Languishing hopes. Issuance of 3G-licenses is delayed for political reasons

Photo: Ivan Chernichkin

It is possible that this year the Ukrainian budget will not receive funds from introduction of the UMTS communication standard (3G). According to the presidential decree signed in July, licenses for the new generation of communication must be issued by October 30, 2014. Director of the Executive Committee of the National Reforms Council Dmytro Shymkiv says this could attract nearly UAH 3 bn to the national budget. The Defense Ministry would earn another UAH 2 bn from the conversion of radio frequencies.

Officials, however, are missing the deadline specified by the presidential decree. By August 15 the National Commission for State Regulation of Communications and Informatization (NCSRCI) was supposed publish the terms of the tender. But that did not happen. “In fact, the terms of the tender are ready. However, the controller cannot approve them as the regulatory framework has not been adopted yet,” said Capital’s source in the commission.

The source reminded that the decision on the joint use of radio frequencies for military and civilian purposes has not been adopted by the Cabinet. This document should also define the ways of spending the funds received from conversion. However, the source of the publication in the Defense Ministry claims that the NCSRCI could start the conversion not waiting for the decision. “We and the State Service of Special Communication and Information Protection of Ukraine did our part of the job and took a series of comprehensive measures required for conversion, as written in the presidential decree,” he confirmed. The approximate amount of conversion as of August 1, he said, was UAH 1.6 bn. This is UAH 300 mn less than the amount stated a month ago. “But this figure can be adjusted, as it is tied to the cost of equipment and the exchange rate,” he explained.

The bill on sanctions, which the Verkhovna Rada adopted last week, could also affect the conversion and the 3G-tender. After the law was signed by the president the National Security and Defense Council will have the right to stop telecommunication works and prohibit the use of radio frequencies if it considers them a threat to national security.

This means that even after funding the conversion and paying for licenses, mobile operators may be deprived of uninterrupted operation in the event that there are any claims against them. As a reminder, earlier the SBU conducted inspections of companies backed by Russian capital – MTS Ukraine and Kyivstar – and said their networks could be vulnerable to interference from other countries, in particular, Russia.

Representatives of these companies are convinced that sanctions will not affect them and have so far not announced any changes in their investment plans. “Limitations of cellular communications within the framework of assurance of national security are a standard international practice. For example, within the framework of international summits additional encryption can be turned on and during anti-terrorist operations communication can be turned off in certain areas. As a rule, operators understand such initiatives,” says Artem Minaev, Director of the Public Relations Department of Vimpelcom Ltd, which owns Kyivstar. He argues that the shareholders are not going to cut investments simply due to the risk of sanctions. MTS has a similar position. “In our business there are no actions that would create any… actual or potential threats to national interests, national security, sovereignty and the territorial integrity of Ukraine,” noted Head of the Public Relations Department at MTS Ukraine Viktoria Ruban.

Operators agree that it is actually quite difficult to call the conversion process public, yet they still expect the regulator to discuss and approve the terms of tenders. Director of the Regulatory and Legal Support Affairs Department at Kyivstar Andriy Osadchuk believes they should include conversion plans and tenders should be held simultaneously for all three lots.