INTERNATIONAL COPYRIGHT U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE 2000

ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES

 

LOCAL LOOP WIRELESS: PAGING IN UKRAINE

 

AUTHOR:               RUBEN BELIAEV

 

24 JANUARY 2000

 

                                                        

SUMMARY

                                           

Although Ukraine’s telecommunications infrastructure has developed significantly since 1992, it still lags behind Eastern and Central European countries.  There are 80,000 paging customers in Ukraine.  Average monthly fees vary from $25 to $40.  The size of the paging market is calculated at between $24 million and $38 million for services only.  Approximately 50,000 paging customers live in Kiev. 

                                          

Industry insiders anticipate the number of paging customers to double shortly.  Others argue that in addition to the lack of growth in the paging services market, a growing number of paging clients opt for mobile telephone service, due to new flexible and cheap service packages being offered by operators.  It should be noted that all paging operators reported a lack of growth 1999.

 

8 paging companies operate in Kiev and around 20 companies operate in other regions of Ukraine.  The current lack of growth for paging services and strong competition from mobile phone operators may lead to the consolidation of the market under 2 or 4 providers, while smaller companies may close business all together.  Strong competition in the market has forced regional providers to team up with operators at the national level.

 

A.  MARKET HIGHLIGHTS & BEST PROSPECTS

 

ú       MARKET PROFILE

 

Telecommunications in Ukraine has expanded over the past few years, resulting in the development of both wired and wireless communications.  Ukraine now possesses the potential for sophisticated telecommunications in line with European standards. 

 

1.  TELECOMMUNICATIONS INFRASTRUCTURE

 

1.1 WIRELINE COMMUNICATIONS

 

Significant advances in wire-line communications include the completion of a national telecom network with 27 digital, long-distance exchanges. These are located in regional centers (the other 19 regional exchanges are analog) and 3 digital international gateways, as well as installation of a national fiber optic network connected to international fiber optic networks: ITUR, TEL, TAE, BSFOCS.  The fiber optic network consists of 3,500 km of fiber and digital microwave communication lines.  Ukrainian users are offered international telephone communication with more than 200 countries.  ISDN service has been available in Ukraine since late 1996.

 

Two companies dominate the national and long-distance wire line networks: Ukrtelecom and Utel, respectively.  Ukrtelecom was created in 1993, when the Ukrainian Ministry of Communications reorganized the national telecommunications structure by merging several telecom departments and regional PTTs into the Ukrainian State Telecommunications Corporation (Ukrtelecom).  Owning all transmission facilities, Ukrtelecom administers the national wire line infrastructure.  The company employs more than 130,000 people.  Ukrtelecom’s profits totaled US$ 100 million in 1995 grew to US$ 130 million in 1996 and US$ 220 million in 1997.  Estimates for 1998 were thought to be around US$ 500 million net profit, but devaluation of the national currency reportedly brought profits down to US$140 million.

 

Ukraine's resistance to liberalization of its telecommunications industry gave Ukrtelecom a substantial clout in both the political and business communities.  Fierce opposition has delayed privatization of Ukrtelecom, which was reportedly proposed by the Ukrainian Government in 1997 and 1998.  Opposition to privatization has come from different political forces in the National Parliament. Privatization, when it happens, will certainly reshuffle the structure of the telecommunications industry in Ukraine.

 

The long-distance and international provider Utel (owned by: Ukrtelecom 70.5 percent, Deutsche Telecom 19.5 percent, PTT Telecom of the Netherlands 10 percent) was created in 1992. With 1,500 employees and 23 affiliate offices, Utel has enjoyed success: Utel’s total revenues exceeded $338 million in 1998, with a profit of $38 million, compared to $312 million in 1997, with a profit of $34 million for the year. This profit was up from $27 million in 1996.  The company has reinvested profits into infrastructure development, primarily concentrating on interregional and international compatibility.  Ukrtelecom announced more than once its plans to purchase the shares of foreign shareholders (reportedly, negotiations in this regard are under way) to make itself more attractive for potential strategic investors, who would be interested in privatization of Ukrtelecom.  AT&T had a 19.5 percent share in Utel in 1992-1999, but late in 1999 these shares were sold to Ukrtelecom.

 

Ukraine's wire line network, remain far from optimal.  First, fees for new line installation can reach US$ 1000, and may require a long wait.  Secondly, although an increasing percentage of digital equipment is in place, many regional stations continue to connect customers using outdated equipment.  Therefore, the quality of the connection cannot be guaranteed.   Almost all-local loops remain analog with obsolete and worn-out equipment.  This fact prohibits the introduction of a new billing system.  Users pay a symbolic fee of US$ 2-3 per month.  Only in large cities has a new billing system, based on per minute billing, been introduced.  Almost all-local loops are unprofitable.  Ukrtelecom subsidizes local loops with revenues received from unrealistically high fees for international calls, line installation, and registration. 

