Kiev’s threat to Russia operators ‘challenging’

MOSCOW / KIEV - Reuters

People stand in line outside the office of Russian MTS cell phone operator in Simferopol. AFP photo

Russian mobile firms face being squeezed out of Ukraine after Kiev signaled it would favor European companies in future airwave auctions to curb Moscow’s influence in the country.

It’s the latest move in a concerted effort by Kyiv, Europe and the United States, to push Russian companies out of international markets until Moscow halts its involvement in territorial fighting in eastern Ukraine. The United States and the EU have imposed sanctions; Kiev and Moscow are engaged in tit for tat action to hurt each other’s businesses.

Yet Ukraine’s government - which has yet to publish the terms of future airwave auctions - may struggle to sideline Russia’s top mobile operators: One has already said it may seek legal redress if necessary and the other may follow.

And with Kiev needing billions in cash to cover funding gaps - the crisis has drained its already shaky economy - it seems unlikely that Prime Minister Arseny Yatsenyuk will follow through his threat to sell a data-focused third-generation (3G) telecom licence to an EU operator for 1 hryvnia ($0.0771) “with the only purpose of not having the Russian monopoly here.”

MTS dominance

Around 80 percent of Ukraine’s mobile market is controlled by Russia’s top mobile firm MTS and Amsterdam-based Vimpelcom, in which Russian billionaire Mikhail Fridman’s Alfa-Group is the biggest shareholder.

Yatsenyuk said he would act to break up that monopoly.

“This time Russia will not receive monopoly rights to all telecommunications licenses ... We want to see European companies as participants of the public sale of the licenses.”

He gave no indication that Russia-linked firms could lose their existing business in the country. But a failure to secure 3G licenses would put them at a big competitive disadvantage because revenues from data and Internet access via mobiles are growing while revenues from phone calls are stagnant.