Vietnamese Viettel joins the competition for a 3G license in Ukraine

Photo: en.wikipedia.org

The Vietnamese state-owned telecom corporation Viettel is proposing to implement a US $1 bn investment project in Ukraine, reads the letter of the Ukrainian Ambassador to Vietnam Oleksiy Shovkoplyas to Presidential Chief-of-Staff Borys Lozhkin (Capital has a copy of the document). The Presidential Administration has already informed the National Commission for Communication Regulation and Informatization (NCCRI) about the investment proposal.

Expansion hunger

In the letter, the ambassador informed that the Vietnamese side is interested in acquiring 3G (UMTS) frequencies (10 MHz) at the future tender (under the presidential decree it must be held by the end of October, though it is being postponed). For the implementation of the project Viettel wants to also acquire licenses for GSM-900 (5 MHz) and GSM-1800 (10 MHz). The company is planning to provide Internet access services as well. For this, it is proposing to build a 60,000 km cable network.

The Viettel Group Corporation is the largest mobile network operator. In recent years, the company has been actively expanding its international presence. Its networks operate in Cambodia, Laos, Haiti and Mozambique. Viettel has a total of 63 mn subscribers. The company plans to become one of the top 10 telecom operators in the world by 2015. In order to achieve this goal, it is seeking investment opportunities in African countries and in Cuba. In 2013, the corporation’s revenues amounted to US $7.7 bn, net profit – US $1.66 bn.

Shovkoplyas reminds that back in March 2011 Viettel signed a memorandum with the National Agency for Investments and National Projects on the possibility of investment of US $600 mn in telecommunications. The government then wanted to attract money into the national project Open World, which would ensure 4G Internet access for 1 mn school students. The national agency appealed to the NCCRI asking to issue a radio frequency license for the company within the range of 700-800 MHz for the LTE, but there was no available range.

Free bonus

Now, there is a possibility to hold additional talks on increasing the investment offer to US $1 bn, according to Shovkoplyas. As a reminder, in June five Ukrainians operators expressed the desire to participate in the 3G license tender. These were GSM operators Kyivstar, MTS Ukraine, Astelit (life:)), holder of the only UMTS license Ukrtelecom and the CDMA operator Intertelecom.
The Cabinet of Ministers is planning to put up for tender three licenses. Each will cost at least UAH 3 bn for the winner, taking into account sponsoring of frequencies, which will be freed up from the communications means of the army.

Meanwhile, in addition to investments into the infrastructure, Viettel is proposing the government a certain ‘social package’, namely creation of a network of electronic communication between the central and local bodies of power, unlimited Internet access for all secondary schools in Ukraine, central and regional bodies of executive power and also for 700,000 least provided for citizens (for instance, students). The ambassador also believes that appearance of a major player on the monopolized market will reduce the financial burden on the population using mobile communications and Internet access services.

National roaming or transaction

Viettel’s proposal is quite attractive for Ukraine. Nonetheless, the Vietnamese company may face huge difficulties in obtaining the required frequency range. In the 3G range it will have to acquire not 10 MHz, but all 30 MHz as this will be the minimum lot offered on the tender. “However, there are no free GSM frequencies,” confirmed telecom expert Olena Minich. Member of the NCCRI Viktor Mazur says the acquisition of a GSM operator could be a solution in this situation. Another option is to agree on national roaming with the existing 2G player in the GSM network, believes Minich.

A 3G project will have no chances without 2G frequencies as it is economically expedient to use the frequencies that the government plans to put up for tender only for the coverage of suburban areas. This will not allow for creating coverage for the entire population and therefore will destroy the business model of the Vietnamese. The experience of Trimob, the only 3G operator owned by Ukrtelecom, already proved that not all populated areas have been covered by the network over the seven years of the project’s existence. Data of E&C shows that as of the end of Q2 2014 Trimob provided services to only 461,500 subscribers.

Asians at the crouch start

Up until recently, none of the owners of GSM operators in Ukraine held talks about sale. However, the complicated economic situation in the country and the first anti-Russian sanctions, which the Cabinet wants to apply to 3G tenders, could prompt shareholders to consider this option.

As a reminder, the government has proposed not to allow operators, over 50% of which is owned by an entity registered in Russia, to participate in the tender. MTS Ukraine is one such company. On the contrary, for Asian structures, which are financially quite stable, entering a European market, even one undergoing a crisis, is a very important step in international expansion. As Capital wrote earlier, besides Viettel, the Chinese holding company Xinwei is discussing a 4G project with the Ukrainian government. It also plans to “entice” the government with assistance in organizing communication for government bodies during the development of e-government.