Ukraine’s Telecom sector desperately needs regulatory clarity. PERVAIZ IFTIKHAR

ISLAMABAD ( SPECIAL FOR TELECO ALERT )

FOR FOUR DAYS THAT I WAS IN UKRAINE THE MAXIMUM TEMP. WAS MINUS 2 C AND THANKS TO LANGUAGE ISSUE, “BREAKING THE ICE” WASN’T ALL THAT EASY EITHER! But two things I couldn’t help noticing. The first thing was that despite the huge differences between Ukraine and Pakistan, there are also striking similarities, especially in the telecom domain. Like Pakistan, Ukraine enjoyed strong economic growth in the early part of the century but then it got adversely impacted by local and global economic turmoil. And like Pakistan it had to seek (US$ 15 bn) assistance of IMF in late 2008. Like Pakistan again, the telecom sector has not fared as badly as other sectors, but since 2008 revenue growth hasn’t been all that great.

One of Eastern Europe’s largest countries (population 45 Mil) Ukraine has tradionally been very close to Russia (largest and closest partner during Soviet era with large investments in the country’s telcos). But now it is seeking an increasingly closer relationship with the European Union (EU).  This would have significant implications for Ukraine’s UAH 50 bn (US$ 6.5 bn) telecom sector, not only in terms of tighter regulation but also in its capacity to cope with competitive pressures and market forces within the EU.

Unlike Pakistan, where the regulatory regime is well established, Ukraine’s Telecom sector desperately needs regulatory clarity. Until recently, the lack of an independent regulator and transparent regulatory system had discouraged investment by major European telcos. The influence of EU, as well as the regulatory conditions which Ukraine would have to meet to become an EU member, are expected to promote that much-needed investment. Also the recent privatization of incumbent Ukrtelecom is expected to improve implementation of telecom regulation – just as it happened in Pakistan!

Fixed broadband (presently 3.9 Mil, nearly 10% penetration) is growing fast. Broadband based on Fiber to the Building (FttB) is significantly increasing. For instance, the fibre network of the operator Kyivstar now connects a large number of apartment houses in over 100 cities. Fixed-Wireless broadband is not so much to be seen probably due to large copper embedded base (12 Mil fixed lines). Only recently it is becoming more relevant as more and more operators are applying for CDMA-450 licenses. Incidentally this is a very appropriate technology/spectrum for starting rural coverage of broadband anywhere in the world. Unfortunately in Pakistan it is lying unused with the licensee ‘Dialog’.

With 56 Mil Mobile voice customers (125% penetration), it is the mobile broadband scenario that is of most interest now-a-days. Strangely there is only one 3G license – with the incumbent Ukrtelecom! Therefore, thus far major GSM operators have been hampered by lack of licences to offer 3G services. And yet the mobile unit of the Ukrtelecom is unprofitable! Consequently the mobile unit is being offloaded, with its spectrum being re-assigned. In the meantime government (both civil and military departments) agreed on a plan to make available a 100MHz block of spectrum in the 2.1GHz band. A third of it’s cost will come from the private sector mobile network operators and the rest two-thirds from the government itself. It shows the keenness of the government to fast-track mobile broadband availability. Come to think of it, our government does not even have to do that, they just have to issue mobile broadband licenses in the country against open bidding! As a consequence, demand for content is also expected to grow significantly in coming years.

Yet another similarity (which is actually true all over the world) is the reluctance of Operators to contribute to USF! But the Ukrainians’ case deserves a little more sympathy as they (on top of all the other usual taxes) already pay 7.5% of their revenues to the Pensions Fund!

A practice that Pakistan could follow is to reduce the number of towers in the country. In mid-2011 Kyivstar began selling excess base stations decommissioned as a result of its integration with Beeline Ukraine. Kyivstar plans to remove two-thirds of Beeline’s former base stations. Can’t our celcos do something similar in Pakistan – with or without integration?

As could be expected, women play a very significant role in all walks of life. Both the members of NCCIR (Telecom Regulator) who were there full time taking a very keen part in the discussions about USF for 2 days were women. So were both the translators. There were others among the 12 to 15 participants representing various stakeholders including Operators. And this brings me to the second thing that I couldnt help noticing – that on the average, Ukrainian women are probably the best dressed women in the world!

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