 

In small towns and villages, the situation is even worse.  There are instances when only one line exists in a village of several thousand people; the wait for a line can range between 7-11 years.  The number of phone lines may vary throughout the regions.  Kiev has the highest density (43 percent), followed by the industrial regions in the east (19 percent).  Telephone lines are scarce in the agricultural regions of Transcarpathia and Carpathia, in the western part of the country.

 

As stated before, Ukraine’s telecommunications infrastructure has developed significantly since 1992, but it still lags behind Eastern and Central European countries. The Government of Ukraine (GOU) hopes to raise average wireline teledensity from 19 to 40 percent over the next 10 years, placing the country closer to industrialized world standards.  This requires the installation of 10 million new phone lines and would costs between US$ 5-10 billion.  This figure calls for US$ 1 billion of annual investment into the developing industry.  This at the present time only seems feasible after Ukrtelecom is privatized.  In the meantime, wireless communication has emerged as the only viable alternative.

 

 

1.2 WIRELESS COMMUNICATIONS

 

Wireless communications is the most active subsector of the telecom industry in Ukraine.  The market penetration for mobile communications is 0.3 percent.  It is one of the most promising subsectors of the market, because of the investments it has received since 1997, when the GSM900 network began.  Mobile service customers do not number above 170,000, but significant reductions in tariffs fees and the introduction of flexible payment plans may increase these numbers considerably. 

The most striking characteristic of the Ukrainian mobile

Communications market is the number of operators.  Presently, five operators offer wireless mobile services in the following standards: GSM900, NMTi 450, DCS 1800, and D-AMPS.  Two more operators are deploying CDMA and TDMA wireless fixed networks with a potential to go into mobile. With exorbitant frequency license fees established for GSM900 and DCS1800 spectrum use, a limited number of customers and the number of operators, it is expected that the development of mobile wireless services in Ukraine will slow down and some of the operators will leave the market.

 

1.3 PAGING

 

The first provider of paging services in Ukraine, Company Radiocom, started operating in 1994.  RDS was selected the standard for paging services.  This standard was in use up until January 1999, when it was replaced by POCSAG.  From 1994 to 1997, paging networks operated on RDS and POCSAG standards.  In 1997, Ukraine was the first in the CIS countries to introduce the ERMES standard.  Though the State Communications Committee of Ukraine selected RDS and ERMES as national standards for paging communications in Ukraine, POCSAG and FLEX standards are widely used.

 

Official statistics for the size of paging services market in Ukraine are not exact.  The Information Center of the State Committee for Statistics provided the following information on revenues generated by mobile communication services:

 

REVENUES FOR JANUARY-SEPTEMBER 1999

($1/UHA 3.7-4.5)

Type of communications	Private companies	Joint Stock Companies	State owned companies
Cellular	-0-	UHA 587,409,600	-0-
Paging	UHA 527,000	UHA  22,981,500	-0-
Trunking	UHA 1,342,100	UHA   3,925,800	-0-

 

(Source: “DK-Zvyazok”, No.42, Nov. 1999)

 

Estimates indicate paging companies provided USD7.64 million worth of services in 1998, or 4% of mobile services in Ukraine.  Reportedly, 71 percent of the total paging services sold in 1998 were provided in Kiev, where 40-45 thousand customers are located.  15.7 percent of the paging services were provided in Odessa, the second largest paging market in Ukraine.  According to these estimates, there are 50,000 customers for paging services in Ukraine.

 

The leading business magazine “Biznes” (No. 8, February 1999) provides conflicting estimates.  In their opinion, there are 80,000 paging customers in Ukraine.  Average monthly fees vary from $25 to $40.  According to these calculations, the size of the paging market is between $24 and $38 million for services only.  Approximately 50,000 paging customers live in Kiev.

 

Numbers for the paging equipment market are not available. Paging companies prefer equipment manufactured by Phillips (50%), Motorola (45%), and NEC (5%).

 

Industry experts anticipate the number of paging customers to double shortly.  Other experts argue that in addition to a lack of growth in the market, there is a growing number of paging clients that opt for mobile telephone services due to the new flexible and cheap service packages being offered by mobile phone operators.  It should be noted that all paging operators reported a lack of growth in 1999.

