Ukraine IT Landscape:
Telecommunication Infrastructure

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The quality of telecom services available has improved markedly over the past few years as private, independent providers with their own networks aggressively challenge the traditional dominance of Ukrtelecom, the national telecom monopoly. Currently two companies dominate the fixed-line business market: Utel, majority-owned by Ukrtelecom; and Golden Telecom(GT), which is controlled by the US firm Global TeleSystems Group (GTS).  UkrTelecom owns the entire old national network and the city and intercity networking, and controls 98% of the country's fixed lines. The company also has a monopoly on the physical channels for international traffic. In preparation for eventual privatization, the state telecom monopoly has been successfully restructured and now includes 30 branches providing basic telecommunications services to more than 9 million subscribers.  A setback to the privatization of UkrTelecom came in June 2001 when the company reported that it was likely to sell only a 25% share in Ukraine’s main mobile phone operator Ukrainian Mobile Communications (UMC). UMC is Ukraine’s largest mobile operator with about 600,000 customers. It is a joint venture between Ukrtelekom and three foreign firms that have a 16.3% stake each: Deutsche Telekom (Germany), Tele Danmark (Denmark) and KPN (Netherlands).1 The government still hopes to proceed with the sale of UkrTelecom in 2002.  Ukrtelecom offers telecom services to businesses through Utel, a joint venture formed in 1992 that handles inter-city and international traffic. Ukrtelecom owns 51% of Utel; AT&T (US) and Deutsche Telekom (Germany) each own 19.5%; and Brokbiznesbank (Ukraine) owns 10%, which it bought from KPN (Netherlands) last summer.  Utel is the only business telecom provider with its own national network of digital exchanges. The company offers businesses direct connections to digital transfer exchanges in Kyiv and in 24 of 26 regional capitals--Zaporizhya and Sevastopol being the exceptions.  Utel offers a set of services similar to Golden Telecom’s, although its Internet services are less developed. Utel does not provide mobile phones, but it can make bids in partnership with UMC. UMC offers a national GSM-900 cellular network, whereas GT's GSM-1800 cellular system so far works only in Kyiv and Odessa.  Although the long-distance market was liberalized in 1994, it is not possible to choose a long-distance provider separately: a Utel line comes with Utel long-distance service, and a GT line comes with GT long-distance service. To save money on long-distance calls it is necessary to use secondary long-distance providers, which provide cheaper connections through callback or IP telephony.  In February 2000 GT bought Sovam Ukraine, a major Internet provider, giving GT a national Internet network and World Wide Web hosting capability. However, GT currently offers telephone connections only in Kyiv. Its simplest offer is a single digital phone line for $150, while its most complex projects to date were seamless intranet connections set up for Coca-Cola (US) and Henkel (Germany) between the companies' Kyiv headquarters and suburban factories.  GT makes its international connections through GTS's global network and through Cable & Wireless (UK) and other providers for the rest of the world. Calls placed through GT within Ukraine run through Ukrtelecom's cables because of Ukrtelecom's legal monopoly on all inter-city telephone cables. Although GT's long-distance tariffs are virtually identical to Utel's rates, GT offers individually negotiated discounts for customers who make large numbers of calls. 2 There are about a dozen smaller companies offering telecom services to businesses in Kyiv, and in most other large cities there are at least one or two competitors to Utel. The small providers, such as Optima Telecom and Personal City Communications, aim mainly for local companies and for some foreign entrepreneurs whose main criterion is price. Most smaller providers offer cheaper (but slower) installation and slightly lower minimum monthly phone bills than Utel and GT.  The smaller providers' transmission quality is generally reasonable, but their customer care and reaction speed when systems fail are not up to international companies' expectations. However, while the smaller providers are not yet able to compete for international companies' business, they are having a positive effect on the high end of the market by pushing GT and Utel to improve service and lower prices.  Nevertheless, international tariffs in Ukraine remain high. Some of the smaller providers have licenses to sell their own long-distance services, but since they connect through Ukrtelecom's network and must pay Ukrtelecom for the privilege, their tariffs are generally the same as Utel's tariffs. However, almost all providers offer discounts on a client-by-client basis.  A wide range of secondary long-distance providers offer rates as low as one-fifth those offered by Utel and GT. The introduction of IP telephony presents one promising solution. The past year has seen rapid growth in the number of IP telephony providers, which save money by routing calls through the Internet. Calls are placed directly by dialing a local number, a PIN code and then the destination number. Payment is usually by prepaid card, sold in post offices and by the same sidewalk merchants who sell prepaid mobile phone and dial-up Internet cards.  GT has quietly launched its own IP telephony service, allowing clients to cut international call costs without leaving the Golden "mother ship". GT says that it is still testing its IP system and has not yet decided whether to continue the service in the long term. But one GT client says that his company had been using the system since mid-summer and that it was part of the bundle of services offered to his company when it was shopping for a provider.  Telephones: 1991 per 1,000 people:  135 Mobile Phones: 1998 per 1,000 people: 2 Source:  International Telecommunication Union’s (ITU) World Telecommunication Development Report 1999 and the Internet Software Consortium (http://www.isc.org). Satellite Systems Ukraine has never been active in developing commercial applications for its large and developed space industry, an industry that has primarily focused on military and scientific research projects. But that is changing.  There is a Globalstar satellite gateway station (that will service Ukrainian customers) under construction near Kyiv. Plans include the creation of a Single national Satellite System of Information Transmission (SSSIT).   Also, Iridium's satellite communications services are available in Ukraine.3

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