Ukraine 3G Auction Raises Less Than $300MUkraine 3G Auction Raises Less Than $300M

Three mobile operators each secure the same amount of spectrum in Europe's last 3G auction.

Iain Morris, International Editor

February 24, 2015

4 Min Read
Ukraine 3G Auction Raises Less Than $300M

Ukraine's long-awaited 3G spectrum auction has drawn to a close with the country's three existing mobile operators spending a collective 8.77 billion Ukrainian hryvnia (US$270 million) on licenses.

The sale marks the last major award of 2.1GHz airwaves in the European region, whose biggest economies sold 3G airwaves about 15 years ago and are now focused on the rollout of 4G services.

Each operator secured a 2x15MHz license to operate services for 15 years and will be required to launch 3G technology in all regions of the country within 18 months of receiving its concession.

That could be especially challenging in eastern parts of Ukraine, which have recently been racked by a conflict with Russia-backed separatist rebels.

Despite being the country's smallest mobile network operator, Astelit emerged from the auction as the biggest 3G spender, paying nearly UAH 3.36 billion ($103 million) for a 2x15MHz block of paired spectrum.

Amount

Fee (UAH)

Fee ($)

Price per MHz/capita

Kyivstar

2x15MHz

2.70B

83M

$0.06

MTS

2x15MHz

2.72B

84M

$0.06

Astelit

2x15MHz

3.36B

103M

$0.08

Total

2x45MHz

8.77B

270M

$0.07

Majority owned by Turkish operator Turkcell Iletisim Hizmetleri A.S. (NYSE: TKC), Astelit claimed to have picked up the highest-quality spectrum in its statement on the auction results and said it would aim to launch 3G services within six months of receiving its license.

According to a report from Ukraine's Kyiv Post, an English-language newspaper, the spectrum awarded to market-leader Kyivstar GSM and number two player MTS Ukraine (NYSE: MBT) could be subject to interference because parts of it are already being used by other organizations.

MTS Ukraine, a subsidiary of Russia's Mobile TeleSystems OJSC (MTS) (NYSE: MBT), paid about UAH 2.72 billion ($84 million) for its license, while Kyivstar -- owned by VimpelCom Ltd. (NYSE: VIP), another Russian operator -- spent UAH 2.7 billion ($83 million).

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MTS and Kyivstar did not provide any indication of when they aim to launch 3G services, although MTS said previous investments would allow it to "quickly launch" the high-speed technology.

Ukraine's dispute with Russia had stoked concern among investors that Russian companies would be stopped from bidding in the auction, but this would clearly have excluded the country's two biggest mobile operators from the process. (See MTS's Russian Resolution.)

With no other companies bidding for spectrum, and Ukraine's economy in the doldrums, spending on airwaves worked out at less than $0.07 per MHz per capita -- a measure commonly used to value spectrum.

By comparison, the recently concluded auction of AWS-3 spectrum in the US raised $2.21 per MHz per capita, according to data from Coleago Consulting.

Operators are looking to mobile data services as a driver of revenue growth in the years ahead, but they may struggle to attract customers to pricier smartphone plans in the current malaise. (See MTS Braced for Ruble Trouble.)

Yet to report its 2014 results, MTS Ukraine witnessed a 13.7% year-on-year dip in revenues from value-added services in the July-to-September quarter, with minutes of usage falling by 18.4% over the same period.

Longer term, however, the auction results could leave Kyivstar in a stronger position than MTS and Astelit, assuming it can overcome any problems related to interference in the 2.1GHz band.

Besides holding the same amount of 3G spectrum as each of its rivals, Kyivstar also controls more airwaves in the 900MHz and 1800MHz bands thanks to its merger with Ukrainian Radio Systems, another mobile operator, in 2012.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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Europe

About the Author

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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