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Ukraine Telecommunications Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: October 2009 Product Code: R302-8505 Description Our Q409 report on Ukraine’s telecommunications market has seen our five-year forecasts for the mobile,fixed-line and broadband sectors revised as well as updates to our market data analysis sections. All in all,Ukraine’s telecoms markets are faring relatively well given the extent of the economic contractioncurrently underway in the country. Broadband saw strong growth, the fixed-line sector is still expandingand the demand for advanced services in the mobile market is holding up.The mobile sector stagnated in 2008, with growth coming in at just 0.3%. This was largely due to MTSUkraine, which discounted close to 1.9mn inactive SIMs from its subscriber base. The first half of 2009has seen market leader Kyivstar heavily discounting subscribers and the mobile market has shrunk inboth the first and the second quarters of 2009. Astelit continues to be the growth driver in the Ukrainianmarket although the operator has a significant proportion of inactive SIMs. Going forward, furtherdiscounting of inactive SIMs will limit the sector’s growth, but there will be a concurrent improvement insubscriber quality as the market matures. With a lack of W-CDMA 3G services, owing to the regulator having only awarded a licence to incumbentUkrtelecom, Ukraine’s value-added services (VAS) market is not as advanced as it could be. However,demand still appears to be growing at a rapid rate and the mobile operators have introduced advancedservices such as location-based services (LBS) launched by Kyivstar and MTS and a mobile paymentservice launched by MTS, which will help to drive up revenues. The fixed-line sector is dominated by state-owned fixed-line incumbent Ukrtelecom, which had over10mn subscribers at the end of 2008. That said, competition from alternative operators such as Vega isincreasing, helping to drive the sector forward. Both the incumbent and the alternative operators areexpanding their network infrastructure, which is helping to drive growth. The fixed-line sector expandedby 2.5% in 2008, which, although significantly less than the 4.2% seen in 2007, still illustrates thatdemand for fixed-line services remains. That said, BMI has forecast 2009 to be the last year of growth inthe sector as fixed-to-mobile substitution and the growing popularity of VoIP services begin to outweighfixed-line network expansion. This is pushing the country’s fixed-line operators to increasingly turn theirfocus towards the latent broadband market as well as other advanced services such as VoIP and IPTV. In contrast to Ukraine’s slowing fixed-line sector, the broadband market grew by a whopping 74.9%during 2008 and penetration has still only reached 3.5%. The sector has suffered from years ofunderinvestment from Ukrtelecom which has resulted in the incumbent having less than 30% marketshare at the end of 2008. Competition is growing from alternative operators such as VimpelCom’sGolden Telecom, Vega, Comstar Ukraine and Volia Cable. Competition is also increasing betweenalternative technologies such as cable, ADSL, WiMAX and CDMA as operators look to exploit the hugepotential of a country with such low broadband penetration and a population in excess of 46mn. InAugust 2009, Icon Private Equity signed a contract with ZTE Corporation to expand the WiMAXnetwork of its subsidiary, Ukrainian High Technology (UHT). Network deployments are still beingconcentrated on major urban centres such as Kiev and Odessa, with the rural areas being largely neglectedand this is expected to continue in the near future, given the under-developed nature of broadband in thecountry. A number of advanced service such as high-speed broadband over ADSL2+ networks and IPTVhave been launched and demand for high-value services is expected to grow, although it will be heldback, owing to the country’s economic situation. One of the highlights in the broadband sector has beenKyivstar’s announcement that it is deploying a fibre-optic network in Kyiv and Odessa and plans toconduct fibre-to-the-home (FTTH) trials. The privatisation of incumbent Ukrtelecom continues to be delayed. There had been suggestions that thetender process would be launched in March 2009 but this never materialised. The latest developmentappears to suggest that the privatisation will be launched in December 2009. However, this could again bedelayed due to political infighting, highlighted by Prime Minster Tymoshenko’s desire to push theprivatisation through and President Yushchenko allegedly attempting to stall the move. Presidentialelections are due to be held in January 2010, and current opinion polls suggest Yushchenko will be forcedout, which could pave the way for this very protracted privatisation to finally take place. BMI does notanticipate the privatisation occurring before the presidential elections. Table of Contents
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