 

Presently 8 paging companies operate in Kiev and around 20 operate in the regions of Ukraine. The lack of growth in the paging services and competition from mobile phone operators, will lead to the consolidation of the market to 2 or 4 providers, while smaller companies may close. Strong competition in the market will force regional providers to merge with operators at the national level, increasing their roaming area.  In this case a corporation or an association under the same trademark is usually formed. All operators provide manual roaming, except for U-page that offers automatic roaming.

 

Monthly subscriber fees charged by providers ranges from USD 25 to USD 40 depending on the services provided.  Some providers have claimed that a further decrease in fees will make their business economically unfeasible.  However, some regional companies charge as low as $15 a month and continue to operate, admittedly their services may be not of the best in quality and reliability.  Most paging companies have the following features in their marketing strategies:

 

ú       service packages offered by established paging companies are nearly identical in price, given the actual size of the market and number of operators, (fees have already hit the bottom); 

ú       the real competitive distinctions are in a) quality and reliability of service, b) coverage area, and c) additional services offered on top of the basic package;

ú       paging operators set their pricing policy based on the fact that they have to compete with cellular and trunking companies for one category of clients (i.e. mobile service consumers);

ú       it should be noted that while the loss of paging subscribers to cellular providers grew, the number of customers that use both paging and cellular services increased three fold, enabling customers to save on incoming calls;

ú       standard package offered to a new customer includes the price of the pager and subscription fee based on monthly user fee;

ú       the price of a package depends on the number of months prepaid: the longer the term, the lower the monthly fee;

ú       clients are offered digital or text-digital pager packages, the second package, as a rule, is twice as expensive;

ú       flexible discounts are offered to categories of customers (corporate clients, students, war veterans, doctors, etc.);

ú       some providers started offering their customers an additional option, a discount shopping card;  

ú       new companies offer aggressive pricing;

ú       network upgrading and expanding the coverage area does not lead to an increase in monthly fees;

ú       average monthly fees tend to decline;

ú       profitability of paging has tended to decline, preventing new providers from entering the market;

ú       The CPP (Calling Party Pays) principle, widely used in many countries, is not popular due to low-income level of most Ukrainians.

 

The following chart indicates service packages offered by two different providers of paging, along with the costs for pagers:

 

 

PAGER	PRICE ($)	MONTHLY FEE ($) + PAGER	MONTHLY FEE($) + PAGER	MONTHLY FEE($) + PAGER	MONTHLY FEE($) + PAGER
RADIOCOM COMPANY	STANDARD PACKAGE	1 MONTH	3 MONTHS	6 MONTHS	12 MONTHS
CIRSYS	49	78	123	193	327
NIXXO SWING	49	78	123	193	327
GLS BUMERANG	59	88	133	203	337
PHILLIS TWO CAN	59	88	133	203	337
GLS BUMERANG MINI	69	98	143	213	347
GLS BUMERANG 6	69	98	143	213	347
DAEWOO GLA	69	98	143	213	347
MOTOROLA SCRIPTOR LX1	69	98	143	213	347
SUPER VISOR	79	108	153	223	357
MOTOROLA SCRIPTOR LX2	79	108	153	223	357
NEC 26B	89	118	163	233	367
MOTOROLA SCRIPTOR LX4	89	118	163	233	367
NEC 21A	99	128	173	243	377
PHILLIPS PR32310	99	128	173	243	377
DAEWOO APR1100	30	36	45	59	87
PHILLIPS MYNA	39	45	54	68	-
	BUSINESS PACKAGE
CIRCISYS	49	76	118	179	292
NIXXO SWING	49	76	118	179	292
BUMERANG 2	59	86	128	189	302
PHILLIPS TWO CAN	59	86	128	189	302
GLS BUMERANG MINI	69	96	138	199	312
GLS BUMERANG 4	69	96	138	199	312
DAEWOO GLA	69	96	138	199	312
MOTOROLA SCRIPTOR LX1	69	96	138	199	312
GLS SUPER VISOR	79	106	148	209	322
MOTOROLA SCRIPTOR LX2	79	106	148	209	322
NEC260	89	116	158	219	332
MOTOROLA SCRIPTOR LX4	89	116	158	219	332
NEC 12A	99	126	168	229	342
PHILLIPS PRG2310	99	126	168	229	342
DAEWOO APR1100	30	35	41	57	80
PHILLIPS MINA	39	44	53	66	89
LINK TELECOM COMPANY	DIGITAL PACKAGE
PHILLIPS TWO CAN	62	70	87	112	225
PHILLIPS FIORI	62	70	87	112	225
MOTOROLA SCRIPTOR LX1	57	65	82	108	216
MOTOROLA SCRIPTOR LX2	68	75	93	118	237

