17 Apr 2012Ukraine Broadband Overview

Ukraine is one of the largest countries in Central and Eastern Europe (CEE) and it has already shown potential for significant economic growth. Due to still rather low penetration, the broadband market is an attractive sector for companies seeking significant revenues. However, a drop in growth rates in large metropolitan areas with relatively high broadband penetration can already be seen. For example, as of mid-2011, the largest number of Internet users lived in Kiev region – 44 per cent. At the same time, good growth is observed in smaller towns and regions. In the next three years, Internet penetration in these settlements will begin to approach the performance of large cities. Overall, it is projected that in the coming years, broadband penetration will increase to 50-70 per cent, with revenues increasing several times.

Until 2004, the telecoms sector was monopolised by the incumbent Ukrtelecom. In 2004, the regulatory body was established, and since then the regulator has been taking steps to open up the market, one such initiative being the privatisation of Ukrtelecom.

When it comes to deployment of new technologies, Ukraine is even behind countries of Central Asia. At the same time this provides high potential for growth, especially with respect to the development of new technologies such as 3G and convergent services. This trend will be facilitated by recent mergers between fixed and mobile operators Comstar and MTS as well as Kyivstar and VimpelCom (Beeline). In the coming months and years, Ukraine expects even further consolidation of the market, with large operators absorbing the smaller players.

The subscriber base of local fixed-line telephone networks had been growing until 2008. Since 2009, however, the number of subscribers kept falling. By the end of 2011, the number of fixed line customers in urban areas fell to 10.56 million (down 2.5 per cent since 2008) while the number of fixed line customers in rural areas fell to 1.59 million (down 4.2 per cent since 2008). At the end of 2011, the average fixed line penetration in Ukraine stood at 26.6 per cent. However, it varied greatly between regions – from 60 per cent in Odessa to 14.8 per cent in Zakarpatsky region. Fixed telecommunication lines hardly evolve, especially in rural areas. Ukrtelecom being the leading fixed-line operator with a 95 per cent share in rural areas has suspended deployment of the lines. Other local fixed-line operators do not intend to roll out their networks in rural, mountainous, or depressed areas, but rather target customers in cities and in business segment.

In addition to Ukrtelecom, some 700 other companies operate in the local fixed-line market. The largest ones include Vega Tele communication Group, Intertelecom, Telesystems of Ukraine, CST Invest, and ITC.