Ukraine Telecommunications Report Q2 2013 - New Market Research Report

BMI View: There was strong subscription growth in the Ukrainian mobile market during 2012, with y-o-y growth of 7.3% to Q412. Operators also benefited from increases to mobile ARPU over the course of 2012. However, the growth trend is unsustainable in the medium term considering market saturation, while ARPU levels are set to decline from 2013 onwards due to increasing competition and the introduction of mobile number portability. In terms of data services, Ukraine sits at the bottom of the league table for Central And Eastern Europe, having only licensed one operator for 3G services, exacerbating the geographic difficulties of extending fixed broadband coverage.

Key Data

* The uptake of broadband services is low, with penetration estimated to have reached just 15.8% at the end of 2012.
* Particularly significant is the lack of 3G service development, with 3G subscriptions accounting for just 2.3% of the mobile market at the end of 2012, by far the lowest in the region.
* Ukraine's mobile market is expected to expand by 3% in 2013, down from the strong 7% in 2012, due to market saturation and the possibility of inactive subscription deduction.

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Key Developments

The National Commission for State Regulation of Communications and Informatization approved a draft regulation for the introduction of Mobile Number Portability (MNP) In March 2013. MNP enables subscribers to switch operators while retaining their phone number, which should help to increase competition in the market. The service is expected to be launched in Ukraine by November 30 2013, meaning it will likely have only limited impact on prices in 2013, but is expected to intensify price competition from 2014. As a result of the introduction of MNP BMI revised its ARPU forecast down this quarter.

Ukraine could be set to benefit from greater integration into international networks, with potential benefits in terms of quality of service and cost of international bandwidth. In February 2013 it was announced that Ukraine, along with Georgia and Bulgaria would join the Trans-Eurasian Information Super Highway (TASIM) in the near future. The TASIM backbone project received UN support in December 2012 and includes five members, Azerbaijan is administering the project, with four other members in China, Russia, Kazakhstan and Turkey. TASIM is reported to be looking to expand membership to build two fibre-optic transit routes, the first connecting China, Kazakhstan, Azerbaijan, Georgia and Turkey to Germany, with a second proposed redundancy route linking Russia, Ukraine and Poland.

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