In May last year, Ukraine’s ex-president signed a decree to roll out the fifth-generation, or 5G, network in Ukraine, currently the fastest mobile data technology available. The deadline for the first launches was set for the end of 2020.
Incumbent President Volodymyr Zelensky, however, canceled this plan in July 2019. He asked mobile operators to slow down and, first, bring the internet to rural Ukraine – where there’s often no internet at all – before taking steps toward a more developed future.
When the change of plans was announced, Alexander Komarov, 47, CEO of Ukraine’s largest mobile operator Kyivstar, breathed a sigh of relief. According to him, 5G sounds cool, but its commercial use will bring nothing but financial losses in today’s Ukraine.
5G systems are more suited for urban areas. Featuring high-speed, low-range equipment, the technology is the first network built to serve the sensors, robots, autonomous vehicles and other devices that continuously feed each other vast amounts of data.
Ukraine isn’t even testing such high-tech stuff. In fact, out of Kyivstar’s 26 million users, only 8 million use 4G.
For this reason, further developing 4G represents a more down-to-earth step, which promises to bring high-speed internet to millions of still disconnected Ukrainians. Komarov is happy that the government and Kyivstar’s visions now align.
“4G is the core tech. It will be the main tech for at least next 10 years,” Komarov says. “Any attempts to switch us to developing more modern, but much less sought after technologies would just divert our resources.”
One of Zelensky’s pre-election promises was to develop the State in the Smartphone, a system that aims to improve communication between citizens and officials. During his campaign, Zelensky criticized the fact that Ukrainians in rural areas often don’t have the internet to use it, and 4G is the best tool available now to fix that.
A man passes by a store of Ukraine’s largest mobile operator Kyivstar in central Kyiv on March 17, 2020. Kyivstar services 26 million SIM cards in Ukraine. Its main competitors are Vodafone and lifecell, which collectively service 26 million SIM cards. Historically, millions of Ukrainians have several SIM cards from rival operators to save on calls to other mobile networks. (Oleg Petrasiuk)
Long negotiations
Kyivstar will start rolling out its high-range mobile internet in small villages of Zakarpattia Oblast in July 2020. Other operators – Vodafone and lifecell, which collectively service 26 million SIM cards – will follow shortly.
Two months from now seems like a good plan. But the negotiations didn’t go smoothly. The operators and the government have been in official talks for a year to start servicing 4G in villages. Kyivstar claims that it offered to launch mobile internet in villages back in 2013.
4G, also called LTE, came to Ukraine in 2018, and the network currently covers 79% of Ukraine’s population. Kyivstar now has a plan to connect 90% of Ukrainians to the web by 2022 as well as to cover all the highways in the country.
The reasons for the year-long delay were technical and political.
The high-range radio frequencies needed to send 4G signals to rural areas weren’t ready for modern use. In Ukraine, these frequencies are in the 900 megahertz range. Using them, operators need fewer network stations – big street internet routers – to cover vast territories. The signal goes far. But they wouldn’t work for urban areas, because radio waves in this range wouldn’t pass through buildings as easily. In cities, Ukrainian mobile operators use low-range 1,800 and 2,600 MHz frequencies.
The high-speed mobile internet is called broadband. In order for it to work, its band must be broad, as the name suggests. But historically each of Ukraine’s operators has had a fragmented band in the 900 MHz range, meaning they could service calls but could not provide 4G.
To fix it, each operator had to pool their frequencies into one basket, and the government had to rearrange them, giving each operator an almost equal share, securing a necessary width of the frequency for every rival.
Kyivstar wanted this to happen and was reluctant at the same time. The carrier possessed more than others in the range – 36% – and pooling its frequencies meant some of Kyivstar’s assets would transfer for free to rivals lifecell and Vodafone, who together had only 25%.
“We sacrificed some radio frequencies that we owned,” Komarov says. “As a result, we have strengthened our competitors.”
The government also had to ensure that once operators start using the 900 MHz range for the internet, Kyivstar would still be able to service voice calls in the same frequency as it has been doing for years.
