Users will gain access to 3G in the summer of 2015

Photo: Reuters

In the end of last week, the Cabinet of Ministers of Ukraine finally approved the resolution that will allow for the final preparation of tenders for third generation communication (3G, UMTS) licenses, as reported on the government’s website.

The basic conditions for the tenders did not change, according to the document. It is planned that three 3G licenses at a starting price of UAH 2.433 bn will be put up for tender simultaneously and that the means of communication of the army will be transferred to alternative ranges at the expense of operators that win the tenders (another UAH 1.6 bn). According to information Capital possesses, at this point there are three potential bidders – Kyivstar, MTS Ukraine and Astelit (life:)).

However, the Cabinet of Ministers gave a new interpretation of who should not be admitted to the tender. Until the very last moment, the government insisted on including a separate limiting clause in the text of the resolution. The clause, as it was planned, would prohibit participation in the tenders of companies, in which over 50% is owned by Russian entities and also those, controlled by Russians. MTS Ukraine and Kyivstar fit this description. However, the National Communication Regulation and Informatization Commission (NCRIC) did not support this version of the resolution last Tuesday.

The safest option

The published resolution specifies that everything will be decided within the framework of the Law on Sanctions. If sanctions are applied to some mobile companies, they may be not only prohibited from participation in the tender, but also be stripped of the 3G license that they were issued. A source well versed in the preparation of the final text of the resolution told Capital that this version is the only safe one from the legal standpoint. “If you write into the resolution of the Cabinet (the norms that do not allow companies with Russian capital – Capital), it may be viewed as abuse of power and such a document may be cancelled by court,” he emphasized.

Market players believe that the Law on Sanctions should in no way be applied against them. “That is why Kyivstar’s position towards it is totally neutral,” says Director for Regulatory and Legal Provision at Kyivstar Andriy Osadchuk. “Life:) believes the proposed edition of the resolution to be the most balance version,” adds Director for Corporate Regulatory and Legal Relations of Astelit Dmytro Furman. “There is now a good chance that the 3G tender may be announced soon,” predicts Director for Corporate Management and Control at MTS Ukraine Oleh Prozhyvalskiy.

Tricky move

The story, however, does not end here, according to the source of Capital. “The next step of the Cabinet is submission of sanctions to the National Security and Defense Council. If the NSDC does not meet or two thirds of the votes are not garnered, it will become clear who was interested in supporting Russian business from the very beginning,” he emphasized. The source claims that now the implementation of the mechanism for the imposing of sanctions on the mobile market is in the hands of the president. “The premier essentially fought the NCRIC against the development of Russian business in Ukraine, but now it is up to the president,” he summed up.

Another interlocutor of Capital in the government structures believes that Yatsenyuk is in this way trying to improve his popularity rating on the eve of the elections and relay the approval of unpopular decisions to the president. One part of society supports sanctions against mobile operators, while the other believes they are absurd.

The regulator is in a hurry

The NCRIC plans to hold tenders and collect at least UAH 7.329 bn in revenues to the state budget in 2014. Member of the NCRIC Viktor Mazur said there is still a chance of holding the tenders before the year’s end. He pointed out that at today’s meeting the commission should consider the draft changes to the general procedure of holding tenders for radio frequency licenses resulting from the signed resolution and might even approve it immediately without debate that would last a month, provided that no remarks are made by the public.

After that, the NCRIC will have to coordinate this procedure with the Anti-monopoly Committee, the State Entrepreneurship Committee, obtain a signature of the Ministry of Justice and finalize the revised version of concrete conditions for 3G tenders with the Cabinet. Only then will the regulator be able to announce the tender. Under the law on the use of radio frequency resources, such an announcement must be made at least two months prior to the tender. Thus, in order to sell the licenses in 2014, the regulator must complete most of the paper work by the end of October.

New services by summer

“If the licenses are obtained by financially healthy companies with sufficient production and investment potential, they will seriously compete for the market. As a result, full-fledged 3G services may appear in Ukraine very soon,” believes Prozhyvalskiy. As Technical Director of MTS Ukraine Andriy Tereshchuk earlier told Capital, it will take at least six months to launch 3G in the renewed regions of the country (35% of the network has already been upgraded). In addition to that, expenses will be minimal. “It may take 6-9 months from the moment of gaining access to the frequencies to the launch of 3G services in major cities,” says Technical Director of Kyivstar Volodymyr Kabanenko. “We predict that it will not take much time for us to finish preparations of our network for the launch of 3G – around six months,” noted Furman.

As a result, if the government manages to hold tenders by the end of December, the majority of subscribers will gain access to high-speed mobile Internet by June-September 2015.