The army of privileged subscribers is pulling Ukrtelecom down to the bottom

Photo: Ivan Chernichkin

The state owes the largest operator of landline communication Ukrtelecom UAH 111 mn in compensations for telecom services provided to citizens, who enjoy privileges. This debt will only be increasing, predict the operator’s managers.

The country’s wealthiest city – its capital Kyiv – has the largest debt to the telecom operator. Last month Ukrtelecom won a trial in the Kyiv Commercial Court against the Department of Social Policy of the Kyiv City State Administration. In the court of first instance the company managed to adjudge a debt in the amount of UAH 48.5 mn for provision of preferential services to Kyivans. This is specified in the court ruling, a copy of which Capital possesses. Over the period September 2011 to August 2014, Ukrtelecom subsidized privileged provision of services in the capital in the amount of UAH 68.5 mn, while the city administration compensated only UAH 20 mn.

Prosecutors get involved

Under the law of Ukraine, Ukrtelecom provides preferences on payments for communication services to a large number of citizens (veterans, the disabled, Chornobyl victims, families with many children and even prosecutors and investigators, both on duty and retired). Such preferences include free of charge installation of a phone in an apartment, 50% payment for the use of the phone or free of charge use of the landline for local calls. Overall, there are 41 categories of privileged subscribers listed on the website of Ukrtelecom. Their total number already exceeds 1.2 mn (the company has a total of 8.7 mn subscribers).

“Basically, we provide services to the privileged categories of citizens on loan and have the right to demand compensation from the state for them. Unfortunately, the government pays us compensations as they please,” complains Director of the Mass Segment Development Division at Ukrtelecom Denys Zakharenko. Noteworthy, local self-government bodies are responsible for covering the expenses for providing communication to the privileged categories of citizens. In this case the national budget and local budgets are the sources of financing. Payment discipline in the cities and county centers differs: some pay on time and some don’t pay for years, says Zakharenko. Kyiv is also among regular debtors.

As a reminder, in the beginning of 2011 Ukrtelecom lost a dispute for the debt accumulated by the capital’s city administration of all instances. The company then demanded compensation of UAH 25 mn. The court, however, decided that the local government, although it is indebted, cannot do anything as there is no money in the budget. That is why despite the victory in the court of first instance there is a high probability that courts of higher instances will again support the mayor’s office. There have been other examples. For instance, this summer Ukrtelecom won a case against Odesa in all instances over compensation of UAH 1.5 mn for 2010.

Social operator

Head of the Legal Department of Ukrtelecom Ivan Kolomoyets says the total debt of local self-government bodies to Ukrtelecom for services provided to privileged citizens amounted to UAH 111 mn as of November 1. “We are obligated by the law to provide such services, because local communication is a universal service regulated by the state. We cannot cut off phones of a privileged subscriber even if they don’t pay at all for some time. At that, no discounts are envisaged for mobile communications,” notes Zakharenko.

Noteworthy, local landline communications now has six times less subscribers than the mobile communications – 10.4 mn against 60.6 mn, according to the State Statistics Service.

The National Commission for the State Regulation of Communications and Informatization (NCSRCI) is currently considering the possibility of including mobile communications in the specialized law as a universal service. Mobile operators, however, are cautiously viewing this idea: they clearly do not want to fall under regulation. Noteworthy, besides Ukrtelecom there are other smaller players on the local communications market – Vega, Datagroup, Intertelecom, which also have social obligations to the state.

ATO will add the number of privileged citizens

Ukrtelecom CEO Oleksandr Barinov adds that the situation with the debts of the local administration will only get worse in the foreseeable future. “We continue to provide services to privileged subscribers in Crimea, for which we are very unlikely to receive any compensation at all. In addition, we fulfill our social obligations in Donetsk and Luhansk,” he says. Barinov believes that the number of privileged subscribers will only increase, because ATO participants will be added to the categories. “At that, other countries, even Russia, have no privileges at all,” he emphasizes.

The government includes the forecast expenses for communication services in the volume of pensions and other payments to different categories of citizens. We received no response from the Department of Social Policy of the KCSA to the question why the capital accumulated debts for communications. We only managed to speak with its representative on the phone off the record. “We have lines of people on crutches sitting in the corridors, while there are only four people responsible for granting privileges,” he explained, hinting that responding to requests of journalists is not their primary task at the moment.