“We needed to ensure our voice coverage isn’t worsened by this launch, because we serve a lot of voice communication in villages,” Komarov says. Kyivstar has 9 million rural clients. For these people, “voice communication is a social thing, which they use round the clock.”
Kyivstar demanded that the government drive away mobile operator Intertelecom from the 900 MHz range, in which it used to provide 1 million clients with voice calls and 3G. Their obsolete CDMA technology would interfere with Kyivstar voice calls, Komarov says. Intertelecom freed the range on April 1.
Ambitious plan
Once the government ensured voice calls and rearranged frequencies, the operators agreed to start covering Ukraine from the west of the country to its east.
The whole country will never be covered with the mobile internet, Komarov says. But it is in operators’ interest to widen the geography of its services as much as possible, for it’s their revenue which depends on it.
“We are moving to a time when people can get contemporary telecommunication services practically everywhere where they have economic interests,” he says.
Only five years ago, there was no 3G internet in Ukraine. 3G appeared in Ukraine in 2015, and it boosted the development of local online retail and mobile banking, and opened doors for internet giants like taxi service Uber and food delivery Glovo, and streaming media Netflix.
When there’s internet, the economy develops faster, no matter if it’s rural or urban Ukraine, Komarov believes.
“I sincerely believe that we, mobile operators, are building a technological foundation for progress,” Komarov says. “Once it was electricity, heat supply, and the steam engine. Today well-developed, modern IT and telecom is the foundation of the future development of any state.”
A man walks by Kyivstar employees, wearing medical masks during the coronavirus pandemic, in central Kyiv on March 17, 2020. (Oleg Petrasiuk)
No internet in trains
One of the steps Ukrainians are waiting for from the mobile operators nowadays is the roll-out of 4G on intercity trains, but covering railways with internet isn’t even in the plan currently, according to Komarov.
Komarov says it is “a difficult task” that needs operators to build stations along the railroads and have access to equipping the trains, which isn’t possible without an agreement with the government. Ukrzaliznytsia, Ukraine’s railway monopolist, belongs to the state.
Besides, covering trains is too expensive. In order to cover one route – from Kyiv to Lviv, for example – one operator has to invest up to $37 million.
The mobile operators need to find a course of partnership with the government, and it’s not on the agenda at the moment, Komarov says.
More data, higher prices
Today, Ukraine’s three operators invest about $400 million a year into developing their networks. Kyivstar, as the biggest player on the telecom market, puts in roughly half of it, $190 million.
To continue investing at least on the same level, including in the development of 4G in villages, the operators will have to increase prices, Komarov says. Outlining the main reasons for it, the executive points out Ukraine’s 5% annual inflation rate in 2019 and 10% average rate over the last three years.
Besides, according to statistics, once a person starts using mobile internet, their consumption grows almost every month and operators have to increase the capacity of their networks. The growth of internet consumption will be about 70% in 2020.
Another “scourge” is devaluation. Kyivstar buys equipment from international firms like Ericsson, Nokia, Huawei and ZTE, making 70% of all the transactions in dollars or euros.
“Imagine, a slight fluctuation – Hr 1-2 difference per $1 – and we see Hr 100 million evaporating from our investment plan for this year,” Komarov says. “We are a business, so we balance everything. The price levels things.”
Over the last year, the average price per month has grown from $1.8 to $2.6, which still makes Ukraine’s mobile internet the fourth cheapest globally. The average cost of one gigabyte of mobile data in Ukraine is $0.46. Greece is the most expensive in Europe with $12 per gigabyte on average, while Kyivstar’s most expensive tariff with unlimited internet is worth $11.
The operator also pours money into cable internet, developing voice communication and building data centers for storing big data it collects from its 26 million clients.
“This is inevitable – communication services will grow in price,” Komarov says.
But as much as the telecom market would like to increase prices, the cut-throat competition among Kyivstar, Vodafone and lifecell restrains sharp price growth.
On this shaky ground, Komarov has to find a balance: increasing prices but not too much, developing but not too fast, innovating but “within the framework of the reasonable.”
The balance is difficult to find, but the executive enjoys it.
“We are changing Ukraine,” Komarov says. “Any investment in developing telecom is a push toward developing the country where I was born and brought up, and where I live.”
