As Ukraine’s largest mobile operator with over 26 million customers, Kyivstar is the undisputed leader in Ukraine’s telecommunications market. Today, CEO Alexander Komarov is steering the company to become a multiservice digital IT provider, having already played a paramount role in the development of national infrastructure. Here, Komarov reflects on how Kyivstar is now looking to further enable Ukraine’s promising IT sector to thrive by building its reputation as the Ukraine’s go-to telecom company
You joined Kyivstar in 2018 and bring solid track record in the telecommunications sector, having overseen the launch and growth of digital services in Kazakhstan. What was the road that brought you to Kyivstar?
First and foremost, we need to recognize that Kyivstar is already a large and successful business. As CEO, my biggest aim is to keep it a large and successful business. We are the largest telecommunications company here in Ukraine. I have experience in launching 4G in Kazakhstan that I can leverage here in terms of growth, but 4G was already here in Ukraine when I joined Kyivstar. What’s really critical though is that we explore new revenue streams. That is where a lot of the opportunity for growth is. We are interested in identifying ways to engage our customers that go beyond what a traditional telecomm provider offers. In a few years, I hope we can transform Kyivstar into a multiservice digital IT provider. That is a big task, and of course while we are developing new capacities, we still have to develop our telecommunication services; that is our core. We need to make sure we are continuing to build the network and serve customers. However, if we keep that as our only focus, we aren’t able to focus on innovation as much as we would now like to. We want to have about 5 percent of total revenue of Kyivstar coming from new revenue streams in the next five years. Culture is important in achieving that goal.
Telecommunications is a thriving and growing sector in Ukraine. What is the driving force behind this growth?
Digitization of the customer base is crucial here. While 3G and 4G were delayed in being introduced in Ukraine, one the positive side, now that they are here, penetration and consumption of these services are skyrocketing and this is the main driver of growth. We anticipate double digit market growth for the foreseeable future, which is good and aligned with the large investments we are making in this area. New services, growing consumption of these new services, and data consumption are growing almost 100 percent year on year, and we are continuing to build coverage to support these services in the Ukrainian market. This requires constant reinvestment—we are one of the biggest internal investors in 3G and 4G, and we have only invested about 25 billion Ukrainian hryvnia; other smaller companies have to invest much more. While we are in a growth boom, sooner or later we’ll reach market saturation and full market penetration. At that point consumption growth will steady and that’s where the ability to provide new products will be key.
While penetration in Ukraine is growing, there are still some “black holes” in coverage in Ukraine. What needs to be done to address this?
There will likely always be some black holes. There are almost no countries of a similar size to Ukraine in the world with 100 percent coverage of the territory. However, coverage should grow. 2G is the biggest domain for this. Even in some of the black holes, there is 2G coverage. We will continue to accelerate our current investments into the coverage. Right now we cover over 70 percent of the population through Kyivstar. With organic acceleration we will reach over 80 percent in the next year. In order to go further and deeper, we need to use our frequencies and resources more efficiently. In Ukraine as part of the government’s national plan, high-speed mobile broadband data coverage should increase to over 90 percent. 95 percent of the population will have mobile broadband technology in 3 to 4 years. It’s a big infrastructure target, and we are a main player in this project. Kyivstar accepted a number of difficult compromises to our business in order to be able to partner with government to work towards developing the telecommunications infrastructure of the whole country. We think it is a worthwhile tradeoff.
Most Americans don’t realize that Paypal, Grammarly, or other major tech brands are Ukrainian-made. How do you see the role of telecoms in tech and innovation evolving on the world stage and how can Ukrainians get the word out about brand Ukraine to those who don’t know how much Ukraine is already contributing in technology and innovation?
The first layer we need to work on is improving the business climate in Ukraine. It is the government’s role to make the regulatory environment support the business climate. The second layer is the talent in Ukraine, which is extremely strong. You’re right, we underestimate and undersell the number of gifted Ukrainians who have made tremendous impact on innovation and the global start up ecosystem. The government needs to combine ease of doing business with the immense talent pool. We are a quite high discipline country—we are not a lazy people. The level of education is high here. That’s a good combination. What we see now is the result of constant long term development. The ecosystem will continue to grow on its own, as its successes snowball and lead to more resources and more successes. However, we do need to help out IT companies shift from resource creating companies to value creating companies by continuing to support infrastructure development. If there’s no infrastructure, there’s no further innovation. The infrastructure we create needs to be specific for the ecosystem. For instance, 5G infrastructure and IoT infrastructure on top of basic connectivity will help the ecosystem develop.
