Georgia’s ICT sector is very promising. It recorded a 14.5% annual growth over the 2005-2010 period to reach 7% of the national GDP, a higher share than in other countries of the region.
Fuelled by the launch of major e-government projects, in cooperation with leading private companies such as Intel or Microsoft, the IT segment shows good growth potential. With its strategic location (and competitive workforce, Georgia envisions to become a ICT hub for the Caucasus-Caspian region. Organised in 2012, the first edition of TEDxTbilisi gathered international attention on the country’s potential for innovation and IT development.
Telecommunication services’ penetration has also been growing rapidly (mobile subscriptions increased by 31.1% annually over the 2001-2010 period and internet subscriptions by 44.3%) along with the liberalisation of the sector and the introduction of new technologies (wide 3.5G coverage, extensive fiber optics network, wireless broadband service). However, there is still significant domestic demand to meet.
Strategic direction/ specific schemes and incentives
With the aim to promote the development of the ICT sector and increase the use of IT in the society, the government has launched a number of support schemes:
IT Virtual Zones
: online registration with the LEPL Financial Analytical Service of the Ministry of Finance, exemption from VAT, corporate income tax and export fees for export-oriented software development activities, additional incentives for foreign companies;
IT Start-Up Days
: provision of consultancy and networking services for IT entrepreneurs;
Computers for Everyone
: cooperation with Intel and Microsoft to support individuals in purchasing personal computers at a favourable price;
: support to the IT equipment of educational institutions and to the introduction of learning methods based on ICT (80% of schools benefited from this project as of 2009).
On the private sector side, the Business Incubation Initiative was launched in 2002 with the support of World Bank’s infoDev Incubator Support Center and Eurasia Foundation. The first business incubator was established in Tbilisi in 2008 and currently accommodates 3 tenant companies and 2 virtually incubated external clients.
The capital-intensive telecom industry is already well penetrated by international service providers:
Fixed line telephony: privatised in 2006 and dominated by Silknet (owned by Georgian-Kazakh consortium BST Holding), Akhtel and Akhali Kselebi (both privately-owned local companies), it reaches only 14% of the population (concentrated in Tbilisi) but offers low growth potential since fixed line is overtaken by other technologies;
Mobile telephony: Geocell
(owned by Sweden’s TeliaSonera
(owned by US MIG
) and Beeline (owned by Russia’s VimpelCom) hold respectively 46%, 43% and 11% of the market share but the cross-selling of new services is expected;
Internet services: there are 113 licensed providers but 4 of them provide 80% of internet connections, with insufficient bandwidth to meet the needs of their customers;
Digital TV: Internet service providers are expected to drive the TV digitalisation, which model is to be selected in 2012;
Therefore, outsourced professional services are the main opportunities:
E-government tenders: networking infrastructure, software development, web-content management, professionally managed solutions, data storage and management, cyber-security, etc.
Software development: consolidation of small software developers, acquisition of leading players (UGT, GGS, ITex, Delta systems, Azry, IBS), specialised software for the tourism and textile industry;
Outsourced data centres and other digital services to banks, insurance companies, telecom operators and other ICT businesses (mobile operators, ISPs);
Consulting and IT integration: Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), etc.;
Online services/ E-commerce.
Some success stories
OpenRevolution (USA) was founded in Washington in 2008 and provides mobile transaction solutions. In 2009, US private equity firms Blue Heron Capital and V-Ten Capital Partners became shareholders of the group. The same year, the latter established OpenRevolution Georgia in Tbilisi as the Eurasian base of MobiPay, the first multi-national payment network for mobile financial services.
Zooplus (Germany), a leading supplier of pet food and pet accessories with offices in Munich, Strasbourg, Krakow, Genoa and Oxford, opened a call centre in Tbilisi to offer 24/7 assistance to its customers.
UGT (Georgia) is a leading provider of IT products (Compaq, Microsoft, HP, RITTAL) and integrator of ERP and CRM systems. In 2010, UGT became the first Georgian company to enter the US market. It opened its first branch in Dallas in 2011.
Microsoft (USA), a global IT leader opened its representative office in Tbilisi in 2006 and progressively increased its presence by introducing new products. Since 2010, the group has a local team dedicated to analysing the local market and broadening the portfolio of operations. It notably engaged cooperation projects with the government.
Geocell, launched in 1996 as a subsidiary of Sweden’s TeliaSonera is the biggest mobile operator in Georgia (46% of the market share). Since the very beginning of its operations, the company invested around USD 420 million and today covers 98% of Georgia’s populated territory.
MagtiCom, launched in 1997 as a subsidiary of US MIG, is a leading telecom company in Georgia. It offers both mobile and fixed telecommunication services. The company has over 2,000,000 subscribers and covers 98% of Georgia’s populated territory.
Useful links and contacts
Georgian Chamber of Commerce and Industry
Georgian National Investment Agency
Ministry of Economy and Sustainable Development