 

MOTOROLA ADVISOR	75	83	100	125	250
	STANDARD PACKAGE
PHILLIPS TWO CAN	62	75	102	143	287
PHILLIPS FIORI	62	75	102	143	287
PHILLIPS PRG2310	111	124	151	192	384
MOTOROLA SCRIPTOR LX1	57	71	98	138	277
MOTOROLA SCRIPTOR LX2	68	81	108	149	299
MOTOROLA ADVISOR	75	88	115	156	312
	BUSINESS PACKAGE
PHILLIPS TWO CAN	62	84	94	191	383
PHILLIPS FIORI	62	84	94	191	383
PHILLIPS PRG2310	111	133	143	240	480
MOTOROLA SCRIPTOR LX1	57	79	89	186	373
MOTOROLA SCRIPTOR LX2	68	90	100	197	395
MOTOROLA ADVISOR	75	97	107	204	408

 

 

(Source: Magazine “Myr Svyazy” No.3, Nov. 1999)

 

Analysis of the price list shows that 1999 prices are down 11%-40% versus 1998 pricing levels. 

 

B.  COMPETITIVE ANALYSIS

 

There are five major paging operators in Ukraine that share 76% of the national market.  The following chart shows the current share of the market and potential coverage that operators may have in the existing network:

 

OPERATOR	CURRENT SHARE OF THE MARKET	POTENTIAL COVERAGE: TERRITORY (km2)	POTENTIAL COVERAGE: PEOPLE
UKRPAGE	24%	377,000	41,000,000
RADIOCOM	20%	300,000	40,000,000
BEEPER	20%	140,000	21,000,000
LINK TELECOM	8%	30,000	3,000,000
U-PAGE	4%	30,000	4,000,000
OTHER	24%	-------	------

 

(Source: Magazine “Myr Svyazy” No.3, Nov. 1999)

 

MAJOR PAGING OPERATORS:

 

UkrPage

 

UkrPage, a Ukrainian-American joint venture, was formed in September 1997, as a result of a merger between two paging companies in operation since 1995. 

 

The company has 20,000 subscribers in Ukraine, of which 4,000 live in Kiev.  UkrPage claims to control almost 25% the paging market.  The company’s network covers 23 regions and over 150 cities of Ukraine.  The company plans to provide roaming with Russia and Belarus. UkrPage actively incorporates regional operators into its network. UkrPage employs the ERMES standard, and offers services in English, Ukrainian, and Russian.

 

UkrPage provides clients with a single multichannel access number (054) service.  The Company offers pagers manufactured by Philips, Motorola, NEC, and Future Telecom.  The Company offers discounts for teachers, students and doctors. 

 

UkrPage plans to use Internet to forward messages, bypassing the company’s operating center. UkrPage works with the Ministry of Interior to establish a system that would provide clients with office, residential security and fire alarm service.

UkrPage offers the following additional services:

ú       banking and financial news

ú       general news and weather forecasts

ú       voice mail

ú       virtual pager (forwarding of messages to the e-mail address)

ú       leasing of pagers

ú       access and monitoring of personal bank account

ú       group paging: up to five pagers are connected to the same personal service number

 

 

Radiocom

 

Radiocom was founded in April 1994. The Company became the first paging provider in Ukraine and operated the POCSAG and RDS standards (the RDS standard ended early in 1999). The company doesn’t plan to introduce other standards before its customers exceed 25,000.  Radiocom has 20 percent of the local market for paging.  Radiocom offers a single service access number: 069, which has 36, access lines.  The company employs 150 people.  In April 1998, Radiocom in association with regional paging companies established the Radiocom Corporation including ABC+ (Nikolaev), Astelecom (Cherkassy), Bravo (Odessa), Gannibal (Kherson), and Dniprovyklyk Ltd. (Dnepropetrovsk).  To date, the Radiocom network covers 22 regions and 140 cities including Odessa, Mykolayv, Dnypropetryvsk, Kherson, Zhytomyr, Cherkassy, Poltava, Donetsk, Chernyhyv, Kharkyv, Luhansk, Kyrovohrad, Uzhhorod, Vynnytsa, Khmelnytskiy, Sumy, Zhaporyzhyya, Chernyvtsy, Lvyv, Symferopyl.  About 80-90 percent of the company’s customers are located in Kiev.