How is Kyivstar incorporating innovation it sees in the broader ecosystem into its work to elevate traditional telecommunications and to create new products?
We need to provide a base as a mobile operator for these innovative tech companies to build their platforms. We’re trying to incorporate this type of forward thinking into our own work. For instance, we are the first Ukrainian telecoms company to launch an accelerator. We also created a big data school. We’ve already taught 80 people, 12 of whom have joined Kyivstar, so it’s a great way to feed innovation into our business process. This year we had 3,000 applications for our incoming big data school cohort. Now we’re thinking about how we can scale up. In addition to these larger initiatives we also have to be willing to support innovation on a project by project basis where it is complementary to our business. We have to attract and retain talent here in Ukraine and the only way we do this is by ensuring the ecosystem and the market are strong. People pay 100 times the amount they pay elsewhere to go and study in the United States. It’s not just because the universities are great. It’s because there is a huge supportive ecosystem and a strong market as well. All the elements work together. There is academia, talent, money, and opportunities all in one location. We are a big country with a lot of the potential to become something similar. We want Ukraine to be able to compete for the Eurasian, and ultimately global, talent pool.
The new Ukrainian administration’s big target is digitization for transparency. Andy Hunder of the American Chamber of Commerce in Ukraine said that historically, rule of law and transparency have given potential investors pause. How can the telecoms sector work with government to help meet transparency targets?
I’ll say once again that it all depends on the infrastructure, and the government supporting this with industry. There are important tools and platforms that lay on top of the infrastructure, so the infrastructure itself needs to be solid. The government is trying currently to unite their multiple databases into one database that will be created on top of telecom and connectivity infrastructure and will give external visitors to the site easy access to the government information they need. In order to do this, we need to ensure accurate identification and classification of the customers. Then we can build cloud services to integrate Mobile ID, face ID, and national ID. The government of course is also tasked with determining how to keep the data protected and inside Ukraine. The whole digital services market is developing rapidly here. Currently at Kyivstar, our role is focused on telecoms infrastructure, data storage infrastructure, data and verification, but we are also looking for other roles in the end user infrastructure. We are trying to utilize our creativity and abilities to find new services that will enrich and engage our 26 million customer base as much as possible.
In recent years we’ve seen near market saturation of cell phones here, and we’ve also seen major foreign players enter the market. What opportunities does Kyivstar see that will allow it to retain and grow its market share?
There are two trends. The market is really saturated for a number of devices and sim cards, and we’re even seeing a backwards trend, because of migration out and sim card shrinkages. Since roughly 2016, customers tend to want to stay with one brand operator versus having a number of sim cards. There are opportunities in IoT. We see that the overall number of customers is declining, but the number of devices connected to the internet are growing. This growth is dependent on the 3G and 4G infrastructure, but specifically designed 5G infrastructure can increase device connectivity and allow room for further growth with much higher numbers of simultaneous high speed connections. We still have a few years left of over 50 percent growth of data consumption. The average revenue per user should still continue to grow quickly, as Ukraine data consumption is still somewhere in the middle from a GDP per capita perspective, and we are low in other usage indicators. We also see some opportunities in fusing national infrastructure and our current work. For instance, the national stadium and Kiev metro are major infrastructure projects that require efficient and extensive systems of coverage.
Do you have a final message for readers from Kyivstar on why they should consider Ukraine for investment and why they should be partnering with Kyivstar?
We are an extremely transparent company, and are setting an example of how to do business in Ukraine, a relatively difficult environment by international standards. We are very open to sharing our experience and knowledge with other companies to support our clients in new ways. From a broader Ukrainian perspective, Ukraine is a hot spot on the investment map right now. I hope that all of the buzz we have been receiving will translate into foreign direct investment. The purchasing power of Ukrainians is higher than some of their spending patterns right now. We hope that good policy combined with significant investments can make a miracle happen.