VZCZCXYZ0000
RR RUEHWEB

DE RUEHKV #4386 3331301
ZNR UUUUU ZZH
R 291301Z NOV 06
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 0493
INFO RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS KYIV 004386 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: DECL: NA 
TAGS: ECPS PGOV UP
SUBJECT: TELECOM REGULATOR DENIES 3G LICENSES TO MOBILE OPERATORS; 
UKRTELECOM TO BENEFIT 
 
Sensitive but Unclassified.  Not for Internet Distribution. 
 
¶1.  (U) Ukraine's National Communications Regulatory Commission 
(NCRC) on November 2 denied applications to issue next-generation, 
3G licenses to Ukraine's top four mobile phone operators.  With the 
NCRC refusal, state fixed-line monopolist UkrTelecom remains the 
sole operator in Ukraine with a 3G mobile license, though it offers 
no mobile services.  The NCRC justified its license refusals by 
stating it had already licensed a portion of the available 3G 
frequency range to UkrTelecom, and that the Ukrainian military had 
not authorized additional frequencies to be converted to commercial 
use. 
 
¶2.  (SBU) Telenor country director Sigmund Ekhougan told EconOff on 
November 28 that the designated 3G range of 1.9 - 2.2 GHz was large 
enough for all Ukraine's mobile operators to use, without the 
Ukrainian military converting additional frequencies.  (Note: 
Norway's Telenor owns 57% of KyivStar -- Ukraine's #1 mobile 
operator.) The NCRC refused to grant additional 3G licenses, 
Ekhougan said, so that UkrTelecom could gain a foothold in the 
mobile market as sole provider of 3G services, and increase its 
market value ahead of its expected, but long-postponed, 
privatization.  (Note: 97% of Ukraine's radio frequencies remains 
under control of the military as a hold-over from the Soviet Union. 
Ekhougan conceded the military needed assistance in converting these 
frequencies to commercial use, but maintained there was no technical 
justification to deny mobile operators 3G licenses within the 
existing commercially-designated range.) 
 
¶3.  (U) UkrTelecom announced on November 3 plans to launch 3G mobile 
service on March 1, 2007, which would be 15 months from the time it 
received its license.  UkrTelecom expects to invest $130 million in 
developing it mobile communications in 2007, with a total projected 
investment of $680 million.  Nokia will be UkrTelecom's main mobile 
equipment supplier. 
 
Comment 
------- 
 
¶4. (SBU) Most observers believe an exclusive 3G license, along with 
higher fixed-line rates that went into effect June 15, are part of a 
GOU plan to increase UkrTelecom's profitability so it could fetch a 
more attractive price if privatized.  UkrTelecom announced on 
November 27 third quarter profits of 120.5 UAH ($24 million), which 
is a 264% increase over the company's second quarter profits of 33.1 
million UAH ($6.6 million).  GOU has not announced a privatization 
timetable for UkrTelecom, although President Yushchenko spoke in 
favor of the privatization November 27 at a speech before the Union 
of Industrialists and Entrepreneurs. 
 
TAYLOR