 

Radiocom subscribers can receive e-mail messages and digital messages to their telephone.  The company also started offering voice mailbox service.  Beginning in December 1997, Radiocom provided its customers with the incentive of a free discount card “Capital Club”.

 

Beeper Paging

 

The Company Beeper was founded in October 1995.  Reportedly, shareholders include American and Israel companies.  Beeper employs 300 people and boasts of having a 20 percent share of the paging market.  Company covers 23 of the major Ukrainian cities and their regions: Kiev city, Kharkov, Donetsk, Dnepropetrovsk, Zaporyzha, Odessa, Mykolayv and Lvyv.  To expand its business network, Beeper incorporated several regional operators.         

 

Beeper was the first Ukrainian operator employing the truncated data interchange format, FLEX (this standard is also used by UnetPage). The company offers a single access telephone number with 21 access lines.  Beeper’s customers are serviced in Russian, Ukrainian and English.  Beeper is an authorized distributor of paging equipment manufactured by Motorola. 

 

The Company offers a variety of additional services: Aside from paging, Beeper operates a trunking network in Kiev based on equipment manufactured by Motorola. Company performs telecom “turn key” projects for corporate clients.

 

Link Telecom

Link Telecom started operating in November 1995.  Reportedly, the founders are PIKON -Macedonia’s paging and trunking provider, and Travelink -a Ukrainian Company operating a chain of Motorola service-centers.  To date, the Link Telecom network covers two cities: Kiev and Zhitomir, it has licenses to operate in 7 regions.  The company has over 4,000 subscribers, and cooperates with regional operator’s, in this way, increasing the number of customers and the coverage area. Currently, Link Telecom has 8 percent of the local market for paging.

 

Link Telecom plans to introduce roaming with numerous countries, including Russia, Kazakhstan, Belarus, Macedonia, Bulgaria, and to expand to Eastern European markets in the near future.

 

Link Telecom is also an official distributor of Golden Telecom, a GSM1800 operator.  The cooperation began with the Golden Package project, when a subscriber buys a pager he receives a free mobile phone.  This marketing boosted sales of Golden Telecom's mobile phones by 25 percent.

 

U-Page

Closed Joint Stock Company U-Page is an exclusive provider of paging services based on ERMES standard in Ukraine. In October 1997 U-Page started providing “Eurotext” service. Currently, U-Page has 4 percent of the local market for paging.

U-Page automatic roaming network covers Kiev and Dnypropetrovsk.  U-Page offers the following additional services:

ú       forwarding of alphanumeric messages directly though a multichannel phone in Kiev;

ú       reception of messages via Internet to the home page of U-Page (http://www.eurotext.kiev.ua;

ú       forwarding of e-mail messages directly to the pager;

ú       voice-mail service

ú       international and Ukrainian news

ú       weather forecasts

ú       entertainment

ú       sport news

ú       road traffic reports

ú       page-print (print out of e-mail messages)

ú       page-mail (forwarding of e-mail messages to the phone)

 

 

C.  END-USER ANALYSIS

 

Statistics and research, that would identify social or professional groups most inclined to become customers of paging services are not available in Ukraine.  However, some estimates can be made for mobile phone and Internet users, two categories of customers that are very close and often overlap with paging user.  Based on this analogy it can be estimated that an average Internet user in Ukraine is a male, between 21-40 years old, engaged in business.  Most paging users are corporate customers or medium and small businesses.  Miscellaneous self employed individuals including private doctors, real estate agents, multi level marketing agents represent a large portion of the paging customers base.  The most promising end-user category is the corporate user.

 

D.  MARKET ACCESS

 

Leading Ukrainian paging operators are looking for opportunities to diversify and to upgrade the services they offer.  Expensive local credit and lack of confidence from foreign manufacturers usually limit their growth or size.   In practice, the U.S. companies that operate in the Ukrainian market through a local partner achieve better results than those entering on their own.  Ukrainian company representatives who are engaged in the IT industry, usually posses excellent professional skills and an advanced educational level.

 

1. Legal environment

 

Because of the capital-intensive nature of telecommunications development industry, foreign firms have been, and will continue to be, significant players in the market.  At the same time, foreign firms are restricted in their participation by stringent government regulations.  Currently, no Telecommunications provider in Ukraine is 100 percent foreign-owned.  Ukrainian law stipulates that the foreign share in a telecommunications services provider may not exceed 49 percent.  Regardless of a foreign partner's investment, only Ukrainian private or state companies are allowed to apply for the operational and frequency licenses and must hold a 51 percent of the joint venture.  This provision does not however, regulate profit distribution, which can reflect the actual investment made by shareholders. 

