Biznews (#03 March 2015)

BIZNEWS

Telecommunications

 

3G licensing tender winners

The National Commission for Regulation of Communications and Informatization (NCRCI) held tender and provided 15-year licenses for the third generation of mobile communication. Astelit won the first 3G license by paying UAH 3.355 billion. The second license went to MTS-Ukraine at the starting price of UAH 2.715 billion. And the remaining third license was acquired by Kyivstar for UAH 2.705 billion.

JSC MTS Ukraine estimated the total investment in development of the 3G network to reach USD 1 billion, including money already invested. After obtaining the 3G licenses, mobile operators are expected to provide the third generation mobile communication in all regions within 18 months. Over the next two to six years, 3G should come to all district cities and cities with a population exceeding 10,000 as well as to major highways in Ukraine. Some regions of the country are still unavailable to launch 3G, as the frequencies are used by the military. Deallocation of all bands will continue for another five years and the three operators will spend at least UAH 1.6 billion for this purpose.

 

Capital Markets

 

Fitch lowers Ukraine’s foreign currency rating to CC

The international rating agency Fitch Ratings lowered Ukraine’s Issuer Default Rating (IDR) in foreign currencies and its Eurobonds down to CC from CCC. The agency admitted that the new IMF program, which was announced on 12 February, will help to fill the funding gap in Ukraine, but the related restructuring of the debt to private creditors appears increasingly likely.

It also said that the escalating conflict with separatists in Donetsk and Lugansk Regions severely affected the country’s economy, resulting in GDP dropping by 7.5% last year. Experts at the agency believe that the economy will decrease by 5% this year, and its growth will resume only in 2016 and come to just 1%.

 

M&A

 

Samsung to Acquire LoopPay

Samsung Electronics Co. Ltd. has announced it has agreed to acquire LoopPay, the acclaimed mobile wallet solutions provider that turns existing magnetic stripe readers into secure, contact less receivers. LoopPay’s technology has the potential to work in approximately 90% of existing point-of-sale (POS) terminals, according to internal research, with no investment in new infrastructure required by merchants. LoopPay will join Samsung to strengthen the company’s overall efforts to provide users with seamless, safe, and reliable mobile wallet solutions.

Samsung has an existing relationship with LoopPay, having first identified the potential for the pioneering technology when it became a strategic investor along with Visa and Synchrony Financial.

 

 

Antimonopoly Committee of Ukraine

 

Violation of legislation by Energoatom

Based on the complaint of HALLSBROOK ENGINEERING LLC on violation of legislation by state enterprise Energoatom during procurement (Panels non-typical for KHNPP — 16 units), the AMCU board obliged the customer to cancel the procurement as the offer did not meet the requirements. Based on the complaint made by NBU BIGMART LLC on violation of the legislation by the state enterprise Energoatom, as represented by its separate entity South Ukrainian Nuclear Power Plant during procurement of electric motors with bearings, the AMCU’s board obliged the customer to cancel the procurement and to complete the procurement procedure in accordance with the On Public Procurement Act.

 

Violation of legislation by the National Cancer Institute

Based on the review of the complaint made by the enterprise Bukovina-Pharm on violation of legislation by the National Cancer Institute during procurement of medications, the AMCU board obliged the customer to cancel the procurement procedure as the latter violated requirements of the On Public Procurement Act of Ukraine.

 

IT

 

Multibillion-dollar IT deal between Deutsche Bank and Hewlett-Packard

Deutsche Bank AG has mandated Hewlett-Packard to help modernise its information technology systems in a 10-year multi-billion dollar agreement which is expected to significantly cut costs. The contract mainly covers wholesale banking IT infrastructure, and HP will provide dedicated data centre services on demand, including storage, platform and hosting according to the bank. The giant German lender is in the midst of a strategy review to improve profitability and its share price. Both have been lagging behind interna- tional rivals for over a year.

 

 

 

 


Comments

Oksana Legka, associate, Asters

On 27 February the Ukrainian telecom regulator decided to award spectrum licenses to three winners of the 3G auction held on 23 February. This gives the wireless operators the green light to start rapid deployment of their IMT-2000 networks so as to meet the aggressive deadlines for launching 3G services (from 6 to 18 months in major cities and regional centers). In order to enable the operators to meet these requirements, the legislation should be amended to provide for clear mechanics of conversion of allocated military frequencies to civil use, as well as to liberalize regulations on wireless equipment. Draft Act No.1888 submitted to the Ukrainian Parliament on 29 January seeks to address these issues.

This Draft, inter alia, focuses on distribution of powers vested in various governmental agencies as regards conversion of military frequencies. Furthermore, certain regulations should be enacted to support conversion from a technical perspective. For example, in September 2014 the Ukrainian government ordered the special communications and information protection authority to develop the methodology for determining electromagnetic compatibility, as well as other technical standards to ensure smooth operation of radio-electronic equipment within 3G spectrum.

Another goal of Draft No.1888 is to streamline administrative procedures relating to the installation and operation of telecom equipment. Specifically, the Draft shortens the number of required documents and timeframes for issuing a conclusion on the electromagnetic compatibility of radio-electronic equipment, as well as for spectrum allocation. The Draft also suggests shifting to e-government process to facilitate electronic offering of these administrative services.

Nevertheless, Draft Act No.1888 has certain drawbacks (such as switching from the current registry of prohibited radio-electronic devices to a registry of permitted, as well as prohibited ones). Thus, public consultations regarding the Draft and any other 3G-related legislative changes are vital if Ukraine wants its 3G space to flourish.

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