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. Last Updated: 07/27/2016

Kaznet, Cisco Sign $8M Deal To Link Up 18 Kazakh Cities

Kaznet of Kazakhstan has signed an $8 million deal with Cisco, a leading U.S. telecommunications equipment producer, to supply equipment for a national datacom network.

The net, which will cover Kazakhstan's 18 largest cities, is based on a Asynchronous Transfer Mode, or ATM, platform, which provides a unique capability for datacom operators to integrate voice, data, video and other broadband traffic within a single transport environment.

Analysts said Kaznet's move was daring given the limited demand for broad-band services on the underdeveloped market of the former Soviet Union.

"It would take a fair amount of courage from any operator in the CIS to embark on a full scale ATM project," said Mikhail Alexeyev, senior consultant at the management consulting company J'son & Partners.

However, the business environment in Kazakhstan, whose market is less fragmented than Russia's with fewer operators competing in each of the main telecom segments, will allow Kaznet, a subsidiary of the national operator Kazakhtelecom, to thrive, analysts said.

"The regulatory authorities in Kazakhstan appear to be very aware of investors' concerns and try to limit the number of potential competitors, unless it could be justified by excessive demand," Alexeyev said.

"Kaznet must have certain assurance from the regulatory authorities that it will enjoy a de-facto monopoly in broad-band services for a while," he said.

Kaznet said the network with its 24 ATM switches, which it started to build in late 1998, will be put in operation in August.

"With ATM switches to be installed all over Kazakhstan, Kaznet will instantly reach a critical mass and would become a dominant provider on the market," Alexeyev said. "Its service will be a natural choice to smaller operators and corporate customers, which require reliable connectivity within Kazakhstan."

Cisco, one of the leading suppliers of ATM equipment, boasts a number of successful joint projects with corporate and public network operators across Russia and the CIS, its equipment being used by the Russian long-distance provider Rostelecom, the Moscow telephone net MGTS and several of the largest Internet providers.