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Ukraine - Market Intelligence Report
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Market Intelligence Reports provide an invaluable mix of vital market data and background information, including telecoms regulation. The telecommunications market in Ukraine is currently in a state of flux and uncertainty. This is despite the fact that the Law on Telecommunications Regulation, which was adopted in late-2003, greatly simplified, extended, and clarified the rules governing the licensing and operation of telecommunications networks and services as well as updated the laws governing the allocation and use of radio frequencies. The new law also provided for the creation of a number of new regulatory bodies whose goal would be to stimulate the development and growth of information and communications technologies in Ukraine. The law and the new regulatory agencies it created are currently in a state of suspended animation as they had been drafted and promulgated by the government that was later ousted from power in January 2005 amid widespread allocations of corruption and cronyism. Prior to the former regime's replacement, the President had personally appointed key figures to the new Ministry of Transportation and Communications (MTC) and the National Commission for Communications Regulation (NCCR); few of these individuals have the same level of support or confidence under the new regime and the regulators remain unable to operate until new personnel can be installed. Consequently, Ukraine's telecommunications market is governed by old and new laws that provide little or no common working practices or methodologies, while the former industry regulator, a government department, remains in full control of both the national incumbent fixed-line operator - Ukrtelecom - as well as licensing and tariff regulation duties. Little wonder, then, that the market still supports only a negligible level of competition. The new law was expected to remove one of the last hurdles still to be overcome in completing the long-running effort to privatise Ukrtelecom. The reorganisation and corporatisation of Ukrtelecom was concluded in January 2000, and the necessary legislation clearing the sale of a 43% stake in the company to a strategic investor was put in place that summer. Although a small tranche of shares (little more than 7%) was sold to employees and managers of Ukrtelecom in late-2001/early-2002, the government has yet to open an official tender for the majority stake. An offering had been timetabled for early-2005, but has been called off by the new government, wishing to make the operator's finances more transparent and to allow it back into the rapidly-growing mobile communications market. At the time of writing, the authorities would only say that privatisation might take place "after 2005". Ukraine's cellular market has also undergone dramatic changes in the last three years, with all but one of the six licensees having seen significant ownership changes. The two leading players - which between them accounted for 99% of the market in April 2005 - have been taken over by more commercially-aggressive companies and a long-needed price war has begun to drive prices down far enough to encourage the more reticent or poorer Ukrainians to join the mobile market. The four other cellular operators have also announced ambitious expansion plans, five years or more after their initial launches, and the mobile sector could quickly become very competitive indeed. With the cellular operators now offering 2.5G wireless data and value-added services, Ukraine's 400-plus Internet service providers (ISPs) could be in for a rough ride, especially as they are heavily reliant on expensive interconnection agreements with Ukrtelecom. Considerable consolidation is expected in this sector. Ukrtelecom remains the dominant fixed-line service provider, however, serving approximately 94% of all fixed-line connections at the end of 2003 (latest date for which data have been published by the operator). A handful of smaller competitive local carriers have been licensed, but these have chosen to target the more lucrative premium services market, rather than compete head-on with the incumbent. As yet, there are no significant fixed-line operators to speak of, other than Golden Telecom and privately-owned Farlep. Four fixed wireless access (FWA) operators have begun providing services, but are only offering limited coverage.
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