The government does not want to let not only MTS, but also Kyivstar onto the 3G market

Photo: Eugeny Musienko

On Wednesday, the Cabinet of Ministers sent the resolution on executing radio frequency conversion with the aim of issuing 3G communication licenses to the National Commission for Communications Regulation and Informatization (NCCRI) for another review, four sources on the telecom market informed Capital.

Re-writing again

On Tuesday Premier Arseniy Yatsenyuk had the opportunity to sign the version of the resolution agreed with the NCCRI back on September 9. As a reminder, it envisaged issuance of three 3G licenses (3 MHz each) at the minimum price of the lot of UAH 2.443 mn and also the general cost of conversion of UAH 1.6 bn. That version also specified that the companies, in which over 50% is owned by entities registered in Russia, shall not be admitted to the tender. Only MTS Ukraine, a 100% daughter of Russia’s MTS, fit that description. However, yesterday it became known that Yatsenyuk did not sign the document, instead sending it back for another review. “If everything is done adequately and quickly, it could be signed next week,” said Capital’s source in the Cabinet. NCCRI yesterday did not receive the draft, but some of its members already heard about the remarks of the government. Allegedly, they simply did not fully understand one another when the document was drafted. One member of the NCCRI suggested that if the commission votes for the new version of the draft at the extraordinary session this week, it will be indeed coordinated with the Ministry of Defense, the State Special Communications Committee and the Ministry of Finance fairly quickly.

More Russians than it seems

In the new draft, the Cabinet proposes to substantially expand the clause on limitation of participation of companies with Russian capital. Industry expert Olena Minich, who has seen the new version of the document, says that in this edition Kyivstar also will not be allowed to participate in the tender. Director of Telas Association Leonid Osherov, who also saw the draft, notes that Astelit (life:)) will be the only Ukrainian GSM operator eligible for participation in the tender on new conditions.

Capital’s source in the Cabinet confirmed expansion of the clause on Russian capital. He claims that the limitation will apply to all contenders, where Russians have control (in the form defined in the Ukrainian law). “If it is established that the contender is actually controlled by those against whom it competes, the conclusions are quite evident,” he emphasized.

Under the Law on Protection of Economic Competition, control over an enterprise may be enforced through ownership rights to all of its assets or a large part (and not specifically more than 50%). “Kyivstar has no relation to Russian capital. Somebody most likely does not want the tender to be held,” said Director for Law and Regulations at Kyivstar Andriy Osaduk.

Noteworthy, there is no direct link between the Russian companies and the largest Ukrainian operator on the legal plane. The company is a part of the international holding VimpelCom. On the other hand, Altimo – the daughter company of Russian Alfa – owns a 56.2% stake and 47.9% voting shares (the largest package) in the ownership structure of VimpelCom (Amsterdam), Kyivstar being a part of it.

To get one’s own way

The resolution on 3G in the new form is basically throws the 3G process back to its starting position. As a reminder, this summer there were disputes between the Cabinet and the Presidential Administration as to how many licenses should be put up for sale – three or one. The government wanted to sell one and the president – three. However, since of the three most realistic participants of the tender only one remains – Astelit (life:), owned by Turkcell (Turkey, 56%) and SCM (Ukraine, 44%), the attractiveness of the other two tenders is rather questionable.

Hypothetically, Asian holdings Xinwei (China) and Viettel (Vietnam) could have invested into 3G. However, as practice shows, the representatives of these companies have been announcing here and there about multimillion investments into Ukraine, although in reality their projects have not been launched. That is why these movements smack more of Asian PR.

Dark side of the “mobile” moon

The suggestion is that only telecom companies of SCM benefit from MTS and Kyivstar not being allowed to participate in the tender is disputable (Ukrtelecom preserves the value of Trimob, the only UMTS license in the country, while life:) can obtain competitive advantage over the leaders in the form of high-speed mobile Internet access). There are a number of undistinguished assets with promising radio frequency range supported by players that influence the decisions of the Cabinet. For instance, the little known company First Investment Union owns a license for 40 MHz within the 1.9-2 GHz range (where the 3G is).

In the final analysis: even if the dispute between the Cabinet and the PA is resolved, the first license will be issued no earlier than in the middle of December, provided that all legal procedures are carried out. This means that most likely the tenders will again be postponed, this time until 2015.