authority of Mongolia (ICTPA). That number jumped to 85 per 1,000 in 2010.

As such, there is still room for growth, since only half of provincial towns have high-speed internet access.

There are currently about 17,900 kilometers of fiber-optic cables running through the country, covering around 70 percent of current and potential users. Roughly 40,000 kilometers of fiber-optic cable is necessary for full coverage, according to figures released by the ICTPA. There is a connection with both the Russian network to the north and the Chinese one on the southern border.

Optic-cables supply approximately 18.7 percent and digital subscriber lines were used by 12.6 percent. Wireless technologies such as Wi-Fi, WiMAX, and VSAT comprised a little less than 1 percent of the total.

By the end of 2010, the cost of internet through fiber-optic cables and advanced digital subscriber lines stood at around US$140 per month for a line providing speeds up to q Mbps for corporate customer and approximately US$22 for lines supplying home service and small offices.

According to the 2010 Population and Housing Census there are around 709,600 internet users in Mongolia, implying a penetration rate of 30.6 percent. That rate jumped to almost 50 percent in Ulaanbaatar, where one-third of the population lives.

According to an ICTPA paper published in early 2011, the most popular connection method was via general packet radio service, which operates on 2G and 3G mobile systems, and provides access for 64 percent of users.

However, internet subscriptions are lower, estimated to be around 351,758. Frontier’s analysis concluded users are currently reliant on internet cafes which are usually very small and busy. Such users are likely to buy a computer and connect at home once that is affordable.

The hardware and software markets are moving relatively slower. Hardware accounted for 5.1 percent of Mongolia’s total imports in 2009, with 24.1 percent of total imports coming from the Asia-Pacific region. Around 30 companies import and supply computers and other ICT equipment.

“Compared with 2010, we have seen huge growth, and a lot of requests for comprehensive software solutions for expiration and production from both foreign and local companies,” Dagva, general manager of software firm Gemcom, told the Oxford Business Group.

At the end of 2010, there were 77 providers, according to the Mongolian Communications Regulatory Commission. With market share of 21.5 percent, Telecom Mongolia is the largest in the sector, followed by Sky C&C with 20.2 percent, Yokodzunanet with 17.7 percent, and STX City with 15.5 percent. All other providers have less than a 10 percent market share.

Intec, a local IT consulting firm, identified some 3,400 websites with Mongolia-related content, with around 60 percent of them using the county’s “.mn” domain name. There are 1,823 Mongolia-themed blogs, with around one-third of them started in 2010. Roughly 160,000 Mongolians have a Facebook account, with 78 percent of the total aged between 18 and 34.

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