What has changed with the disconnection of mobile communication in Donetsk? (analytical report)

What has changed with the disconnection of mobile communication in Donetsk? (analytical report)

Overview

The disconnection of the last major Ukrainian mobile communication operator in non-government controlled territories of Donetsk region, deteriorates the communication between the Ukrainians on both sides of the demarcation line and makes for the propaganda and financial influence increase of the “Donetsk People's Republic”. Ilko Kucheriv Democratic Initiatives Foundation’s findings show that 49% of the residents  of Donbas territories controlled by the government keep in touch with their relatives in an uncontrolled area. The line of demarcation is daily crossed by more than 20 thousand citizens.  According to the survey of “Detector Media” public organization, conducted in 2017, most citizens in front-line districts trust the news from their relatives and friends, which means that information is communicated informally, including by means of mobile communication.

In early 2018, self-proclaimed power in separate districts of Donetsk region began monopolizing the mobile communications in non-government controlled areas. That was a continuity with the “DPR” group policy of the intensification and development of  budget revenues sources.

Official economic connections with enterprises in the uncontrolled territory were terminated in March 2017 after their being seized by self-proclaimed authorities and the decision of the National Security and Defense Council of Ukraine on the on the termination of the movement of goods across the line of contact.  After gaining control over industrial and other enterprises, including mobile communications, the “DPR” group creates sources for its self-financing in 2018-2019.

Today, the official Ukrainian authorities have only limited influence on the situation at the seized enterprises. Similarly, the Ukrainian government does not affect the process of the mobile communication restoration. It should be noted that Ukraine has available international channels for addressing this issue, which has become humanitarian due to the fact that more than 1 million people are at risk of losing their access to permanent mobile communication, while they not only need to  communicate with their relatives, but also to solve many vital concerns (having access to a bank account, communication with Ukrainian power structures and law authorities, etc.).

Background

On January 11, 2018 in non-government controlled territories of Donetsk and Luhansk regions, the connection of  “Vodafone – Ukraine” mobile operator (hereinafter – “Vodafone” company or the company) has ceased. According to the data of the Register of Legal Entities and Sole Proprietorships as of March 21, 2018, the ultimate beneficiary of a company operating under the international brand is Russian billionaire Volodymyr Yevtushenkov, who also controls the activities of the Russian operator “MTS”.

On January 12, 2018 “Vodafone” informed about the damage of the fiberoptic communication channel in the ATO zone. Similar cases have already happened in 2017, but the connection was restored at that time.

After the commencement of hostilities and the loss of control over these territories by the Ukrainian authorities, the company ceased maintenance of its networks and controlled them remotely.

Representatives of the company said that as of January more than one third of equipment located in a non-controlled territory, was already inoperative.

“Vodafone” reported that it had appealed “to all responsible authorities, including the Ukrainian administrations of Luhansk and Donetsk regions, the Joint Center on the Control and Coordination of the Ceasefire, the OSCE mission, with the request to ensure an access to the “gray” zone for repair teams”.

On January 17, the company informed that “the repair work on removing fiberoptic cables has begun”.

On January 19, the completion of repair work on the restoration of communication was reported. Communications services have been restored in Luhansk region. However, the network did not resume its work in Donetsk region. The company suggested that the equipment was probably out of service or there was no power supply.

On January 21, “DPR” announced the launch of more than 100 seized stations of the Ukrainian “Life” operator in order to meet the “increased demand” for its own “Phoenix” mobile operator .  

“Phoenix” is a “state enterprise” (the name “republican communications provider” is also used), which was established in 2015 on the basis of the Ukrainian company “Kyivstar”’s seized equipment.

In Donetsk, there was a feverish demand for the “DNR” operator’s cards. They were bought faster than delivered at points of sale. Networks could not stand the load.

On January 26, Leonid Kuchma, Ukraine’s representative in the Trilateral Contact Group in Minsk, appealed to the Deputy Prime Minister for Regional Development, Construction and Housing of Ukraine Hennadii Zubko to solve the problem with mobile communication in Donetsk.

