Telecommunications is among the most promising markets in Ukraine that has a significant development potential.
3G for 3 Players
Ukraine used to be one of few countries in Europe, if not the only one, that did not have the capacity to offer 3G/4G technology to the consumers of telecom services. Until recent times only one operator – Trimob LLC, a subsidiary of Ukrtelecom – held a 3G license in Ukraine. Service is provided only in the few largest cities, and Ukrainian consumers mainly use low-tech 2G technology. In February 2015 the Government held a long-awaited public tender and issued 3G licenses to three major Ukrainian telecom operators – MTS, Kyivstar, and Astelit (operating under “the life:)” trademark). MTS and Kyivstar have each just paid the equivalent of approximately EUR 107 million to the State budget for their licenses; and life:) paid the equivalent of approximately EUR 131 million for its license. Conversion will cost these operators around an additional EUR 63 million, on top of their license fees. The Ukrainian Government reported this public tender as effective, transparent, and successful.
Plans for 4G and National Broadband Internet
4G licenses have not yet been granted to any telecom operator in Ukraine, because there is at the moment no spectrum available to them. The spectrum required for offering high-quality 4G services is currently only available to state security and defense authorities – so-called ”special users.” After the parliamentary elections in October 2014, a new parliamentary majority executed a Coalition Agreement, undertaking, in particular, to ensure the development of telecommunication networks of the 4th and 5th generations in 2015. Another ambitious initiative taken by the new parliamentary majority is the implementation of nationwide broadband Internet.
Adaptation of National Laws with EU Acts
One of the most significant achievements of recent years was the signing of the Ukraine-European Union Association Agreement in 2014, in which Ukraine agreed to comply with a range of requirements, including those in the telecom sector. In particular, Ukraine is expected to ensure a competitive market, transparent functioning of competent state agencies, protection of market players against discrimination, and effective allocation and use of frequencies and national numbering resources. In addition, Ukraine has to ensure that relevant national laws and regulations in the telecom sector, among others, are gradually made compatible with the EU acquis. Thus, we expect to see active work adapting Ukrainian legislation to the European legal framework.
Another remarkable trend in Ukraine is the deregulation of business activities in various areas, including the telecom sector. The government is planning to implement a range of measures aimed at bringing the regulation of the telecommunications market in Ukraine up to international standards. In particular, the market should get ready for spectrum refarming, technological neutrality implementation, and mobile number portability. Furthermore, a range of licensing procedures will be abolished or substantially simplified to make doing business in the telecoms sector in Ukraine easier. The economics ministry, which is in charge of implementing these initiatives, is also planning to: (i) introduce a notification procedure for business activities in the telecommunications area that will replace the current requirement that companies first obtain licenses to provide telecommunications services; (ii) simplify the procedure for obtaining spectrum use permits; and (iii) reduce government interference in the telecommunications market.
Public Sector Digitalization
The Ukrainian government has recently intensified cooperation with global vendors of software and hardware and solutions for data protection, cyber security, and other advanced technology products. Application of cutting-edge solutions is aimed at improving the efficiency of the Ukrainian public sector, which faces a great challenge, most particularly in the context of the ongoing Russian aggression.
To Invest or not to Invest?
Summarizing the above, the Ukrainian telecommunications market is going through significant changes. Some of these changes have been triggered by the necessity to bring Ukrainian legislation into compliance with relevant EU acts, while others were triggered by the development and introduction of new technologies. So, Ukraine, as an emerging market, offers good opportunities for investors to get a high yield from the telecom field.