NCCIR approves final 3G licence auction conditions; asking price around USD225m

29 Oct 2014

At a meeting held on 28 October 2014, Ukraine’s National Commission for the State Regulation of Communications and Informatization (NCCIR) approved the final 3G licence auction conditions for three 15-year concessions each including 2×15MHz spectrum in the paired 2100MHz UMTS band, it disclosed on its website. Bidding will be on three lots (licences) simultaneously, and the minimum bid price for each licence is UAH2.443 billion (USD185 million), plus extra costs associated with the conversion of the radio frequency resources from their previous military usage, estimated at around UAH533 million apiece – putting the total one-off cost of a 15-year UMTS permit at around UAH2.976 billion, or roughly USD225 million.

The NCCIR explains in its announcement that financing expenses related to the implementation of measures for the frequency conversion are valued at a total of UAH1.6 billion, and will be applied under individual contracts in accordance with the conversion plan developed by the General Staff of the Armed Forces of Ukraine, agreed on by the NCCIR and approved by the Minister of Defence on 23 September 2014. The winners of the 3G licence tender shall agree terms of reference with the NCCIR covering conditions of the conversion within two months of the announcement of the auction results.

Specific conditions of the UMTS licences oblige winners to cover ‘all regional centres’ with 2100MHz network services within 18 months, and ensure compliance with mobile service quality indicators as defined by current regulations, while within six years licensees must cover all towns with populations over 10,000.

The NCCIR emphasised in its announcement that the approved tender conditions do not impose any additional restrictions on which companies may participate in the auction, other than those restrictions already provided for by existing legislation concerning the application of sanctions on named individuals/legal entities under the Law of Ukraine ‘On Sanctions.’ As previously noted by TeleGeography’s CommsUpdate, the August 2014 sanctions law allows the Ukrainian government to impose sanctions on a list of named individuals/entities initially reported to comprise 65 Russian companies and 172 individuals (of Russia and other countries) regarded by the state to be supporting/financing separatist rebels in eastern Ukraine. Although the sanctions law adds uncertainty to the 3G auction, Ukraine has not decided to categorically block Russian-backed companies, such as the two leading Ukrainian cellcos Kyivstar and MTS Ukraine, contrary to earlier disclosures from Ukrainian cabinet sources.

Conditions of the tender will be valid from the day following the date of Cabinet approval. The 3G auction is expected to be held by the end of the year. Frequencies on offer are: 1920MHz-1935MHz, 2110MHz-2125MHz / 1950MHz-1965MHz, 2140MHz-2155MHz / 1965MHz-1980MHz, 2155MHz-2170MHz.