It’s been two years since mobile operators started rolling out third-generation internet in Ukraine — years after most other European countries. And it’s still the talk of the market.
Kyivstar, Vodafone Ukraine and lifecell, the top three Ukrainian cellphone operators, who service a total of 60 million active SIM cards in Ukraine, are continuing to pump millions into the rollout of 3G in Ukraine. So far, they have covered less than half of Ukraine’s territory, and are primarily focusing on big cities for now.
Compared to the rest of Europe, 3G in Ukraine is more than a decade late: EU countries started to introduce mass market commercial 3G services back in March 2003. Ukrainian carriers only started in 2015.
But despite the lag on their 3G rollout, the big operators are already planning to launch the faster and higher capacity 4G standard. As countries with more developed cellphone markets are only just starting to introduce 4G, Ukraine will have a chance to catch up — if everything goes smoothly.
A gain for all
On March 23, Chairman of the National Commission for the State Regulation of Communications and Informatization (NCCIR) Alexander Zhyvotovsky announced the start of preparations to hold a tender for 4G licenses.
If the government approves of the NCCIR’s roadmap — deciding on the cost of licenses, accepting changes in radio frequency allocations (some frequencies are used by the military now) and a procedure for conversion — the tender is to take part in 2017, with the launch of 4G happening in 2018.
“The rollout of new technologies like 4G will be a gain for all,” says Maxim Savchenko, Kyivstar’s regulatory advisor. “The market will gain new opportunities, the government — more taxes raised by new services, and subscribers — broader possibilities for communication.”
Savchenko also says the 4G rollout represents a chance for Ukraine to catch up with the rest of the world, at least in terms of cellphone services.
“The country must work a lot, and hard, to reduce the gap between it and Europe in the telecoms industry. This must be done, and it can be done, by implementing 4G in Ukraine (as soon as possible),” says Savchenko.
Today, about 70 percent of the data traffic of Ukrainian mobile operators is generated by 3G users, and 4G will boost this still further by making higher quality services available.
The average speed of 4G is at least three times faster than any modern 3G technology. That will allow users to exchange “data-heavy” content, stream high-definition television, and even watch 4K resolution video.
Market players say 4G will also open up possibilities for many cutting-edge technologies, such as the internet of things, machine-to-machine communications, mobile health (m-Health), smart city services, and allow more automation and data exchange in manufacturing technologies.
Big investment
However, the introduction of a new generation of cellphone services always demands massive investment. Kyivvstar, for example, spent $142 million on its 3G rollout, plus $100 million spent on licenses. Vodafone Ukraine and lifecell put in similar sums — $283 million and $238 million respectively.
“It is difficult to make any assumptions on how quickly we will return these investments, even looking ahead,” Savchenko said. “The telecoms industry has never (seen) … rapid investment returns, even in favorable conditions.”
Ukrainian cellphone operators say the country’s shaky economy and other domestic difficulties, including the turmoil generated by Russia’s war in the Donbas, are making things that much more difficult.
And taking into account that the 3G network build-out is still sucking a lot of capital out of the operators, 4G could be too much of an additional burden to take on at the moment. According to Kyivstar’s estimates, most of the expenditure is expected to be on licenses. Kyivstar’s Savchenko says if the regulator cuts their cost, the operators will be able to reinvest the money saved into a faster 4G rollout.
Lifecell, the smallest of the three leading cellphone operators, sees other problems that might hold up 4G. According to Andrey Krylya, the director of corporate regulatory and jurisdictional relations at the company, limits on competition in the market are making it inefficient, which in turn will hamper the 4G rollout.
“The effective implementation of new technologies is possible only on an effective market, where there’s competition,” Krylya said.
According to him, two things have to be done to fix the situation.
First, mobile number portability has to be introduced, finally giving Ukrainians the ability to change mobile operators without losing their old phone number.
Second, all the market players should have equal rights, regardless their size, to eliminate current abuses of market power by the dominant players.
“Only then will the operators have a stimulus to develop and offer new quality products (like 4G),” Krylya says. “As for the urgency of rolling out 4G, the readiness of all the operators to start rolling them simultaneously has to be considered.”
Krylya says Ukraine’s 3G coverage is still far from 100 percent, and as soon as the carriers start investing in 4G, 3G development will rapidly slow down. That, in turn, will widen the services gap between residents of big cities and rural areas.
He says operators should focus more on 3G, and stop thinking about developing 4G in Ukraine for now.
Moreover, the fact that Ukraine started to introduce 3G so late has its positive sides, according to Krylya. The quality of the network is sometimes better than 4G in some European countries, because when launching 3G the Ukrainian companies used the latest available equipment, he said.
Economic benefits
Lifecell now says it has the widest geographical 3G coverage in Ukraine — 20 percent of the country, with the goal of covering 100 percent.
And Krylya insists 4G is little different from 3G.
“It’s faster, but that’s it,” he said. “Only 5G will bring new services.”
Instead, Lifecell thinks Ukraine should simply skip 4G, wait until 5G is developed, and then implement that.
Kyivstar CEO Peter Chernyshov speaks at the Kyiv Post CEO Breakfast on Feb. 12. (Volodymyr Petrov)
“5G is a new market with a myriad of opportunities and rich functionality. If we want a breakthrough in Ukraine and to take part in the development of new technologies, we need to understand that 5G will appear before it is economically feasible to launch 4G.”
But Kyivstar’s Savchuk does not think it’s wise to skip 4G.
“We don’t agree with this approach,” he says.
5G might only start to enter commercial use by the end of 2020, he said. “The state of economy of Ukraine and its prospects doesn’t give us much hope that we’ll be among the early adopters.”
Ericsson Senior Vice President and Head of the Europe & Latin America Market Area Arun Bansal also thinks skipping 4G is unwise. For him, it’s a question of economics.
According to Bansal’s estimates, every 10 percent increase in mobile broadband penetration in Ukraine can increase the country’s GDP by 1.1 percent.
“Today you might feel in Ukraine that 3G is enough, but with the growth of video services, you’ll need 4G, and when you go to multiple industries, you’ll need 5G,” he says.
But to get to 5G, Bansal says, 4G infrastructure will be needed first, and before that 3G. Once an operator has 3G or 4G infrastructure set up, it will be easier for them to build 5G on top of it.
The economic benefits of 5G could be enormous.
“5G will enable the economic growth of a country by helping other industries be more efficient,” Bansal says. “Mobile operators will be able to earn $562 billion in additional revenues by 2026” and play a role in connecting billions of new devices.
“While 3G and 4G are technologies that basically connect people, for 5G, that’s just one of the uses. 3G and 4G are for consumers, while 5G, due to its speed, can support different industries — connecting together cars, electricity grids, and factories.”
