Danon: illegal cable operators remain key challenge in Ukraine

Piracy and associated artificially low-cost competition remains the major challenge facing network service providers in Ukraine, according to Pierre Danon, the chairman of Volia, the country’s leading cable operator.

In an interview with Ukrainian magazine Correspondent, Danon said that competition from pirate operators that did not pay taxes and did not pay or underpaid for content by underreporting the number of subscribers they had presented a real challenge to operators that played by the rules. Danon said such operators, unlike Volia, did not invest in upgrading their networks and provided only analogue services, leading to the underdevelopment of HD and advanced services in the country.

Danon ruled out an IPO for Volia in the near future. He said the operator would focus on acquiring new operators following its acquisition of Falstap in Dnepropetrovsk  and Odek in western Ukraine last year, and on improving sales, marketing and customer service under new CEO György Zsembery.

Volia is backed by private equity groups SigmaBleyzer, Providence Equity Partners, Goldman Sachs and Eton Park Capital Management.

According to Danon, Volia’s share in the Ukrainian pay TV market in cities in which it was active had grown from 55% to 59% over the last year. In internet services, its share stood at 20%, he said.

Danon said Volia’s turnover was now just under US$1 billion (€750 million) and revenue were growing at 2-3% a year. He said profitability was comparable with western countries, with EBITDA coming in at just over US$400 million, producing cash flow of US$150 million.