No 3G licenses to be issued this year

For the time being Trimob remains the only UMTS (3G) operator

Photo: Konstantin Melnitskiy

The Cabinet of Ministers and the telecommunications regulator are still playing the endless “ball game”, which is already devoid of common sense – they bandy each other the documents for a 3G tender. Yesterday, the National Commission for the State Regulation of Communications and Informatization (NCSRCI) supported another draft of the corrected decree of the Cabinet, which allows starting the process of issuing licenses for 3G communication. Head of the NCSRCI Oleksandr Zhyvotovskiy said his office submitted the draft to the government after additional coordination for the fourth time. The first time was back on July 1. But there is still no agreement between the structures. The commission has nothing against the first part of the draft resolution. Its conditions are as follows: three 3G licenses (UAH 2.433 bn each) should be offered for the tender; alternative bands covered at the expense of the operators that win the tender should be used for military communications (another UAH 1.6 bn).

But the second part of the Cabinet’s instructions is clearly not satisfying the telecommunication regulator. The government wants to interfere with participation in the tender of those companies, in which more than 50% is owned by Russian structures, as well as those controlled by Russian structures.

Therefore, the government may reject the participation in the tender of such major companies as MTS Ukraine (owned by MTS (Russia)) and Kyivstar (part of the international holding VimpelCom, in which Altimo – a subsidiary of Russian Alpha – owns 56.2% economic interest and 47.9% of the voting shares).

NCSRCI gets all excited

Recently, the NCSRCI decided to inform the government that the second part of its order would be fulfilled, but only as prescribed by the law. At first the regulator will have to introduce changes to the existing framework conditions of tenders. That is a regulatory document authorized by the interested authorities and the Ministry of Justice. Moreover, the document must be put up for public debate in which market players will give their remarks within a month. And only in case all the parties approve the changes in the terms regarding limitation of the Russian capital, the Cabinet’s wish will be granted.

In addition, the NCSRCI also deleted from the Cabinet’s draft decree the provision according to which the final terms of the tender should be re-negotiated with the government. This gives the regulator the chance to insist on its own version and allow the maximum number of players to take part in the tender.

The commission made it clear in advance that registering the restriction of Russian control in the companies on tender conditions will not be easy. “There is not a single specification in the law defining what “controlled by a resident of another state” means,” said a representative of the NCSRCI’s staff. “The concept of “control” is described in the Law On Protection of Economic Competition and in the Law on Joint-Stock Companies,” argues one of the Cabinet’s advisers for communications.

Almost framed

In informal conversations with Capital the Cabinet advisers make it clear that the new version of the document will not be passed again. “It is already clear that Zhyvotovskiy & Co. are actually pushing through those companies with which they previously discussed the price of UAH 1 bn, including conversion. It is sad to see the obvious confrontation,” said one of them.

As a reminder, the Presidential Administration wants to hold an open tender for 3G licenses. Earlier, Deputy Head of the Presidential Administration Dmytro Shymkiv stated that in such a manner the budget will come close to UAH 3 bn for three licenses. But now the NCSRCI is suggesting UAH 7.329 bn. However, advisers are trying to persuade the Cabinet that there will be a sufficient number of bidders even after banning the participation of MTS and Kyivstar. They are Astelit (life :)), Ukrtelecom, Intertelecom and some new strategic investors from Europe and Asia, though their financial capacity to buy and develop a license to the tune of UAH 2.4 bn has yet to be officially confirmed.

At yesterday’s meeting the head of the Telas Industry Association Leonid Osherov suggested that the Cabinet simply wanted to frame the NCSRCI, so that the regulator would be ultimately responsible for the decision on banning Kyivstar and MTS from participating in the tender. The expert believes that it would be logical for the NSDC to make decisions on limitations for participation in tenders guided by the Law On Sanctions. “For God's sake – rattle your sabre. Why are they trying to frame you? You are the regulator. You should be responsible for tendering,” he said. Yet, a Cabinet adviser, on condition of anonymity, says that when on September 9 the NCSRCI submitted the previous version of the document to the government, it agreed with the Cabinet’s opinion on the need to accord the final version of the competitive conditions with it and block companies with Russian capital from participation in the tender. But at that time it applied only to those players in which Russian companies owned more than 50% of the authorized capital, which meant only MTS.

In summary, now it is safe to say that the NCSRCI definitely has no time to hold a tender not only by the deadline set by the presidential decree (end of October), but also by the end of the year, because at least a month is needed to discuss changes to the license conditions and another two months will be needed to prepare for the tenders. As a result, this year’s budget will not get any extra money.