State committee has evidence rates artificially high, service poor
Government regulators have begun an investigation into Ukraine’s leading mobile operators on suspicions that the firms have monopolized the country’s mobile communications market.
Speaking at a press conference on Sept. 21, Antimonopoly Committee head Oleksiy Kostusev said that a preliminary investigation performed by his committee indicates that Kyivstar GSM and Ukrainian Mobile Communications are keeping rates artificially high and providing poor services.
They have used their positions as market leaders to shortchange mobile consumers, Kostusev said.
“The committee has gathered enough evidence to categorize them as monopolists,” Kostusev said, adding that the providers together control 98 percent of market subscribers. UMC’s 5 million subscribers account for 51.7 percent of the market, while Kyivstar’s 4.5 million subscribers comprise nearly 47 percent.
“The 38 percent barrier used in determining a monopoly was passed long ago,” he added.
If the committee decides to recognize them as monopolists, the Antimonopoly Committee will continue trying to persuade the firms to lower tariffs for mobile phone users and to provide higher-quality services, Kostusev said.
“In the United States, two cents per minute of talk time is about average,” he said, “while in Russia, seven cents is typical.” The average cost per minute in Ukraine is 10 cents per minute.
Kostusev cited a recent three-day UMC network blackout in Kyiv as proof that the quality of mobile services provided in the country has fallen. Operators have concentrated their efforts on attracting new clients rather than ensuring them high levels of service, he said.
“The existence of high tariffs and poor quality of service are signals that a monopoly exists,” he added.
UMC was tightlipped in answering questions regarding the investigation.
“We have been working for the last month to provide information to the Antimonopoly Committee,” UMC spokesperson Andriy Hunder said Sept. 21. “We will provide the committee with all the information it has requested by the end of the week.”
Meanwhile, Kyivstar spokesperson Zhanna Revnova denied the monopoly accusations, saying that “competition on the market is very high.”
“Not a month goes by where our company does not offer tariff reductions or special bonuses to clients,” Revnova said.
Yuriy Selavyov, chairman of Telas, an industry advocacy group whose members include UMC and Kyivstar, said the Antimonopoly Committee seems to be arguing that tariffs at both companies are too high. However, Ukraine’s mobile market is still developing, and mobile service providers need substantial annual revenues in order to keep on developing, Selavyov argued.
“Lots of investments are still needed in this sector.”
If the two companies are found guilty of operating a monopoly, they could either be forced to simply lower their network tariffs, or they could be fined up to 10 percent of their total turnover from the previous year.
The committee’s investigation into the mobile phone giants coincides with the expansion of two smaller operators, Ukrainian Radiosystems (URS) and Digital Cellular Communications (DCC), which have been pumping hundreds of millions of dollars into network upgrades and expansion this year.
Ukrainian Radiosystems operators the Wellcom brand, which up until this summer offered network access in Kyiv oblast only. Co-owned backed by the so-called Privatbank business group, URS recently launched GSM-900 network service in 16 of Ukraine’s largest cities as part of a $100 million expansion plan. URS currently has about 45,000 subscribers.
Similarly, Donetsk-based DCC has also expanded rapidly, last year unveiling plans to establish a joint venture with a subsidiary of Turkey’s Turkcell in order to build its nationwide GSM network. In April, Turkcell announced that it would enter the Ukrainian market through a subsidiary by acquiring a 51 percent stake in DCC from System Capital Management for $50 million.
DCC has about 85,000 subscribers to date on its existing D-AMPs network, a lower grade mobile phone technology than the GSM standard.
“There are two large operators on the market now, but soon there will be others that offer network access nationwide,” Kyivstar’s Revnova said.
