Will Ukrtelecom be privatised on the cheap to help bail out economy?

10 Nov 2008

In the wake of the recent decision by President Viktor Yushchenko to give the green light for a raft of privatisations including Ukrtelecom, both the president and the government led by Prime Minister Yulia Timoshenko have agreed that proceeds from the sales will be used to fill a new stabilisation fund intended to bail out troubled banks and companies, the Kyiv Post reports. Earlier this month, deputy prime minister Oleksandr Turchynov announced that a number of investors, including Japanese companies, are interested in buying Ukrtelecom, whilst there are also rumours that big Russian buyers could line up to take control of the telco. A 92.8% stake in the incumbent is controlled by the State Property Fund, which is currently managed by socialist politician Valentyna Semenyuk-Samsonenko, who has opposed selling what she views as strategic state assets, but the cabinet is determined to privatise the company.

Ukrtelecom has previously been valued at between USD4 billion-USD5 billion, but estimations of its worth have dipped this year to as low as USD1 billion. Fixed line revenues have fallen in the face of competition from newer competitors, its wireline infrastructure is in need of further upgrades, and it has been very slow to develop a mobile network, despite holding the country’s only UMTS 3G licence. TeleGeography estimates that it had signed up no more than 25,000 3G mobile users by mid-2008, since launching the service in November last year. The company reported a huge drop in net income in the third quarter to a loss of USD40 million. Furthermore, despite the government’s economic arguments for a quick sale, privatisations including Ukrtelecom could face more delays as political divisions between the president and PM grow ever wider. Orange Revolution allies are expected to square off for the presidency in a campaign that kicks off next year. Last but by no means least, the wider international financial slump is also likely to hinder a successful sale.

Ukraine, Ukrtelecom (incl. TriMob)