Zubko redirected this issue to the National Commission, which carries out government control in the sphere of communication and informational support. The commission informed the authors that according to their information received from “Vodafone”, the provision of services in the non-controlled territory of Donetsk region is impossible due to the suspension of the network facilities since 19/01/2018, in particular, the network site in Donetsk city (Illicha street, 111b) and transit network points in Torez (Fabrychna street, 2) and Debaltseve (Zhovtneva street, 84). The actual cause of the suspension (deenergization, disconnection/damage of the equipment or other) have not yet been determined.

The issue of the restoration of the Ukrainian mobile operator has been repeatedly discussed during the negotiations in Minsk at the meetings of the economic subgroup during 2018, but the connection has not yet been restored.

The negotiators blamed the unwillingness to solve the problem on each other.

This is done because for the occupation administration worse is the better... The occupation authorities are interested in breaking the humanitarian and economic ties of the occupied territories with Ukraine... [After Russia’s departure from the Joint Center on the Control and Coordination of the Ceasefire - editor's note] Russians do not assume the responsibility for security guarantee during the repairs, so there is no way to carry them out now”, Iryna Gerashchenko, the representative of Ukraine in the humanitarian subgroup of Minsk negotiations, said on February 15.

“Unfortunately, Ukraine only made statements that they were supporters of “Vodafone” communication restoration, but it did not result in any specific steps. We have the relevant suggestions on what to do”, Denis Pushylin, a member of the “SPR” group said on February 9 on the meeting of the Trilateral Contact Group on the Peaceful Settlement of the Situation in the East of Ukraine.  

On January 29, the “Ministry of Communications” of the “DPR” organization offered “Vodafone” through the media to launch an alternative version of the communication through the territory of Russia. The company was skeptical about this possibility, since no Russian mobile operator works on an uncontrolled territory.

On February 12, Viktor Remskyi, deputy head of Donetsk regional military and civil administration, supposed that the mobile connection in Donetsk region would not be restored due to the position of the Russian Federation and the “Donetsk People's Republic” organization that was under its control. It seems that the “DPR” representatives demand that “Vodafone” pay off a debt for consumed electricity.  Remskyi pointed out that the company was ready for negotiations and for restoring the connection, but it was the position of “DPR” that did not allow it to happen.

Later representatives of DNR stated that the restoration of communication is possible with the "political will" of the Ukrainian authorities, but so far they have allegedly not received a response from Vodafone and the Ukrainian side to offer assistance in restoring the work. They also noted that the lack of communication is not related to debts for consumed electricity, but to damage to the communication channel.

On March 12 Daryna Olifer, the spokeswoman for the representative of Ukraine in the Trilateral Contact Group Leonid Kuchma, has informed that in Minsk, the parties agreed to resume mobile communication.

The last mobile operator

Vodafone was the only major Ukrainian mobile communications operator in the uncontrolled territory. It provided services to subscribers on both sides of the demarcation line.  In general, there are 3 large mobile operators in Ukraine: “Vodafone”, “Kyivstar” and “Life”. “Kyivstar” stopped working in the uncontrolled territory back in 2015, and in 2017 it was “Life”.

Now for the residents of the uncontrolled part of the Donetsk region there is a “DPR” mobile operator “Phoenix” at hand, which was created, as it have been already mentioned above, on the basis of the seized capacities of the Ukrainian operator “Kyivstar”. Although “Phoenix” was not popular among local residents until the disappearance of the Ukrainian operator, in December 2017, on the eve of the connection loss, representatives of the “DPR” claimed that their operator has 625 thousand subscribers. However, not all of them were active users. The services of this operator can be used only in non-government controlled Ukrainian territories - “Phoenix” does not work across the contact line.

“Vodafone” remained the priority for the residents of the uncontrolled Donbas territory, as this mobile operator gave the opportunity to communicate with subscribers in the controlled territory and the quality of services was higher than the “Phoenix”. Ukrainian citizens living in an uncontrolled territory, their bank accounts were tied to the numbers of the Ukrainian operator.

Prospects for restoring communication

At the request of “Donetsk Institute of Information” the “Vodafone” company replied that there is no way to restore the communication, because the equipment is disconnected from electricity. Representatives of the company reported that the situation in Donetsk technically does not differ from the situation in Luhansk. That is why after the “optics repair” the network's work in Luhansk was restored. “Vodafone” reported the “DPR” administration’s  attempts to force the company to pay “taxes” to the groups. The network's performance in uncontrolled territory before the cable damage was estimated by the company at 60-65%.

