NCIRC is trying to revoke TriMob’s 3G license

Photo: Reuters

The Prosecutor General’s Office submitted a claim to the District Administrative Court of Kyiv against TriMob (Ukrtelecom’s subsidiary) and the National Communications and Information Regulatory Commission (NCIRC).

The PGO is demanding that the NCIRC revokes TriMob’s license for 3G radio frequencies (3G, UMTS). The license was issued to TriMob for 30 MHz all over Ukraine in 2011. Capital has a copy of the claim at its disposal. The NCIRC received the claim on December 1.

History of the claim

As a reminder, TriMob was established on the basis of the decision of the Supervisory Board of Ukrtelecom in August 2011 to transfer to the company the responsibilities of Utel, which provided 3G mobile services. Ukrtelecom’s management announced its plans of selling TriMob, but talks with major mobile operators failed. The operator is still the only holder of the UMTS license in the country. In the lawsuit the PGO stressed that TriMob was granted the right to use the frequencies illegally. In late 2011, the NCIRC decided to redistribute 3G radio frequencies between Ukrtelecom and TriMob based on a joint appeal filed by the two companies.

As a result, TriMob was given 30 MHz and Ukrtelecom - 5 MHz. As a reminder, in order to increase the investment attractiveness the Cabinet of Ministers ordered to issue Ukrtelecom the only 3G license back in 2005 (a total of 35 MHz) when the company was still owned by the government. Now it belongs to Rinat Akhmetov’s SCM. Representatives of the PGO believe that the NCIRC violated provisions of the Law “On Radio Frequency Resources” when it re-registered the licenses to two companies, seeing as only the holders of radio frequencies have the right to take part in the redistribution process. At that time, they were only available to Ukrtelecom.

Unrealistic price

The plaintiff also draws attention to the fact that the 3G licenses were issued by the government on special terms without holding any tenders exclusively to Ukrtelecom, while other companies can only be issued such documents through tenders given that the demand for UMTS frequencies exceeds supply. Indeed, in 2006, the commission refused to grant similar licenses to Kyivstar, MTS, Astelit (life :)) and URS (Beeline). But at the time the Ministry of Defense had not yet cleared additional frequencies.

At the same time, the plaintiff points out that in 2011 the NCIRC extended TriMob’s license for a very low fee of UAH 170. “Without any tenders the state budget of Ukraine fell short of a significant amount of proceeds,” it reads in the lawsuit. The agency gives an example saying that in 2009 the NCIRC set the minimum price for a 3G license at UAH 400 mn and in September 2014 – at UAH 2.443 bn (later it was increased to UAH 2.7 bn). Noteworthy is the fact that the PGO discovered violations of the law in the issuing of 3G license to TriMob based on the results of consideration of the application of the NCIRC of November 13. Member of the Commission Oleksandr Sklyarov said that only the Head of the Commission Oleksandr Zhyvotovskiy could explain the reasons for the claim as he was the only one who possessed such information. “My personal opinion is that such disputes should be resolved in court,” he said. Capital was unable to reach Zhyvotovskiy for commentary.

Flip side of the coin

One of Ukrtelecom’s lawyers said the company was studying the claim and planned its future steps. He pointed out that many companies have already used the provision of the law that allows for redistribution of radio frequencies. “And they decided to pick a bone only with our company,” said the lawyer.

Another representative of Ukrtelecom notes that one of the claims from the PGO was totally unsubstantiated. After all, the Law On Radio Frequency Resources does not say that in the process of redistribution of the spectrum each applicant should have some frequencies. “It simply says that the procedure is carried out upon joint request of two legal entities,” he said.

Representatives of Ukrtelecom add that if TriMob’s license is revoked based on the second claim mentioned in the lawsuit (scarce frequencies shall be tendered), then according to this principle it will be possible to challenge the transfer of frequencies from URS (Beeline) and Golden Telecom to Kyivstar within the scope of merger into the single VimpelCom holding. There is no doubt that other companies were willing to receive the range of GSM-900 and GSM-1800, for example, MTS Ukraine and life :).

Yesterday, the first hearing on the lawsuit of PGO was held. The parties voiced their positions. The next hearing is scheduled for December 23.

Who benefits?

There are several versions of why the government wanted to abruptly revoke the 3G license of TriMob. One version says that the NCIRC decided to put pressure on the owner of Ukrtelecom (SCM) so that for the fear of revocation of the license it would not block the process of issuing new licenses. As a reminder, yesterday the regulator announced a tender for three 3G licenses. Its results will be announced in February 2015. The main contenders are Kyivstar, MTS Ukraine and Astelit (life :)). For a long time the Cabinet of Ministers has been holding back the decision and certain market players started to believe that SCM still has considerable influence on the government in this matter, although there is no direct evidence of this.

The second version holds that the government is trying to maximize the duty to the budget in upcoming tenders. Each participant will have to spend a minimum of UAH 3.23 bn for conversion and the license. Some may find such a fee unjustified. Therefore, it will most likely be easier and cheaper to agree to use 3G with Ukrtelecom, especially since the company’s management has already announced its readiness to participate in joint projects. Creating an impression that the license could be revoked at any moment, potential bidders will be afraid to enter into partnership with Ukrtelecom. They will have only one option: namely to compete in the tender so that they don’t become 3G outsiders. And the last version says that one of the mobile operators – a potential winner of the competition – is interested in putting its rivals on the sidelines.

As Capital reported last week, the NCIRC has already canceled Ukrtelecom’s 3G license for 5 MHz across the country due to the fact that the company has not been able to use it. The situation with TriMob’s license is totally different. The company serves more than 800,000 subscribers in all regions of the country.