UKRAINE: Tender For 3G-Communication Licensing

CMS Cameron McKenna, 
Kyiv, Ukraine, Tue, Dec 16, 2014

Previously, the Commission adopted theterms and conditions of tender (the “Tender Conditions”) which wereapproved by the Ukrainian government and made public at the beginning ofDecember 2014.

Offered Lots

According to the Tender Conditions, theUkrainian government offers three licenses each of which will ensure 30 MHz offrequency bands coverage in each region of Ukraine (specifically in thefollowing bands: 1920-1935/2110-2125, 1950-1965/2140-2155 and 1965-1980/2155-2170MHz).

Each license will be valid for a period of15 years.

Bidders’ Eligibility

·        OnlyUkrainian residents are eligible to bid for a license.

·        Thecompanies which are subject to sanctions under the Law of Ukraine “OnSanctions” will not be allowed to bid.

·        One bidderwill be awarded with one license only.

·        All biddersmust submit the documents listed in the Tender Conditions, including: (i) atender proposal (a corporate decision to bid for a license); (ii) documentsabout the bidder (a formal application; financial information about the bidder;information about the bidder’s staff, etc.); and (iii) the bidding price.

Price for a License and Other Costs

UAH 2.7 billion (ca. EUR 135 million) wasannounced as a starting price for each license.

In addition, each successful bidder willhave to partially cover the cost of the conversion required to free up certainfrequencies currently allocated for military purposes. The total cost of theconversion was announced to be UAH 1.6 billion (ca. EUR 80 million) and eachsuccessful bidder will have to cover at least UAH 530 million (ca. EUR 28million).

Successful bidders who have not yetobtained a license to provide mobile telecommunication services in Ukraine(which is required along with a license to use the radio frequency resources ofUkraine) (the “Business License”) will have to obtain it as well.Obtaining a Business License costs UAH 14 million (ca. EUR 700,000).

Tender Procedure

The bids will be accepted from 15 December2014 until 15 January 2015.

The tender will be held as a voice trading(unless there is only one bidder) during 16 February 2015.

Each bidder will have to pay a tendersecurity in the amount of UAH 270 million (ca. EUR 13.5 million) 3 days priorto the tender day. A tender security payment is generally refundable 10 daysafter the tender results are announced (with some exceptions applicable to thesuccessful bidders and those who have been in breach of the tender process,including the process of awarding a license).

Commitments of the Successful Bidders

Once the license is issued in favour of asuccessful bidder, it will have to ensure that:

·        allregional centers of Ukraine are covered with 3G communication (within the bandsgranted to that successful bidder) within 18 months from the date of thelicense issuance;

·        allsettlements with a population of over 10,000 are covered with 3G communication(within the bands granted to that successful bidder) within the period of 2 to6 years from the date of the license issuance;

·        its portionof the cost of the radio frequency conversion is duly financed;

·        an approvalof the Anti-Monopoly Committee of Ukraine, if required, is duly obtained; and

·        it iscompliant with other formal requirements to be able to start providing mobiletelecommunication services in Ukraine.

The Tender Conditions are available at the Commission’s website http://nkrzi.gov.ua/index.php?r=site/index&pg=99&id=705&language=uk.

Regulations:

Resolution No 1181-p of the Cabinet of Ministers of Ukraine “OnApproving Terms and Conditions of the Tender for the Assignation of Licenses onthe Use of Radio Frequency Resource of Ukraine for the implementation of RadioTechnology “Digital cellular radio communication IMT-2000 (UMTS)” in radio frequency bands: 1920-1935/2110-2125,1950-1965/2140-2155, 1965-1980/2155-2170 MHz” dated 05 November 2014; and

Tender Conditions for assignment of licenses on the use of radiofrequency resource
of Ukraine for implementation of radio technology “Digital cellular radiocommunication IMT-2000 (UMTS)” in the radio frequency bands:1920-1935/2110-2125, 1950-1965/2140-2155, 1965-1980/2155-2170 MHz, approved bythe Decision No 730 of the National Commission for the State Regulation ofCommunications and Informatisation of Ukraine, dated 28 October 2014 (asamended by the Decision No 761 dated 18 November 2014 and Decision No 782 dated01 December 2014 issued by the National Commission for the State Regulation ofCommunications and Informatisation of Ukraine).

For more information please contact:

Olexander Martinenko, Senior Partner, Olexander.Martinenko@cms-cmck.com

Olga Belyakova, Counsel, Olga.Belyakova@cms-cmck.com

Anna Spichenko, Lawyer, Anna.Spichenko@cms-cmck.com