Ukrtelecom Going Mobile With 3G Equipment Deal

KIEV, Ukraine -- State-owned Ukrtelecom inked a deal last month that will pave the way for the rollout of the country’s first third-generation mobile communications network, in anticipation of the fixed-line monopolist’s much talked about privatization.

According to the three-year agreement, signed by Ukrtelecom and Finnish-based telecom equipment maker Nokia on Oct. 27, Nokia will supply Ukrtelecom with third-generation, or 3G, network equipment, which will allow Ukrtelecom’s mobile subscribers to enjoy high-speed data transfer, including video and audio streaming.

Users of 3G will be able to view images and hear sounds as they arrive without downloading large files, additionally getting better mobile phone connections than those currently available in the Ukrainian market.

In a tender that was first announced by Ukrtelecom at the beginning of this year, Nokia beat out four other global telecom equipment providers – France’s Alcatel, Sweden’s Ericsson, China’s Huawei and Germany’s Siemens – to supply equipment for the 3G network, which will initially be launched in Kyiv and Kyiv Region, and later extended to other parts of the country.

Ericsson had been chosen earlier this year to provide Ukrtelecom with equipment and services for testing 3-G technology free of charge.

Ukrtelecom would not disclose the value of the contract with Nokia, but industry insiders have said that building a 3G network in Ukraine from scratch could cost over a billion dollars.

Ukrtelecom said in a Oct. 31 press release that it would develop its 3G network on the basis of its fully owned long-distance subsidiary, Utel, servicing its corporate clients.

“We are counting on huge demand for 3G technologies among business people” Ukrtelecom quoted Stanislav Hurskiy, the director of Utel, in its statement.

Ukrtelecom is currently the only Ukrainian telecommunications company with a license to provide 3G-based mobile communications in Ukraine. Ukrtelecom received the 15-year license from Ukraine’s State Telecommunications Commission in December of last year.

The Commission refused all other applicants for the license, including mobile services providers Ukrainian Mobile Communications (UMC) and Kyivstar, which control the lion’s share of Ukraine’s mobile services subscriber market between them.

Ukrtelecom receives about 76 percent of all its revenues from its fixed-line business of around 10 million subscribers, according to the Ukrainian affiliate of iKS Consulting, a Moscow-based telecom think tank, but has no share of the country’s mobile phone market of nearly 40 million subscribers, which represents subscriber penetration of more than 80 percent out of a population of 47 million.

Industry experts have tied the State Telecommunications Commission’s issuance of the 3G license to Ukrtelecom to the government’s efforts to beef up the state-owned monopolist ahead of its privatization.

The state has repeatedly announced its intention to privatize Ukrtelecom, one of Ukraine’s largest companies in revenues, since 2000. But the sale has been repeatedly put off due to political bickering.

Now, efforts to privatize the company appear to be back on the agenda, but the value of Ukrtelecom has fallen in recent years due to poor management and subscribers shift toward usage of mobile communications.

According to UMC press officer Vitaly Mukhin, UMC envisages its launch of a 3G mobile services network at a later date, due to 3G’s high costs and uncertain demand for such services in Ukraine.

“Today, a very tiny part of the market is ready to pay a premium price for such services as stream mobile television or video communication,” Mukhin told the Post.

“UMC recently received a license for a CDMA 450 network, which allows it to provide services that are almost the same in quality as 3G, but less expensive,” he added.

Serhiy Tovstenko-Zabelin, a spokesperson for Kyivstar, said that Kyivstar applied to the State Telecommunications Commission for a 3G license in 2005, but still doesn’t know when the company will get the license.

“Kyivstar considers 3G a logical development of the existing nationwide GSM network,” he said.

Tovstenko-Zabelin noted that the launch of 3G technology would require significant investments into Kyivstar’s GSM network, but ”that is much easier than creating a network from zero.”

Kyivstar and UMC offer mobile phone services in the GSM 900 and 1800 standards.

Source: Kyiv Post