The dispute between two key shareholders in a number of Ukrainian telecommunications companies was once again highlighted this week, with reports in the international media of an offer made by Altimo to swap assets worth around $4 bn with Telenor.
Altimo, the telecoms arm of Russian banking group Alfa, has offered to exchange their 43.5% stake in Kyivstar for shares in Vimplecom, which is owned by Norwegian firm Telenor, or to take full control of Kyivstar and give up Vimplecom. The two companies have been locked in conflict following a decision by Altimo to enter the Ukrainian market with the Vimplecom brand, which Telenor views as having a negative effect on the market share value of Kyivstar.
The dispute has also highlighted some worrying aspects of the legal basis under which companies operate in Ukraine, with a Supreme Court ruling in October giving Altimo equal share in the management of Kyivstar , despite being a minority shareholder. Storm, the entity under which Altimo owns its stake in Kyivstar, boycotted a meeting scheduled for December 12 as part of the ongoing feud.
Another controversial issue for Kyivstar and for GSM operator Ukrainian Mobile Communications (UMC) concerns the implementation of number portability. The bill was overwhelmingly passed at first reading and it will most probably be approved by the parliament early 2007 . Number portability enables customers to switch operators and keep their existing mobile numbers , thus enabling them to move to cheaper tariffs.
Kyivstar and UMC have opposed the move ostensibly on the grounds that the six month time frame for implementation is too short compared to the three year timeframe applied in other countries. However, Oleksiy Kostusev, the chairman of Ukraine’s Anti-Monopoly Committee reported another reason for their opposition “Kyivstar and UMC are not interested in this as they will likely lose many of their clients, who would immediately switch to cheaper service providers ”.
Vimplecom announced on December 7 that it is launching W i F i in seven Ukrainian cities. Ukrainian Radio Systems, a subsidiary of Vimplecom, has begun operation of 26 hot spots including Kiev, Odessa, Dnipropetrovsk, Donetsk, Lviv, Simferopol and Ivano-Frankivsk. W i fi is expected to become a major growth area in Ukraine over the next few years, with companies such as the recently merged Alcatel-Lucent and Intel offering solutions and advice on network infrastructure.
In November, the National Commission for Communications Regulation announced that the applications for 3G licences of four of the main GSM operators – Kyivstar, UMC , Astelit, and Ukrainian Radiosystems – had been rejected. According to the regulator, the decision was taken as a result of the failure of the operators to reach an agreement with military bodies on joint use of the applicable frequencies.
Ukrtelecom currently is the only GSM operator with a 3G licence, which was issued without a tender process by the government, which many observers analyse as an attempt to increase the value of the company before a planned privatisation. The privatisation of Ukrtelecom is currently on hold as the company was not included in the list of privatisations for 2007.
In early November, t he company announced that it was to begin construction of a 3G network, with system solutions provided by Nokia. Services will initially be available in Kiev and then subsequently rolled out to other major cities and regions. It was then announced that the launch would be in March 2007. It will be the first WCDMA /HSDPA network in Ukraine, and will enable Ukrtelecom to provide services such as high speed data transfer for WAP, video calls as well as streaming for video and audio.
Ukrainian Telesystems is another company planning to offer 3G technology using CDMA. The company announced on December 11 that they will launch the 2.4Mbit/s voice and data network, currently undergoing testing, by the end of 2006.
The privatisation of Ukrtelecom is eagerly awaited not only by potential buyers , but also by mobile and convergence network operators who see it as a prelude to regulatory changes that will increase access to the local loop. As i t is presently necessary to apply to Ukrtelecom for access, which is time consuming and often un successful, many operators opt for more expensive equipment set up alternatives . Unbundling would pave the way for new opportunities including ADSL networks.