 

In addition, no provider of public services may receive access to the wireline networks and public switches without establishing a cooperative agreement with Ukrtelecom.  A lack of transparency in the tendering process, erratic behavior on behalf of the government entities, and frequent changes in legislation have posed difficulties to investors.

 

2. Licensing

 

To launch a telecom network in Ukraine, operational and frequency license are required.  However, providing paging services is not subject to an operational license.  Only a frequency license is required to operate a paging system.  The State Committee for Communications issues the frequency license upon request and payment receipt.  The cost of frequency license for paging depends on the spectrum needed and is rather symbolic, equal to several hundreds of USD.  The obvious benefit for the lack of a licensing requirement for paging operations is counter-weighted by the fact that it creates problems for businesses in tax regulations and increases competition in the market. 

 

3.  Standards and Certification

 

A 1994 GOU decree imposed compulsory certification requirements for goods imported into Ukraine.  The decree specifies telecommunications equipment as subject to certification and regulates certification procedures.  Ukrainian regulations for communications specify that all terminal telecommunications equipment is subject to mandatory certification.  All other telecommunications equipment is subject to voluntary certification, unless the equipment is to be used for public networks.  Equipment used in public networks must undergo mandatory certification by special testing centers under the authority of the State Committee for Communications.  This requirement sometimes turns into a burden, because of widespread corruption.

 

Certificates may be one of two types: (a) Certificate of Acceptance of a Foreign Certification, issued by a Ukrainian certifying agency; and (b) Conformance Certificate issued by a Ukrainian agency upon certification of goods.

 

Certificates issued by foreign certification authorities are recognized in Ukraine only to the extent provided in international treaties to which Ukraine is a party.  In most cases, a foreign certificate will not be honored without first testing the product.  To apply for certification, the following documents are to be submitted to the State Committee for Communications of Ukraine:

 

-  An application stating that the company wishes to

   Certify imported products;

-  A description of the equipment and its technical

   Specifications.

 

The availability of a certificate of accreditation from a well-known foreign testing laboratory and protocols/summary of test results would facilitate and expedite the issuance of a Ukrainian certificate.  Upon receipt of these documents, the State Committee determines the laboratory that will conduct the testing of the equipment.  In most cases, this will be one of two research institutes located in Kiev and Odessa.  The laboratory is responsible for testing the equipment, and its compliance with the following basic requirements:

 

- Electrical and environmental safety;

- Electro-magnetic compatibility;

- Operability with national public network

  equipment.

 

In case a foreign company intends to import equipment on a recurring basis, the certifying authorities may require a visit from Ukrainian standards specialists to the importer's production facilities. The visit is to certify that the company in question is able to adhere to quality and safety standards in the equipment samples submitted for testing.

 

Late in 1998, the Ukrainian authorities claimed that in the future Ukraine would adhere to E.U. regulations for standards and certification.  However, meeting E.U. standards and certification process will not be a quick nor automatic process. Industry experts believe that only certificates issued by selected certifying centers will be accepted unconditionally.

 

4.  Taxation

 

The number of taxes decreased by the Gou’s 1997-tax reform and the trend continued in 1998.  The most significant taxes are:

1.       a 20 percent value-added tax (VAT);

2.       a 30 percent corporate profit tax;

3.       a personal income tax based on an employee's income (ranging from 20-40 percent for most employees of foreign companies operating in Ukraine);

4.       Payroll taxes paid by the employers to the Social Insurance Fund, Pension Fund, and Employment Fund (total contributions to these funds amount to 37 percent of wages, borne by the employer).  The State Tax Administration, responsible for the overall implementation of tax laws, was granted broader authority in 1997, accountable directly to the President and incorporating the Ukrainian Tax Police.

 

The 1997 law on company profit tax canceled automatic profit tax exemptions for companies registered prior to January 1, 1995; who have made foreign investment of more than US$ 100,000.  The "Law on Value Added Tax" and the "Law on Business Profits Tax," which were passed by the Parliament during the first half of 1997, formally provided for a more favorable VAT and corporate tax - essentially, a tax structure similar to those found internationally.  However, the language of the new law and procedural issues, as well as numerous small amendments, often diminish the content of the laws and create additional problems for corporate taxpayers.

 

Both Ukrainian and foreign entities pay their taxes on a quarterly basis.  Obtaining the services of experienced international accountants for tax-reporting purposes is recommended, as many local accountants have not yet made the switch to the international accounting standards required for new tax reporting.

