News (#3 March 2020)

Biznews

Infrastructure

Rail provider UZ and Deutsche Bahn signed memorandum of understanding and strategic partnership

Ukrzaliznytsia, Deutsche Bahn and its engineering division DB Engineering & Consulting signed a memorandum of understanding and strategic partnership that envisages provision of management and/or technical support by the German side. The document also establishes three stages of cooperation:

stage one: concluding a cooperation agreement on evaluation of UZ activity and development of an action plan. To do this UZ should draw up terms of reference and the desired terms of the agreement. It is noted that this stage should be carried out within 3 months.

stage two: project implementation. In the event of successful completion of stage one, the parties express their intention to enlist German railway personnel for the roadmaps implementation. According to the document, this stage will last no longer than till 31 December.

stage three: DB E&C support in management.

Approximate period for strategic partnership between UZ and DB is 10 years.

Regulatory

Apple fined EUR 25 million in France for slowing iPhone

The Consumer Protection Office of France imposed a fine on Apple to the tune of EUR 25 million for failing to notify consumers that iPhone updates will slow down the operation of devices.

When consumers could not reset to an older version of their operating system, many were forced to replace their batteries or even buy a new phone, said the CEO of the CPO.

The case against Apple was considered following a complaint filed by a non-governmental organization claiming that the company was deliberately creating updates slowing its phones to encourage consumers to buy new ones. The investigation found no evidence of deliberate action in the legal sense of the term, said an official of the Ministry of Economy.

However, consumers were not informed that their phones could be slowed by an iOS update, so Apple was found guilty of misleading. The fine of EUR 25 million imposed on Apple should clearly remind companies of their responsibility to sell safe and sustainable products to consumers, said Agnes Pannier-Runacher, Junior Minister at the Ministry of Economy. An Apple spokesman noted that our goal has always been to create safe products valued by our customers and to ensure iPhone functioning as long as possible is part of it. We are satisfied with the investigation results.

Telecommunications

EU aims to limit Huawei access to building of 5G networks

According to EU guidelines made public on 29 January, EU member states have the right either to limit or prevent toxic 5G technology providers from accessing major parts of the telecommunications networks.

These guidelines are primarily intended to address the concerns of a number of countries that Chinese companies, namely Huawei Technologies, cooperate with Chinas intelligence services, which may cause risks to these countries security if they construct a 5G network.

At the same time, the guidelines do not meet US requirements related to a total ban on Huawei.

A certain country or company is not specified in the optional recommendations agreed upon with 28 countries of the bloc.

The EU considers 5G to be a key way of stimulating economic growth and competing with the USA and China. Huawei, the worlds largest telecommunications equipment manufacturer, competes with Swedish Ericsson and Finnish Nokia.

The guidelines aim to make EU countries assess the level of risk of suppliers at national or EU level and permit them to exclude toxic suppliers from the development of the main infrastructure.

It is expected that EU countries will implement the guidelines by April and report on the relevant progress by June.

On 28 January the United Kingdom decided not to grant Huawei access to a critical core of its mobile networks, abolish the companys right to access strategic sites and to limit its share in 5G network periphery to 35%.

Lifecell reported UAH 1.1 billion of loss despite rise in revenue

Mobile operator Lifecell has reported a net loss of UAH 1.1 billion at the end of 2019, and if compared to 2018, the operators losses fell by 14.4%, the company noted in its financial statement. At the same time, the operators annual revenue grew 13.6%, up to UAH 5.9 billion.

The company explains the revenue increase by growth in profits from the use of mobile Internet due to the ever-increasing traffic use within the network. According to the financial report, Lifecells revenues rose by 9.9%, up to UAH 1.56 billion in 4Q 2019.

The operators active subscriber base grew by 1.4%, up to 7.4 million, while the total number of subscribers fell by 10.1%, to 8.9 million.

At the same time, the company started earning 26.2% more per subscriber by increasing its average check to UAH 54. For the active subscriber base, this indicator rose to UAH 71.8 (by 25.3%).

