Ukraine Telecommunications Report Q3 2008: Industry Research Report

Ukraine Telecommunications Report Q3 2008

Published Date: August 2008

Published By: Business Monitor International

Page Count: 66

Order Code: R302-3839

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During the first quarter of 2008, Ukraine’s mobile phone market shrank as two of the largest operators eliminated over 1mn inactive subscribers from their databases. These losses greatly outweighed the positive growth recorded by the country’s third-largest operator, Astelit, and very poor growth posted by market leader Kyivstar. Meanwhile, many of the country’s smaller operators which are offering CDMAbased services continued to demonstrate robust growth, adding 248,000 new customers between them.

Among these smaller players is the Utel-branded operation of incumbent fixed-line operator Ukrtelecom, which increased its 3G subscriber base by two-thirds during Q108. Thus, there were 55.304mn mobile subscribers in Ukraine at the end of March 2008, down by 0.5% from 55.596mn in Q407. It is clear that the Ukrainian mobile market, at 120% penetration, has reached the saturation point, even allowing for the high incidence of multiple SIM ownership.

The mobile operators still rely very heavily on sales of prepaid services to maintain momentum. As a result, Ukrainian customers have become used to spending very little on their mobile services, and efforts to migrate users to more profitable contract subscriptions may not prove successful. There are two factors that could change the balance: the potential emergence of one or more mobile virtual network operators (MVNOs), and more aggressive marketing of premium-rate 3G services, particularly in the mobile broadband segment. The introduction of MVNOs would serve merely to reinforce the operators’ decision to focus on prepaid services as a means of continuing to grow organically, while the potential financial benefits of 3G will be outweighed by the costs involved in building out networks and subsidising handsets in the initial stages of deployment. As the only formal 3G licensee in Ukraine, Utel’s lack of success to date suggests that 3G take-up could be slow to gain momentum. Thus, we have not altered our prediction of there being 2.5mn 3G customers by 2012, although we have revised upwards our forecasts for the mobile market at large and now believe there will be nearly 66mn subscribers by 2012.

Newly released data for the country’s broadband and fixed-line markets have also prompted BMI to revise its forecasts for these sectors. It has transpired that the fixed-line market did not grow as fast in 2007 as we had predicted, with 12.86mn lines at the end of the year representing a 4.2% improvement on 2006. Although independent alternative operators are continuing to build out their fixed networks, we believe that the market will be serving 14.65mn lines by 2012 (32.5% penetration). In the broadband sector, consolidation amongst ISPs has accelerated, with the number of service providers having fallen from 600-plus to around 400 in just two years. This has allowed observers to gather more data on the market and it now seems that there were less than 1mn broadband subscribers in 2007, up by 65% from just over 0.5mn a year earlier. Assuming that the privatisation of Ukrtelecom is not delayed any further and that alternative operators such as Golden Telecom, Comstar Ukraine and the SCM Group continue to invest in both ADSL and WiMAX platforms, we believe that there will be 7.1mn broadband subscribers by 2012.

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