The press service of “Vodafone” reported that the company rejects the opportunity to establish communication with the help of Russian communication operators’ network, because the majority of mobile operators in the world, and in particular in Russia, are public companies that should operate within legislation, and the “DPR” has no international recognition.

The estimated number of active subscribers in the uncontrolled territory of Donetsk region was estimated at 1 million people.

At the Verkhovna Rada meeting of the Committee on Human Rights, National Minorities and Interethnic Relations, on January 15, the director of corporate governance and control of “Vodafone-Ukraine” Oleh Prozhyvalskyi suggested that “DPR” intends to seize the equipment of the company and uses the situation for this purpose.

Partly, Viktor Yatsenko, the “communications minister of the DPR”, has confirmed the thesis about the seizure of not equipment, but the market. He said that he did not expect to see large Russian mobile operators in Donetsk and Luhansk, because this did not happen even in the Crimea, annexed by Russia. Therefore, the “DPR” administration intends to develop local operator.  Yatsenko also said that there was a possibility of conversion “Phoenix” into Russian numbering.

How communication in “grey territories” under the Russian Federation control works

The experience of mobile operators in territories with uncertain status can be implemented in Donetsk with a high degree of probability.  

The authors define as “grey” those territories, which are under the control of Russia, namely, the self-proclaimed republics on the territory of the Caucasus, Transnistria and the annexed Crimea, as well as separate districts of Donetsk and Luhansk regions of Ukraine. The large Russian public companies are trying not to work openly in these territories, even in those that were officially recognized by the Russian authorities.

Several local operators registered under Russian legislation were created in the Crimea. The connection of major Russian public operators works in Crimea under the terms of “technical roaming”, which leads to its rise in price.

The situation, similar to that in Donbas, is observed in the unrecognized Transnistria. There is a single operator currently working there, but unlike in the territory controlled by “DPR”, it is not “state”, but a private operator – “Interdnestrсom”. The website of the company indicates that its office is located in Tiraspol, but in Moldova, not Transnistria,  although Tiraspol is the capital of an unrecognized republic. This operator is a partner of the local “Sheriff” company, which operates in many economic areas of Transnistria.

“Interteleсom” is a partner of “Interdnestrсom” in Ukraine.  These companies were linked through the founders. In 2016, the Security Service of Ukraine conducted a search in the office of a Ukrainian company. The reason for the search were suspicions in setting up an unauthorized channel of communication with the Crimea. After the annexation of the Crimea, the company with the similar name “Intertelecom” was founded and started its activities under Russian legislation, but now, according to its website, it stops its work in the Crimea.

In partly recognized by the Russian Federation South Ossetia and Abkhazia there are local communication operators, some of them work under the brands of large Russian companies.

In the territories controlled by Russia and unrecognized by the world, the local mobile operators have high profitability and are among the main taxpayers.  

The Crimean mobile operator “K-telecom”, working under the brand Win Mobile, registered in Russia, showed super profitability in 2016. According to Russian media, its net profit increased to 5.86 billion Russian rubles (approximately $ 100 million). According to the Russian Vedomosti edition, the profitability of the operator amounted to 54% in 2016. This is significantly higher than the other operators’ profitability. Extra profits can come from large Russian operators, which are forced to use roaming of the company. “K-telecom” is one of the largest taxpayers in the Crimea.

Transnistria dominant company “Interdnestrсom” has been one of the three largest taxpayers into the budget of this unrecognized republic for many years.

The rise of “Phoenix”

“Intertelecom” is the only working Ukrainian operator in Donetsk, although there are no uncontrolled districts of Donetsk and Luhansk regions in the  “coverage” section of the company’s website. Before the war, this operator was better known as an Internet provider, had a relatively small number of mobile subscribers and was not among the TOP-3 mobile operators in Ukraine. Also, for communication with Donetsk you can use various computer programs, mobile applications, call on “Phoenix” numbers through Russian Federation or on landline phone numbers.

Disconnection of “Vodafone-Ukraine” caused increased demand for “Phoenix” operator cards. According to Andrii Rudnychenko, as of January 1, 2017, the republican communications operator “Phoenix” had 450 thousand active subscribers, and as of the beginning of February they were already 800 thousand. According to Rudnychenko, “these people did not just bought the cards, but actively use them”, but the veracity of this information is impossible to be checked. If before the disconnection of the Ukrainian operator, according to calculations, it was planned to sell 30,000 “Phoenix” start packages a month, after the “Vodafone” connection has disappeared, the start packages began to be produced up to 100 thousand a week. According to Rudnychenko, the seized stations of “Life” operator will allow servicing 1 to 1.5 million subscribers, that is it will overcover the market share of “Vodafone”.

