Invasion of illegal mobile phones. 800,000 so-called “grey mobile phones” were delivered to Ukraine over three months

Photo: Konstantin Melnitskiy

In Q3 2014, illegal mobile phones and smartphones delivered to Ukraine reached 40% of the total amount, General Director of the Ukrainian State Radio Frequency Center (USRFC) Valentyn Reznychenko informed with reference to the data of the State Customs Service. The senior manager noted that half a year ago this figure was all of 8%.

Cancellation of the code base

According to the research company GfK Ukraine, in July-September more than 2 mn mobile devices were sold in Ukraine for UAH 2.7 bn. “It is impossible to specify the exact number of grey and white (legal) devices. We always referred to the data of research companies on the sale of mobile devices when providing their number,” former manager of the Ukrainian State Research Center Pavlo Slobodyanok commented for Capital explaining the methodology of counting the number of legal phones. Using this method, the number of illegal phones that were brought into Ukraine reached 800,000 (40% of all phones sold – Capital).

The current center’s director attributes the increase in the number of devices that illegally make it into the country to the change in the law on compulsory registration of imported equipment. As a reminder, in April the Verkhovna Rada adopted the Bill No. 2436 by virtue of which the issuance of permits for the import of such devices and the IMEI-code system were cancelled. As a result, the government is left without any levers of influence on the delivery of radio-electronic devices. The amendments adopted by the parliament took force as of July 27.

Losses of the top market segment

In Reznychenko’s opinion, as a result of this cancellation the budget of Ukraine will fall short of nearly UAH 110,000 mn in proceeds per year. At the same time, a well-versed source of Capital says Ukraine will lose this amount of proceeds in a matter of one quarter. Accordingly, annual losses may reach as high as UAH 500,000 mn. “First of all, the number of illegally imported devices is increasing on a daily basis. Secondly, at the moment suppliers mainly declare cheap models of phones costing US $50 and do not pay any deductions,” the source explained to Capital.

Slobodyanok added that the legal suppliers in the segment of high-end expensive mobile phones suffer from such schemes in the first place, as the vendors of grey phones sell them at more affordable prices for consumers. “It is much more rational for a user to buy a device, even if it is illegal, for several hundreds of hryvnia cheaper than the price offered in stores that sell legal phones.

Furthermore, it is not profitable for suppliers to illegally import low-cost phones,” former manager of the retail network Mobilochka Anton Volodkin explains.

“Notwithstanding the fact that there are already official vendors of products of Apple in Ukraine, there are around 500,000 legal iPhones in the network of Ukrainian operators,” informed Slobodyanok.

Bring back the legal phones

Noteworthy is that in October the National Communications and Information Regulatory Commission (NCIRC) approved the new bill on the procedure for the import of radio-electronic and emission devices from abroad. The document regulates the procedure for importers to voluntarily enter IMEI codes in mobile phones, tablets and other devices.

This essentially gives the USRFC the authority to officially exact a fee from importers for entering IMEI codes into a database. A member of the NCIRC said the document is currently being approved in specialized ministries.

At the same time, Reznychenko describes the new bill as half-way completed. In his opinion, many importers will not register IMEI codes on their own freewill. “The USRFC should reinstate full control over the import of mobile telephones. We have already appealed to the Cabinet of Ministers with such an initiative,” he stated.