President vs. Prime Minister: 3G licence auctions to be a casualty of political strife?Political squabbling and paralysed decision-making now looks set to stymie the development of 3G mobile services in of one of Europe's worst-performing economies.
According to a WCIS estimate, there are just 250,000 W-CDMA subscriptions in Ukraine, whose total number of mobile subs stands at around 50.7 million. Just one UMTS licence has so far been awarded in the country, and the very low take-up of 3G services probably has a lot to do with the fact that the lone licensee is not one of the leading mobile operators best-equipped to maximise the value of the technology.
Instead, the single 3G licence was given to state-owned incumbent fixed-line operator Ukrtelecom in late 2005. The use of the word 'given' is quite deliberate here - only one licence was issued and this was handed to Ukrtelecom without a tender, a move which predictably caused consternation on the part of Ukraine's two leading MNOs. It was thought at the time that the point of giving the concession to the public sector telco was to make it a more desirable proposition for potential investors ahead of a planned privatisation. Nearly four years later, Ukrtelecom is still in state hands.
As recently as February this year, the Global Mobile Daily service from Informa Telecoms & Media reported that Turkcell was interested in the Ukrainian incumbent wireline operator. The Turkish cellco has already established a presence in Ukraine via its controlling stake in Life:), the country's third largest mobile operator by subcribers. I have read or heard nothing since then about the Turkish company's plans to purchase Ukrtelecom so I have to assume that this interest came to nothing. Perhaps a well-informed reader could comment.
With Ukrtelecom having failed to make 3G services a truly mass-market proposition, and mobile penetration having passed the 100% mark some time ago, the telco's private sector rivals were presumably looking forward to the opportunity to grow revenues by offering mobile broadband services. The chance to do so, however, now looks in doubt, as Sabina Zawadzki of Reuters wrote last week.
This is because the Ukrainian President, Viktor Yushchenko, has overturned a Government decision to allocate radio spectrum resources for mobile phone network use, thereby casting doubt on a 3G licence tender scheduled for next month.
Things certainly move fast in the East European country. It was only late last month that Ukraine's National Communications Regulatory Commission announced plans to sell a single 3G licence.
The President's decree, referring to the spectrum's use by the military, cited the need to saferguard Ukraine's defensive capabilities.
This could, of course, be a quite genuine concern on the part of Mr. Yushchenko. Those who watch the country's political scene, however, could be forgiven for wondering if the 3G auction might really be a casualty of the poor relations between Yushchenko and Ukraine's Prime Minister, Yulia Tymoshenko, a former ally of the President.
Ms. Tymoshenko and Mr. Yushchenko have not seen eye-to-eye for some time, with their difficult relationship characterised by some uncomfortable clashes. In August 2008, for example, the President's office accused Ms. Tymoshenko of betraying national interests by not backing Georgia in its conflict with Russia. In January this year, when Russian gas reached Europe via Ukraine after a two week interruption of supplies, Yushchenko said the deal clinched by Tymoshenko was a "defeat." Moscow and Kiev had been locked in a prices and debt row that cut supplies to about 20 European countries. As this year unfolded, the Ukrainian Parliament Parliament sacked Foreign Minister Volodymyr Ohryzko, a Yushchenko ally, citing his aggresive stance against Russia, and dismissed another Yushchenko ally, Defence Minister Yuri Yekhanurov, over allegations of corruption in his Ministry.
With this strife in the background, there exist precedents for Mr. Yushchenko blocking proposed transactions favoured by Ms. Tymoshenko's Government. Last month, for example, he halted the privatisation of the Odessa Port plant two weeks before its auction.Yushchenko and Tymoshenko are both expected to run in a presidential election on 17th January, with polls showing the PM would face former premier Viktor Yanukovich in a second round. Yushchenko's popularity ratings are apparently in single digits.
Perhaps this process will need to play out before Ukraine's mobile operators can expect to get their hands on 3G licences.
MNOs in neighbouring Belarus, meanwhile, have received more positive news about the prospects for mobile broadband there. To date, only second generation mobile services are available from the country's four cellcos. The third-placed player (by market share), BeST, formerly a state-owned company 80% of which was acquired by Turkcell in 2008, in July awarded Chinese vendor ZTE a contract to build a new UMTS network. This followed the allocation of suitable spectrum to BeST by the State Commission for Radio Frequencies (SCRF). Since the takeover by the Turkish MNO, BeST has adopted the same Life:) branding as the Turkcell-controlled operator in Ukraine.
Now, according to the Belarusian Telegraph Agency, a working group for the SCRF is supporting the initiative of the Information Technologies and Communications Ministry to allocate UMTS radio bands to MTS (owned by the giant Russian cellco of the same name) and Velcom, which is controlled by the mobilkom austria group.
My understanding is that both Belarus and Ukraine have the somewhat underdeveloped wireline infrastructure which can offer good opportunities for mobile operators to grow wireless broadband revenues. Whether the economic conditions in both countries will allow for really strong mobile broadband growth, though, remains to be seen. With licensing delays in Ukraine, perhaps it is in Belarus that industry watchers will get the earlier opportunity to track the customer adoption of 3G services in this part of the world.
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