You're reading: Feeling bullied by Russian firms, Turkish phone carrier holds on

Ismet Yazici likes Ukrainians and dreams of becoming a Ukrainian citizen himself.

But before the Turk gets a Ukrainian passport, he plans to upset the current status quo on the local telecom market, freeing it from domination by two Russian mobile operators, Kyivstar and MTS (now branded as Vodafone Ukraine).

The two Russian operators service over 45 million SIM cards, while their Turkish challenger lifecell, spearheaded by Yazici, has comparatively modest figures — 7.6 million users. In this market position, lifecell feels bullied by the big guys.

“They are trying to beat us,” Yazici told the Kyiv Post, referring to the pressure he feels from the dominant market players. It manifests in price dumping and blocking the rollout of mobile number portability, a service allowing customers to switch operators but retain their phone number.

“Maybe they see lifecell as touchable easily, defeatable. But we are not going to shut up and sit down,” he added.

Yazici sees his competitors as “old guys from old times” and slams their outdated approach to the telecom business, which he believes will eventually divert users to lifecell. The company’s goal is to take 18 percent of the market revenue share.

“That’s when the real competition will start,” its CEO said.

Currently, the Turkish carrier claims it takes up 15 percent of the market revenue share. For nine month of 2018, it has earned $137 million, an increase of 7 percent over the same period last year.

“But old times are gone. The status quo can’t be carried over for many more years — we started shaking old guys with the new tech,” Yazici said. He thinks the faster 3G mobile internet (introduced here in 2015) gave lifecell a chance to challenge established operators.

This year, the three of them have started introducing 4G.

‘Digital operator’

Yazici’s strategy is to build on the fast internet and bring new online services, for which subscribers may like the carrier.

So he has started doing two things: calling lifecell a digital operator and actively developing and promoting its own “digital tools” — apps like messenger BiP, music streaming service fizy and lifecell magazines app for reading the press.

According to Yazici, this approach has already paid off: a typical lifecell user pays $1.98 a month, 13 cents more than a competitors’ user would pay. This achievement wasn’t possible just 10 years ago, when the only service operators could provide was voice communication, he thinks.

However, lifecell has been operating for 13 years, and its subscriber base has remained the same, compared with the figures in 2007.

Besides, the apps lifecell develops are competing with well-established messengers like Whatsapp, Telegram, Viber, and music streaming services like iTunes and Spotify. They all have millions of daily users.

It is unknown whether people would dump these services and switch to lifecell’s. But Yazici thinks they will.

“Messengers Viber, Whatsapp, Telegram are good, but we can do better,” he said, claiming that Whatsapp has copied some of BiP’s features. Now, some 500,000 Ukrainians actively use BiP, according to lifecell.

“We know how to deal with the new era,” Yazici said, bringing up Kyivstar parent company Veon, which has also tried to launch its own eponymous messenger. He suggests Kyivstar and Veon Eurasia’s former head Peter Chernyshov stepped down in July in part because he failed “to deal with the new era” by making the carrier’s own apps a success.

Falling subscribers

In 2015, lifecell was still operating under brand name life;) and 45 percent of its shares belonged to Ukrainian oligarch Rinat Akhmetov. That year, Turkcell acquired this share and rebranded the carrier. This coincided with a heavy user-base drop in the company — from 13.5 to 7.6 million in 2015–2018.

According to Yazici, these were subscribers who obtained numbers, but rarely used them, topping up their phones with Hr 1–2, mostly keeping lifecell as their second operator.

“Thank goodness they left us,” he said. “All the remainers are the heavy data users.”
According to the company’s 2018 third quarter report, today lifecell services 7.6 million SIM-cards.

Unfair competition

The United States got 3G technology in 2002, 16 years before Ukraine. Yazici says Ukrainians had to wait that long because the market acted conservatively, discouraging newcomers like lifecell.

Resistance to mobile number portability is another way for the Russian players to remain dominant. Business users, in particular, want to stay with the same number and, consequently, they have to stay with the same service.

If the market had introduced this “fundamental telecom service” eight years ago, when the parliament actually passed the relevant bill, lifecell would have started shaking the market earlier, and 3G might have appeared much earlier as well, according to Yazici.

“They would have been in a hurry to invest more, to bring technologies earlier,” he said. “It’s a shame. When people ask me about the mobile portability issue, my face reddens.”

According to him, Kyivstar and Vodafone Ukraine block the launch of services to stay dominant.

Yazici admits that, though he can’t say for sure if number portability will guarantee him more subscribers, he believes that it will level the playing field.

Unfair market

Apart from mobile number portability, Yazici says Ukraine lacks pricing regulations, and says the two Russian operators dump prices, leaving lifecell out of the game.

Yazici also would like the market to introduce pricing asymmetry in operator-to-operator calls. Today calls from and to a different operator cost the same for everybody, but the Turk thinks lifecell users should pay less.

For each lifecell subscriber, there’s at least 2.5 Kyivstar subscribers. It means there are more calls going to Kyivstar from lifecell, but they are charged the same money. So lifecell customers opt for buying a competitor’s SIM card. To avoid this, he’d like lifecell users to pay 2.5 times less for calls to Kyivstar.

“(Otherwise) I am not going to be able to grow organically. In fairer regulations, newcomers are provided with these kinds of incentives,” he said. “Third players are welcomed at any telecom market to really start and speed up the competition. Here, they are just letting us to breathe so that we won’t die.”

The Kyiv Post’s technology coverage is sponsored by Ciklum and NIX Solutions. The content is independent of the donors.