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Home > Communications > Telecommunications > General Telecom
Ukraine Telecommunications Report Q3 2007
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"The Ukrainian telecommunications remains on tenterhooks with the privatisation of Ukrtelecom delayedonce again and now unlikely to happen until 2008. The operator, however, could still, through its 3Gnetwork, enter Ukraine’s mobile market before the end of the year. Such an entrance would, of course,make an investment in Ukrtelecom even more appealing.
Ukraine’s mobile market has reached saturation, with penetration easily in excess of 100%. This alonehas caused a slowdown in market growth, with just 2mn net additions during the first six months of 2007,down from 5.4mn in the same period in 2006. Partly responsible for this fall is the high penetration rate,but MTS’ decision to discount all inactive subscribers from its custom base has also clearly had an effect.However, BMI is convinced there remains potential for further growth, driven on the one hand by thecountry’s intensely competitive mobile market and on the other hand by the fact that when taking inactivemobile subscribers into account, it is likely that penetration is actually around the 80-90% level.Furthermore, BMI sees the potential for an increasing number of multiple SIM cardholders in Kiev,similar to the trend in Moscow and St Petersburg.
And so, despite a challenging start to the year, BMI projects just over 4.5mn net additions to Ukraine’smobile market in the second half of 2007 taking the country’s overall subscriber count to 55.6mn and120% penetration. We expect to see MTS, helped by the launch of its new brand, compete well withKyivstar, whilst the country’s smaller operators Astelit and VimpelCom should continue to increasetheir own market shares from 12% and 5% respectively. Generating much of this competition will be thereduced tariffs made popular by Astelit and VimpelCom, and whilst good in terms of encouragingconsumer demand, BMI does note that there have been an increasing number of complaints at the qualityof operator networks. An increase in capital expenditure levels rather than marketing campaigns isarguably what the industry demands. In any case Kyivstar remains market leader with a 43.5% share,whilst MTS has reported a sub-40% market share for the first time.
Ukraine remains towards the bottom of our Business Environment Rankings. Not helped by thecomparative lack of potential growth, Ukraine also suffers from an uncertain political landscape. TheUkrtelecom privatisation is being used as a political football between the country’s two key politicalfactions. President Yushchenko has called for a majority stake in the incumbent operator to be privatised,thereby allowing much-needed fresh capital into the operator’s hands. This would almost certainly allowUkrtelecom to compete with the country’s mobile operators. But, Prime Minister Yanukovich favours astrategy of minority share auctions, a policy that has been taken up, and has led to delays. In turn, thesedelays mean (amongst other things) that take-up of next-generation data services has been slow, impactedby a lack of investment, causing a weak fixed-line infrastructure.
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