Review of regulatory environment

Description of the main activities of Kazakhtelecom JSC (services):

In accordance with point 1 of Article 7 of the Charter of Kazakhtelecom JSC, the Company operates as a telecommunications operator of the Republic of Kazakhstan for the creation, installation, operation and maintenance of a public telecommunications network and private telecommunications systems, performs the functions of a public telecommunications network operator and, among other things, an operator of long-distance and international communications with the right to make settlements with the Communications Administrations of other states, companies, users, international organizations in accordance with the Regulations of the International Telecommunication Union and the legislation of the ­Republic of Kazakhstan.

State regulatory provisions of the legislation of the Republic of Kazakhstan for the year 2022:

The main legislative acts of the Republic of Kazakhstan governing the activity of Kazakhtelecom JSC are the Business Code of the Republic of Kazakhstan, the Laws of the Republic of Kazakhstan “On Communications”, “On Natural Monopolies”, and “On Joint Stock Companies”.

The Business Code of the Republic of Kazakhstan determines the legal, economic and social conditions and guarantees ensuring freedom of entrepreneurship in the Republic of Kazakhstan and regulates public relations arising in connection with the interaction of business entities and the state, including state regulation and support for entrepreneurship.

Changes were made to the Business Code in different ways during 2022. In accordance with the Law of the Republic of Kazakhstan of 03.01.2022 “On the Introduction of Amendments and Addenda to Certain Legislative Acts of the Republic of Kazakhstan on the Development of Competition”, a new version of Article 193 BC “State Monopoly and Special Law” comes into effect from 01.07.2022.

The exclusive or pre-emptive right of a market subject stipulated by law to produce, sell and/or purchase any goods on a competitive market is a special right. The subject of special law may be a state-owned enterprise, joint-stock company, limited-liability partnership, determined pursuant to the procedure established by the Government of the Republic of Kazakhstan. The determination by a subject of a special right of a legal entity, less than one hundred percent of shares (equity interests in charter capital) of which are directly or indirectly owned by the state, is permitted only if it is impossible for the subject of a special right of a legal entity, 100% of shares (equity interests in charter capital) of which are directly or indirectly owned by the state. Restrictions are also established on the subjects of the state monopoly and special law.

The antimonopoly authority conducts an examination of prices for goods produced and (or) sold by a subject of special law. The pricing rules for goods produced and sold by a subject of special rights are approved by the antimonopoly authority.

The most significant provision is Article 176-1 of the BC, which is effective from 07.03.2022. This norm stipulates the introduction of a mechanism for accessing the Key Capacity. For example, point 1 of article 176-1 of the BC Law establishes that the key capacity is a product, an infrastructure object of a market subject holding a dominant or monopolistic position, without access to which other market participants cannot manufacture and/or sell goods (work, services) on the corresponding or adjacent commodity market. Under this regulation, the Company and its subsidiaries will be forced to provide other market entities with their telecommunications network, mobile network, RFS (radio frequency spectrum) and other infrastructure for use, which will be recognized as key capacity on the terms determined by the antimonopoly body.

In addition, by the Law of the Republic of Kazakhstan dated 03.01.2022, from 07.03.2022, article 210-1 of the BC “Authorized person” was put into effect. According to the provisions of this article, in order to conduct an expert assessment of the fulfillment of the requirements and obligations stipulated by the decision of the antimonopoly body on consent to economic concentration, a market entity has the right to engage a trustee, determined in accordance with the requirements of this article. An authorized person is a person who has special scientific or practical knowledge on issues that are the subject of economic concentration. An agreement is concluded between an authorized person and a market entity in a standard form approved by the antimonopoly authority. The authorized person shall notify the antimonopoly body of the conclusion of the contract no later than ten calendar days after the date of its entry into force. The authorized person must be independent in relation to the participants in the economic concentration.

The antimonopoly body maintains a register of authorized persons in the manner determined by the antimonopoly body. The register of authorized persons includes candidates proposed by associations of business entities.

The Law of the Republic of Kazakhstan “On Communications” establishes the legal framework for communications activity in the Republic of Kazakhstan, determines the ­authorities of the state authorities to regulate this activity, and the rights and obligations of individuals and legal entities providing or using communications services.

In accordance with the Law of the Republic of Kazakhstan of 14.07.2022 No. 141-VІI “On the Introduction of the Amendments and Addenda to certain legislative acts of the Republic of Kazakhstan on the promotion of innovation, the development of digitalization, information security and education”:

1. the notion of “dominant telecommunications operator” and everything related to it was excluded from the Law on Communications;

2. from 14.09.2022 new obligations for telecommunications operators were introduced by amending point 3 and supplementing Article 25 of the Law on Communications with the point 3-1:

• “3. Passage of International traffic shall be routed only through the networks of international telecommunications operators, subject to the procedure for functioning of the centralized telecommunications network management system of the Republic of Kazakhstan”;
• “3-1. Passage of Internet traffic by telecommunications operators in the territory of the Republic of Kazakhstan shall be subject to compliance with the procedure of functioning of the centralized control system of telecommunications networks of the Republic of Kazakhstan”.

3. point 6 of Article 29 of the Law on Communications is supplemented by the second part of the following content:

“Fiber-optic communication lines (FOCL) can be carried out through overhead power lines in accordance with the rules for the installation of electrical installations approved by the state body that manages the electric power industry”. This will further accelerate the process of increasing FOCL in the country with a decrease in the cost of their laying.

The Law of the Republic of Kazakhstan “On Natural Monopolies” applies to relations arising in the market of services of the Republic of Kazakhstan provided by subjects of natural monopolies.

In accordance with the Law of the Republic of Kazakhstan of 30.06.2022 No. 130-VІI “On the Introduction of Amendments and Addenda to certain legislative acts of the Republic of Kazakhstan on the issues of electric power industry, energy saving and energy efficiency, subsoil use, local government, state border, housing and communal services and science”, point 3 of Article 22 of the Law of the Republic of Kazakhstan “On Natural Monopolies” was amended and reworded as follows:

• “3. The tariff change is carried out at the initiative of the authorized body no more than twice a year, at the initiative of the subject of natural monopoly — no more than once a year”.

In addition, in 2022, various general changes were made to some legislative acts of the Republic of Kazakhstan used in the activities of Kazakhtelecom JSC, such as the Civil Code of the Republic of Kazakhstan, the Tax Code of the Republic of Kazakhstan, the Code of the Republic of Kazakhstan on Administrative Offenses, the Law of the Republic of Kazakhstan “On the Securities Market”, Law of the Republic of Kazakhstan “On Permits and Notifications”, Law of the Republic of Kazakhstan “On Joint Stock Companies”.