Although the tender for communication of the fourth generation 4G (LTE) has already been awarded, Ukraine will have fully-fledged coverage no sooner than in four years. Innovation House has found out what are the reasons of such delay and who will be the first to take advantage of high-speed internet connection.
Widespread access to high-speed internet is the prerequisite for digital economy development. Mobile Internet is one of the ways to ensure this access.
On Wednesday, January 31, the first licensing auction for 4G (LTE) communication was held. According to various estimates, this communication generation will “speed up” the mobile internet in the country by a factor of 5-7.
What’s the price?
All three major mobile communication operators – lifecell, Kyivstar, and Vodafone – have got radio frequency bands within the range of 2.5 to 2.6 GHz, having paid for them a total of UAH 2.456 bln ($88.335 mln).
According to Oleksandr Zhyvotovskiy, Chairman of the National Commission for the State Regulation of Communication and Information, this is UAH 169 mln ($6.08 mln) more than the initial amount expected to be raised by the state.
lifecell has won the most expensive lot that included 2540-2545 MHz, 2565-2670/2660-2665 MHz, 2865-2690 MHz bands. Moreover, operator has offered unexpectedly highl price – UAH 601.6 mln ($21.655 mln), while the starting price was UAH 572 mln ($20.593 mln) only. Vodafone that was up for this lot too, chose not to raise the stake. The second lot consisting of 2535-2540/2655-2660 MHz bands was also won by lifecell company, having paid UAH 307.65 mln ($11.076 mln) for it. Thus, lifecell has spent UAH 909.25 mln ($31.669 mln) for 15 MHz bands.
Ismet Yazici, CEO of lifecell, was pleased with this price and in a conversation with the journalist of Innovation House he emphasized that the offer made by lifecell is an contribution to national budget. Andrey Lebedev, Manager of Strategy & New Business Development Division at lifecell, was on the air of Hromadske Radio and said that in the near future the company will invest $150 mln to build the network.
Kyivstar took three lots of 15 MHz bands of 2530-2535/2650-2655 MHz, 2525-2530/2645-2650 MHz, and 2520-2525/2640-2645 MHz having paid for them UAH 916.3 mln ($32.864 mln).
Vodafone got two lots only of 2510-2515/2630-2635 MHz and 2515-2520/2635-2640 MHz. The starting price for these two lots was UAH 286 mln ($10.282 mln) and Vodafone had no intention to raise it.
However, Peter Chernyshov, CEO of Kyivstar, started to raise stakes, realizing that Vodafone will be forced to increase amount, since otherwise operator would be almost without frequency bands. As a result, Vodafone had nothing to do but to pay UAH 345 mln ($12.368 mln) for one of the lots. The second lot was bought by it at initial price. Thus, the operator has paid a total of UAH 631 mln ($22.67 mln) for 10 MHz band.
Tops and roots
Frequency bands are the basic resource for mobile operators. The one, who has more of them, may establish better coverage and may render more qualitative services. Therefore, all operators have expressed interest in this tender. Though, bands that were offered this time make it impossible to deploy carpet coverage throughout Ukraine. After all, the higher the range, the less coverage base station may ensure, the more these base stations are needed, and the higher costs would be.
“We need 2600 MHz band. But it is auxiliary. I see no burning need in wasting big money on it,” – Oleg Prozhivalsky, Director of Corporate Governance & Control at Vodafone-Ukraine, said.
The ultimate fight will be for other band ranges.
Namely, for 1800 MHz, where 2G connection is currently working. It will be auctioned this spring,
In an interview with Innovation House, Dmitry Shimkiv, Deputy Head of the Administration of the President of Ukraine, said that the state is expecting to raise UAH 4 bln ($143.8 mln).
Yet another so-called “digital dividend” exists – low frequencies (700-800 MHz). They are currently occupied by analog television. Operators hope that in 2 to 3 years the regulatory authority will make them available for the use. “This band range is future-oriented, and experience has shown that most money were paid for them in Europe,” – Oleg Prozhivalsky said.
Terms of 4G-license stipulate that during the first year operators shall cover the regional centers, inhabited localities with the population more than 10,000 people shall be covered during the four year period.
The frequencies that were shared by the operators through this competition allows them to render 4G services in large cities in this April already. Their assessment is that by March 15 all the formal procedures related to this competition will be completed, inclusive of settlements. When this is done, test period will be commenced. “In other words, at first, we will grant test access. Most likely that during the initial period 4G will be free of charge. Perhaps, during the adjusting processes, the network will work not as smoothly as everyone would like it to be,” – Peter Chernyshov, CEO of Kyivstar, said.
According to him, the first 4G will be deployed in Kyiv, Lviv, Odesa, Kharkiv, and Dnipro cities. “But there will be other not so big cities as well. We will do something nice for people. It would be cities, where the large number of smartphones is used,” – added he. As of today, about 17% of Kyivstar’s mobile phone subscribers have 4G-compatible smartphones.
Operators cannot now say how 4G tariffs will differ from 3G tariffs, but they promise to refrain from “sudden movements”.
“It is clear that we will need to recoup our investments, and to do this we will be forced to make out subscribers pay. But this will take several years rather than one year or one month. Therefore, there will be no sharp increases in tariffs,” – Peter Chernyshov promised.