Banking & Finance

JP Morgan predicts discount rate cut to 7.5% p.a. by year end

JP Morgan expects the NBU discount rate to fall from the current 13.5% per annum to 11% in January 2020 and to 10% in March, as reported in the Global Emerging Markets Research issued in January. JP Morgan believes that opportunities for further strengthening of the UAH exchange rate are limited. Despite the attractiveness of real return, we see that prospects for further UAH rate growth are limited as the NBU continues reconstitution of foreign exchange reserves. Moreover, we also consider that the currency is overrated, the statement adds. The economy is still expected to enjoy 3.8% GDP growth in 2020.

Deposit Guarantee Fund sold banks assets worth UAH 265 million

Last week, the Deposit Guarantee Fund sold assets of 11 banks, which are managed by the Fund, for a total amount of UAH 264.72 million.

In particular, the following assets were sold:

assets of PJSC VAB Bank worth UAH 234.36 million;

assets of JSC Delta Bank worth UAH 12.72 million;

assets of PJSC CB NADRA worth UAH 8.95 million;

assets of PJSC DIAMANTBANK worth UAH 3.42 million;

assets of PJSC CB Khreschatyk worth UAH 3.31 million;

assets of JSC RODOVID BANK worth UAH 1.42 million.

Moreover, assets of the following banks were also sold last week: JSC VTB BANK, PJSC VBR, JSC Bank Finance and Credit, PJSC PLATINUM BANK, PJSC CB Investbank.

The EU and Ukraine signed agreement on allocation of EUR 26 million for small-size farming

Ukraine and the European Commission signed the agreement, following which the EU will allocate EUR 26 million for development of agriculture and small-size farms in Ukraine.

The agreement was signed in Brussels during the 6th meeting of the EU-Ukraine Association Council.

The aim of the agreement is to attract EU assistance for the development of a more inclusive and competitive agricultural sector of Ukraine focusing on the growth and sustainable development of small and medium-size farms and of small and medium-size enterprises.

Funds will be allocated for supporting land reform by uniting the state land cadastre and the state register of property rights, reform of institutions and the land use system. Funds should also be allocated to institutional and sectoral reforms in the fields of agriculture and rural development, as well as to strengthen value chains in agriculture and to ensure access to funding for small-size farms through implementation of grant programs.

Competition

AMCU imposed fines of UAH 8.7 billion in 2019

In 2019, the Antimonopoly Committee of Ukraine imposed fines of UAH 8.7 billion on companies operating in Ukraine. Despite the large sum of fines, the economic result from AMCU activities for the state totaled UAH 4.3 billion, as some of the fines are being challenged in courts. According to AMCU Chairman Yurii Terentiev, a new branch of law has emerged in Ukraine, an independent new area of legal practice called challenging public procurement.

Sanctions

BlaBlaCar halted operations in Crimea due to EU sanctions against Russia

BlaBlaCar, the French carpooling company, has ceased to provide its services in Russian-occupied Crimea occupied as a result of EU sanctions against Russia.

At the same time, BlaBlaCar failed to specify when exactly the service stopped its operations in Crimea, but noted that it happened recently.

When trying to find a companion to travel to Crimea or in the territory of the peninsula, the company website reports that the service is not available in this region.

On 13 December 2019, the European Council in Brussels approved the continuation of economic sanctions against Russia.

Asset Recovery

Ukraine ranked among top 5 countries in terms of asset recovery requests

Carrying out ARMA asset discovery and search activities, Ukraine is ranked among top five countries in the world to have filed the largest number of international requests through the Asset Recovery Network.

Spain is the leader in terms of the number of requests registered, France is ranked second, and Switzerland is ranked third. Ukraine is ranked in fourth at the end of 2019, leaving the Russian Federation behind, with the latter closing the top 5 world leaders in this field.

A reminder that over the past year more than 266,000 items of property and property rights, as well as more than UAH 30 billion in authorized capital, over UAH 3.5 billion in securities, have become the subject of detection and search activities carried out by ARMA.

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