 

In August of 1999, political motives connected to the upcoming presidential elections and a desperate search for additional sources of financing motivated Ukrainian authorities to establish an additional six percent sales tax on wireless communication services, including paging.  Funds received from this new tax allegedly will be used to finance state social pension debts that amount to USD hundreds of millions.

 

5.  Procurement practices

 

Procurement practices in Ukraine utilize many methods, including open and closed tenders.  In order to avoid abuses in strongly monopolized areas of industry, the Ukrainian government usually prefers open tenders as the main procurement method.  However, in a country with an underdeveloped business infrastructure, personal contacts and networks still play a very important role in the procurement process.

 

6.  Financing

 

A variety of sources exist for funding investment projects in Ukraine.  They include government agencies, government-funded programs, publicly and privately financed investment funds directed towards defense conversion, venture capital funds, and grant programs.  It should be noted however, that Ukraine's budgetary belt-tightening measures make government financing unlikely.  U.S. companies would be wise to concentrate on private sources of financing, as well as U.S. and international programs for trade and project finance, particularly when considering large infrastructure projects.

 

The following list contains U.S. and international programs for sources of financing:

 

-        Export-import Bank (Ex-IM Bank);

-        Overseas Private Investment Corporation (OPIC);

-        U.S. Trade and Development Agency (TDA);

-        European Bank for Reconstruction and Development (EBRD);

-        Western NIS Enterprise Fund;

-        U.S. Agency for International Development (USAID);

-        World Bank.

 

For contacts and information about these programs and institutions, please contact the Commercial Service of the U.S. Embassy in Kiev.

 

Regional and city administrations, commercial banks, and large enterprises have their own (limited) financial resources that are often directed towards projects aimed at improving the infrastructure of the region.  Ukrainian Draft National Budget for FY2000 may include provisions that will give much more financial independence to country regions (oblast).

 

Whatever is the source of financing, obtaining international insurance against commercial and political risks is strongly recommended.

 

KEY CONTACTS:

 

A) AMERICAN EMBASSY

 

Commercial Service

7, Kudriavsky Uzviz, 2nd Floor, Kiev 252053, Ukraine

Tel: (380-44) 417-2669, 417-1413; Fax: (380-44) 417-1419

Contacts:            David Hunter, Senior Commercial Officer

Bela Babus, Commercial Officer

Ruben Beliaev, Industry Commercial Specialist

 

B) UKRAINIAN GOVERNMENT

 

1) State Committee for Communications and Information Technologies of Ukraine

(Formerly the Ministry of Communications of Ukraine)

22, Khreshchatyk, Kiev 252001, Ukraine

Tel: (380-44) 226-2140; Fax: (380-44) 226-2926

Contact: Oleg Shevchuck, Head

 

2) National Space Agency of Ukraine

Olexandr Nehoda, Director General

11, Bozhenko St., Kiev 252022, Ukraine

Tel: (380-44) 226-2555; Fax: (380-44) 269-5058

 

Tel: (380-44) 268-7218; Fax: (380-44) 269-5058

Contact: Mr. Eduard Kuznetsov, Deputy Director for Satellite Communications

 

3) Institute for Registration of Information

National Academy of Sciences

2, Shpaka St., Kiev 252113, Ukraine

Tel: (380-44) 446-8389; Fax: (380-44) 446-1491

Contact:  Vyacheslav Petrov, Director

 

4) Ukrainian Scientific Research Institute of Communications

13, Solomenska St., Kiev 252110, Ukraine

Tel: (380-44) 276-1015; Fax: (380-44) 226-2646

E-mail: info@uniis.Kiev.ua

Contact: Mykola Starodub, Director

 

C) Major Telecom Operators

 

 

1)     Astelcom

62, Khmelnytskoho Blvd., Kiev 252030 Ukraine

Tel/Fax: (380-44) 517-6911

 

Paging

 

2)     Beeper Paging

1, Vyzvolytelyv Ave., Kiev 253125 Ukraine

Tel.: (38044) 460-5-460; 516-8443;Fax: (38044) 552-6070

E-mail: b160@beeper.kiev.ua

 

Paging

 

3)     Dnypro Vyklyk, Ltd.

