Ukrainian telecom market has developed gradually from a state-controlled monopoly to a competitive sector. Over the recent years, Ukrainian telecom policy makers and regulator have been striving to establish pro-competitive regulations aimed at liberalizing the telecom market at large. For instance, in 2011, the Ukrainian Parliament abolished licensing of three out of eleven types of telecom services that required a telecom license. The current policy focus is on developing a transparent regulatory framework to encourage investment in the telecom sector.

1. Telecom market players are divided into "operators" and "providers"

Ukrainian telecom law classifies entities providing telecom services into "operators" and "providers". An operator renders its services under a license and has the right to maintain and operate telecom networks and to lease communication channels. Meanwhile, a provider operates under a contract with an operator, as well as a copy of operator's license issued by the telecom regulator. Unlike operators, providers have no right to maintain and operate telecom networks or to lease communication channels.

2. Foreign companies are barred from operating in the Ukrainian telecom services market directly, but may do so through a local subsidiary (whether wholly or partly owned)

Only a locally incorporated company may provide telecom services in Ukraine. Thus, a foreign-based company may not provide telecom services directly to customers in Ukraine on a cross-border basis and may not apply for any telecom or frequency license unless it enters the Ukrainian market through a local subsidiary. Ukrainian law does not restrict foreign ownership in telecom companies.

3. Undertakings must have a general authorization to provide telecom services

Under Ukrainian law, a company planning activities in the telecom sphere (whether as an operator or provider) must submit a start-up notice to the telecom regulator at least one month prior to commencing operations so that the regulator includes it in the Registry of Telecom Operators and Providers. Only after the regulator adds the applicant to the Registry, such a company may offer telecom services subject to compliance with the rules applicable to the specific type of telecom service.

4. Licenses are required to offer certain types of telecom services and to run telecom networks

Ukrainian telecom law sets forth an exhaustive list of telecom activities that are subject to licensing. Generally, these include the services of (i) fixed telephone communications (local, long distance, or international) with the right to maintain and operate telecom networks and to lease telecom channels, (ii) fixed wireless telephone communications (local, long distance, or international) with the right to maintain and operate telecom networks and to lease telecom channels, (iii) mobile telephone communications with the right to maintain and operate telecom networks and to lease telecom channels, and (iv) technical maintenance and operation of telecom and broadcasting networks.

5. Use of radio frequencies is subject to licensing and authorizations

The use of radio frequencies for providing telecom services in Ukraine is subject to licensing. A license to engage in a telecom activity that requires radio spectrum is issued simultaneously with a relevant license to use radio frequencies. The telecom regulator grants licenses to use radio spectrum for providing telecom services on a "first come – first served" basis. However, if the declared demand for spectrum exceeds its actual availability, the regulator must allocate the spectrum only through competitive bidding or tender.

Apart from the frequency license, a radio frequency user must obtain a conclusion on electromagnetic compatibility and a permit to use radio electronic and transmitting equipment for each piece of such equipment.

6. Licenses are not assignable

The holder of a telecom license or a license to use radio frequencies may not transfer such a license to any third party on pain of revocation of the license. Nevertheless, Ukrainian law allows telecom operators using the frequencies to approach the telecom regulator with a joint application seeking to re-allocate the spectrum used by such operators.

7. Telecom operators provide interconnection to their networks

Ukrainian telecom law requires all telecom operators to provide interconnection to their telecom networks in all technically feasible interconnection spots where they have the capacity required to provide up-to-the-standard telecom services. Ukrainian law regulates interconnection of telecom networks and sets forth the conditions and procedure for entry into interconnection agreements and their termination. The catalogue of offers of telecom operators as to interconnecting with their telecom networks is publicly available.

8. Numbering resource is allocated based on a specific permit

The telecom regulator allocates the numbering resource to telecom operators for the period of validity of their licenses and issues respective numbering permits. An operator is eligible to apply for the numbering resource once it obtains a telecom license. An operator should start using the allocated numbering resource by the deadline specified in the numbering permit. An operator may not transfer its numbering resource to third parties, except for assigning numbers to customers or allocating a portion of the resource to providers subject to regulator's permit.

9. Retail tariffs are not subject to ex-ante regulation

Ukrainian law allows telecom operators to set tariffs for telecom services provided to subscribers, although such tariffs are generally subject to control for anticompetitive practices. Furthermore, the telecom regulator approves maximum tariffs for universal telecommunications services. Such services include local telephony, universal access, calls to emergency services, reference information services, and communication via public payphones.

10. Operators designated as having significant market power may be subject to more stringent regulatory requirements

Ukrainian telecom law allows the regulator to establish mandatory tariffs for interconnection and traffic transfer for operators having significant market power (as defined by the regulator) and dominant operators. The regulator also sets maximum tariffs for lease of electrical communications channels by telecom operators with significant market power on the respective markets. Operators with significant market power may not reject an offer from another operator to interconnect, except when a telecom network to be interconnected fails to meet certain requirements (i.e., certification of telecom equipment, etc.).