Ukrainian Antitrust Agency might fine MTS, Kyivstar for not lowering tariffs

The Anti-Monopoly Committee of Ukraine (AMCU) opened an investigation of two leading Ukrainian mobile operators, Kyivstar and MTS. The Committee said both operators failed to execute an order to decrease mobile tariffs “to economic justified levels”. AMCU has a power to fine the companies for breaching anti-trust regulations by up to 10% of their annual revenue, according to Ukrainian legislation.

Alexander Paraschiy: The news might have negative implications for parent companies of Ukraine’s leading operators, MTS (MBT US) and Vimpelcom (VIP US). In the worst case scenario, Kyivstar will pay USD 164 mln fine (6% of Vimplecom’s operating profit and 61% of its net profit for 2011), while MTS-Ukraine will pay USD 144 mln (2% of MTS consolidated OIBDA and 8% of profit for 2011). Nevertheless, we see apparent unwillingness of Ukrainian mobile majors to cut tariffs as well-grounded, as tariff cuts to the levels demanded by AMCU would be more painful for the companies’ financials than a maximum AMCU’s penalty.