Oleksandr Komarov, President of Kyivstar, the largest mobile operator on the market, hopes for the growth of the sector in 2023 due to continued demand for modern communication services, the low base effect and de-occupation, but, this growth will be relatively small due to a decrease in the active base subscribers along with reducing profitability.

"The main factor of any market is its capacity in the number of consumers. We see its stabilization around the level of approximately minus 10% of the active base that was before the war. We have stabilized territorially. Moreover, I expect that there will be some de-occupations, and we will be able to grow at the expense of the returned territories," he said in an interview with Interfax-Ukraine.

Komarov added that the first quarter of 2022 was still "more or less normal," but the market began to decline in the following months.

"That is, I think that the industry will improve a little from year to year in the second, third and fourth quarters: not only because it is growing, but also because the comparison bases have fallen significantly," Kyivstar president said, explaining his expectations.

He also said that communication services are critical services for consumers, and therefore the demand for them is not elastic. "Moreover, the crisis encourages people to spend more on telecommunications: people want to reserve their ability to be in touch. During the blackouts, we had incredible growth in new connections throughout the Ukrainian telecom market," Komarov said, citing an example.

The President of Kyivstar also pointed to the continued demand for more modern communication services, naming the key driver of LTE services, 4G services, which provided the market with growth in the last three years before the war by 15% annually.

"In 2022, the market grew by 5%, while LTE consumption grew by almost 30% year-on-year, with an increase in the customer base of LTE services by only 4%. That is, consumption is the main driver that continues to pull this market up: people need more mobile Internet," the head of the largest mobile operator said.

Among the factors that will negatively affect revenues, he pointed to the ongoing decline in the active subscriber base in roaming due to the prolongation of the war. According to him, it is slow, because it is held back by the "roaming like at home" service.

Komarov said that, among other things, due to this service and a number of other factors, the company's costs increased significantly, which led to pressure on profits and a decrease in profitability.

"In the first quarter, Kyivstar's total revenue in hryvnia grew by 6% year-on-year, while profit grew by only 1%, and overall profitability decreased to 59% from 62% in 2022," the company president said.

Among the factors, he named an increase in the share of negative or very low-margin income, such as from roaming, an increase in expenses for risk, recovery, and social assistance. In particular, according to Komarov, during the 15 months of the war, Kyivstar provided financial charitable assistance and bonus services worth UAH 1.08 billion.

"Certainly, it is also inflation: cost inflation, electricity inflation, wage inflation, and so on," the head of the company added.

Komarov said that Kyivstar's investments and expenditures are largely made in foreign currency, and the devaluation of the hryvnia resulted in an 8% year-on-year decrease in purchasing or investment power in foreign currency.

"As a company that is integrated, on the one hand, into domestic consumption, and, on the other hand, into the purchase of equipment from international suppliers, we must understand that the pre-war formula of average industrial profitability will not work for the next few years. We will have significant pressure on profitability," the head of the largest mobile operator said.

He also said that it is impossible to raise communication tariffs in such a volume to compensate for the increase in costs.

According to him, certain inflationary elements are included in pricing. In addition, customers follow their consumption by switching from old tariff plans to new ones. On average, such migrations are made up to 100,000 per month, Komarov said.