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In the first week of February 2006, the Ukrainian government will officially begin the bidding process for the privatization of its incumbent, Ukrtelecom. This operator is one of last incumbents to be privatized in Central and East Europe (CEE) and offers foreign investors a stake in Ukraine’s largest telco, raising hopes among industry participants in Europe. As with many other large fixed-line operators, its infrastructure is old and the company has been neglected for many years. Despite the risks, Pyramid Research believes Ukrtelecom is an attractive investment for a buyer with a large budget to fund improvements in the near term while having a strategic outlook and managing a return over an extended period.
However, Ukrtelecom offers more than any other fixed operator which was privatized over the last few years in this region: market growth in the fixed sector and huge potential of this under-developed country promises to be an attractive place to do business over the next 5 to 10 years. Additionally, Ukraine is one of the largest countries in CEE with over 47m people and displays huge potential as a growing economy. The real GDP growth in 2005 reached 3.7 percent and, according to the EIU, it will double over the next two years. The purchase of Ukrtelecom provides an excellent opportunity to enter this very attractive part of CEE – neighboring Russia and a number of developing CIS countries like Kazakhstan.
The Ukrainian market has shown double-digit growth in the mobile sector and a growing fixed-line segment. The markets under-developed infrastructure and increasing demand for telecom services creates attractive opportunity for investors and vendors alike. The mobile sector has been doubling its subscriber base every year since 2003 and Pyramid expects the market to remain strong for at least the next 5 years. While the mobile sector is flourishing now, the broadband market will follow suit in the next few years and become another focus point for companies seeking significant revenues from the Ukrainian market. Fixed-line penetration in Ukraine reached just 26 percent in 2005 and it is expected to rise steadily during the next 5 years. Dial-up Internet dominates the market at the moment and broadband penetration remains negligible. However, escalating demand from business as well residential costumers for fixed–line services will make the market very attractive in the next 5 to 10 years.
Purchase the Ukraine Research Pack that includes the Ukraine fixed and mobile forecasts as well as the Ukraine Country Outlook in our online store.
Purchase complete analysis of Ukrtelecom liberalization in the Europe Perspective available in our online store.
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