Kyivstar Awarded 3G Licence by Ukrainian Court Decision

Ukraine's leading mobile operator by subscriber numbers, Kyivstar, has been awarded a 3G licence. Ukraine's National Communications Regulation Commission (NCRC) has been ordered to grant the licence to Kyivstar by the District Administrative Court of Kyiv, according to press reports. The court decision was made after Kyivstar had complained about the NCRC's repeated refusals to grant a 3G licence to the operator since 2005. The NCRC claimed that this was due to a lack of frequencies for 3G services, as military radio frequencies first needed to be converted for civilian use.

In August 2007, Ukraine's cabinet of ministers approved the provision of extra-budgetary funds for the roll-out of 3G services in the 2.1-2.2 GHz band for use by mobile operators, and a contest for 3G frequencies is currently being mooted in the second or third quarter of 2008 (see Ukraine: 3 August 2007: Ministers Approve 3G Development Among Ukrainian Mobile Operators).

To date, the country's only other 3G licence-holder has been state-owned, fixed-line incumbent Ukrtelecom, which was awarded its licence without tender in December 2005 and launched 3G services under the "Utel" brand in November 2007 (see Ukraine: 2 November 2007:Ukrtelecom Steps Into the Unknown with Long-Awaited Launch of 3G Services). Mobile penetration in Ukraine was 107% at the start of 2007 and has continued to rise. Within this context of limited organic subscriber growth, the opportunity to offer value-added services should be welcomed by the country's mobile operators.

Outlook and Implications

• NCRC Angry: The District Administrative Court’s decision and Kyivstar’s conduct have been lambasted by the NCRC. Volodymyr Zverev, the NCRC chairman, has reported that Kyivstar had complained that its appeal for a 3G licence had not been satisfied within 60 days. However, he has criticised this behaviour, describing it as "an unfair move, rather ugly and indecent", according to Ukrainian News. The grounds for Zverev's disapproval appear to be that Kyivstar's appeal for an answer within 60 days was unreasonable, given that it came at a time when "the situation at the commission was uneasy". This is presumably a reference to the problems of frequency conversion. Zverev has also voiced his disapproval at the fact that Kyivstar's approach has led to the licensing of a single operator, rather than a contest also open to rival players MTS Ukraine, Ukrainian Radiosystems (URS) and Astelit.
• 3G Licensing in Ukraine Not a Straightforward Issue: The issue of 3G licensing in Ukraine has rarely been straightforward. The awarding of a licence to Ukrtelecom back in 2005 was criticised by mobile operators as Ukrtelecom itself did not have any expertise or background in the mobile sphere. The decision was widely interpreted as a government move to increase the value of Ukrtelecom prior to its oft-mooted privatisation. Since then, repeated attempts by operators to gain licences have been rebuffed, and the promise of licence awards in 2006 failed to materialise (see Ukraine: 14 November 2006: Regulator Refuses 3G Licences to Mobile Operators). The NCRC plans to appeal against the decision of the District Court once it receives official documentation from the latter. Zverev has hinted that the NCRC will turn to the Ukrainian cabinet of ministers for assistance. This indicates that further complications are likely. Global Insight considers it likelier that Kyivstar's 3G licence will be revoked, than that it will proceed smoothly with the roll-out of 3G services.