In early March of 2018 “communications minister of the DPR” Viktor Yatsenko said that since the disappearance of the Ukrainian operator 500 thousand “Phoenix” cards has been sold and another 500 thousand potential subscribers are in queues. He estimated the total number of “Phoenix” subscribers at 1 million. This figure coincides with the data about the approximate “Vodafone” subscribers number, received from the company.

According to Yatsenko, the cards for “Phoenix” is produced by a Russian enterprise in the Russian Federation at a rate of 100 thousand cards a week, and it is planning to produce them at a rate of 200 thousand a week.  According to Yatsenko, before “Vodafone-Ukraine” disconnection even the separate representatives of the “DPR” leadership used its services, that, as Yatsenko put it, enabled security services of Ukraine to track their contacts and movements.

Now “Phoenix” is becoming a monopolist in an uncontrolled territory, while the quality of its services remains extremely low. The users complain about the service troubles. More than once the connection just disappeared. There are elements of the information campaign appearing on the local TV channels controlled by the “DPR” group in order to generate users’ confidence in “Phoenix”. In uncontrolled territory, the Ukrainian citizens are looking for special places where the “Vodafone” connection works. They are usually close to the front line - these are the end points of the city in the south and north.

The price of “Phoenix” operator’s standard start package is 120 Russian rubles (about 55 hryvnias, or 2 dollars). The sale of additional 350-500 thousand start packages only paid the “DPR” operator at least 42 to 60 million Russian rubles (20-28 million hryvnias or 750 thousand - 1 million 61 thousand dollars), excluding extra service income and subscriber fee.

This will substantially increase the communication service revenues to “DPR” budget. Taking into account the budget economy in the Russian Federation and economic problems in Donetsk because of the blockade by the Ukrainian authorities, this may become one of the few sources of increase in tax revenues, which will reduce the financial burden for Russia.

Conclusions

Consequences of disconnection of Ukrainian mobile operator:

  • Significant decrease of communication of Donbas uncontrolled part residents with the “great” Ukraine;
  • Ideological and propagandistic “DPR” influence increase as a result of an information gap;
  • The increased control over the residents of the uncontrolled territory by the “DPR” through the communication monopolist of the militant groups’ special services;
  • “DPR” operator “Phoenix” began to receive super profits;
  • Communication becomes one of the “state” monopolies of the “DPR” and a source of revenue for the budget of the militants.   

Currently, despite repeated rounds of negotiations, including in the Minsk format, the issue of Ukrainian mobile communication restoration in Donetsk has not been resolved yet.  

What Ukraine can do:

  • to intensify the process of deconfliction at the meetings of the Trilateral Contact Group on the Peaceful Settlement of the Situation in the East of Ukraine, which includes authorized representatives of Ukraine, the OSCE and Russia;
  • to involve international, non-governmental, volunteer organizations working in the field of human rights protection, in order to recognize the fact that mobile communication has been disconnected as a violation of the human right to communication;
  • to introduce a state system of grant support for NGOs and volunteers who play an important role in providing accurate information on the observance of the temporarily occupied territory citizens’ rights;
  • the Ministry of the Temporary Occupied Territories and Internally Displaced Persons and the Ministry of Information Policy should start working on finding joint models of cooperation aimed at eliminating the gap in the area of government communication with the residents of uncontrolled territories, dissemination of information and infrastructure development;
  • to the Council on Reconstruction and Development of Peace in Ukraine, established by the order of the Cabinet of Ministers of Ukraine dated 14/09/2016: to take into account the current situation with the disconnection of mobile communication and assess this as a risk to the process of the national empowerment for building sustainable peace and to suggest ways of resolving the problem specified;
  • to the Council on National Unity, created by the Decree of the President of Ukraine dated 11/12/2015, to recognize the issue of the unavailability of mobile communication as a risk for the consolidation of Ukrainian society and, taking into account the current situation, to offer the best practices aimed at increasing the national unity and at the national consciousness development.