2, Kuybysheva St., Dnypropetryvsk 320027 Ukraine

Tel/Fax:(380562)460-092; 460-225

 

Paging

 

4)     Dopari-beta

146, 50^th Aniversary of USSR St., Donetsk 340055 Ukraine

Tel: (380622) 923358, 353358

 

Paging

 

5)     Elsyton

117a, Lenina Ave., Zaporyzhzha 330095, Ukraine

Tel. (380612) 130-540; 130-541

 

Paging

 

6)     Global Ukraine

27, Panasa Myrnoho St., Kiev 252011, Ukraine

Tel/Fax: (380-44) 294-4366/67

Contact: Yuriy Korzh, Director General

 

ISP

 

7)     Golden Telecom

14/1, Mechnykova, Kiev 252023, Ukraine

Tel: (380-44) 247-5683; Fax: (380-44) 247-5670

Contact: Jeff Howley, Director

 

Provider of DCS1800 cellular telecommunication services,

Fiber optic business lines, ISP

 

8)     Infocom

10, Volodymyrska St., Kiev 254025, Ukraine

Tel: (380-44) 212-2234; Fax: (380-44) 245-4643

Contact: Vasiliy Polischuck, Director General

ISP and satellite services

 

9)     IP Telecom

34, Lesy Ukraynky Blvd., Suite 213, Kiev Ukraine

Tel/Fax: (380-44) 238-8989; 295-5514

E-mail: mail@iptelecom.net.ua

http:\\www.iptelecom.net.ua

 

ISP

 

10)Link Telecom Ukraine

57/3, Krasnoarmeyskaya St., Kiev 252150 Ukraine

Tel.: (38044) 461-9222; Tel/Fax: (38044) 461-9223

Http\\www.link.com.ua

 

Paging

 

11)Lucky Net

19/7, Lypskaya St., Suite 49

Tel/Fax: (380-44) 573-8101

Contact: Sergiy Hulchuck, Director General

 

ISP

 

12)Monolit

1/27, Lykhachova St., Kiev 252133 Ukraine

Tel: (380-44) 295-9080; Fax: (380-44) 295-3053

Contact: N.A. Bakanov, Director General

 

ISP

 

13)Odessa-paging

1, Gretska Sq., Odessa 270026 Ukraine

Tel: (380482) 263-503, 264-907

 

Paging

 

14)Paging & telephone communications

1a, Derevyanka St., Kharkyv 310000 Ukraine

Tel.: (380572) 127-244

 

Paging

 

15)Poltavaradiocom

146a, Frunze St., Poltava 314008 Ukraine

Tel.: (380532) 58-48-70; Fax: (380532) 584-769

E-mail: nmn@prc.poltava.ua

www.radiocom.poltava.ua

 

Paging

 

16)Radiocom Corp.

27, Ushynskogo St., Kiev 252151 Ukraine

Tel.: (38044) 0-69; 573-8888; Tel/Fax: (38044) 242-0300; 242-0301

http\\www.radiocom.kiev.ua

 

Paging

 

17)Romantis-Ukraine, JSCo

12, Borysoglebskaya St., Kiev 252070, Ukraine

Tel: (380-44) 416-1130; Fax: (380-44) 416-4532

E-mail: postmaster@romukr.Kiev.ua

 

ISP and satellite services

 

18)Sovam Teleport

18/7, Kutuzova St., Kiev 252133 Ukraine

Tel/Fax: (380-44) 296-4238

Contact: A.P. Khaletskiy, Director General

 

ISP

 

19)UkrPage

1, Laboratorniy Lane, Suite 240,Kiev 252033 Ukraine

Tel.: (38044) 0-54; 252-8669; 268-3262;

Tel/Fax: (38044) 268-5198

E-mail: marketing@ukrpage.com

Contact: Vladymyr Kryzhanovskiy, Director General

 

20)Ukrtelecom

18, T. Shevchenko, Kiev 252030, Ukraine

Tel: (380-44) 225-3254; Fax: (380-44) 229-8593

Contact: Leonid Netudykhata, Director General

 

This state owned corporation controls all the national wire telecommunications including basic networks, data transmission channels, and Internet channels.

 

21)Unet Page

14/16, Lebedeva Kumacha St., Kiev 252058 Ukraine

Tel: (38044) 457-7775

 

Paging

 

22)U-Page

44, Schorsa St., Kiev 252133,Ukraine

Tel.: (38044) 269-8616; Fax: (38044) 294-4419

http\\www.eurotext.kiev.ua

 

23)Utel

34, Bohdan Khmelnitskiy St., Kiev 252030, Ukraine

Tel: (380-44) 229-8622; 220-7100, 229-0864, 229-1265; Fax: (380-44) 229-8373

Contact:  Olexiy Marinchuck, President

 

Major provider of international and long-distance telecommunication services.

 

24)Vinpaging

22, Kozytskoho St., Vynnytsa 286000 Ukraine

Tel: (380432) 320570

 

Paging