Ukrtelecom privatisation to be launched in March; MTS awaits

6 Feb 2009

Ukraine’s State Property Fund (SPF) has announced that it will launch a tender for the privatisation of incumbent fixed line operator Ukrtelecom in March 2009, with an exact date to be announced shortly, reports the Kyiv Post. A 67.79% stake in Ukrtelecom will be put up for sale, with the government planning to retain a 25% stake plus one share. ‘The terms and conditions for privatising Ukrtelecom shall be set based on analysing customers’ demands and market conditions’, the SPF’s statement said. Transport and Communications Minister Yosyp Vinskyi was quoted as saying that the details of the tender will be announced next week, and predicted that Ukrtelecom would fetch at least UAH25 billion (USD3.2 billion). Prime Minister Yulia Tymoshenko said at a briefing on 4 February that the government will hold talks with all of the potential buyers of Ukrtelecom with the aim of achieving the maximum possible sale price, adding that the privatisation will only go ahead if the right amount is offered by a ‘global brand’. ‘The government will study this process very thoroughly and thoughtfully. Nothing will be done hastily’, she claimed. Negotiations with large private telecoms companies on Ukrtelecom’s privatisation are constantly being held, according to Tymoshenko, who added that the state is ‘studying their intentions and analysing price formation.’

Reacting to the SPF’s latest announcement was Andrei Dubovskov, CEO of the country’s second largest cellco MTS Ukraine. A report from Business New Europe quoted him as saying that his company’s Russian parent group Mobile TeleSystems (MTS) had already expressed interest in acquiring a majority stake in Ukrtelecom, and had submitted its preferences for the conditions of tender, the final details of which will determine whether or not it will place a bid. According to the report, proposed tender conditions for Ukrtelecom in the past have favoured MTS, by excluding any bidders that have over 25% state ownership, thus ruling out several major European players such as Telenor, TeliaSonera, Telekom Austria and France Telecom. The Russian state has no direct stake in MTS. Yevgeny Yevtushenkov, main shareholder in AFK Sistema, the Russian conglomerate that owns 52.8% of MTS, reportedly said on 2 February that Sistema was planning new acquisitions, after securing ‘several billion dollars’ in financing from banks.

A string of previous attempts to attract a strategic investment partner for Ukrtelecom have failed, largely as a result of political squabbling. In April 2008 the Cabinet of Ministers approved conditions for privatising the telco with the starting price of UAH12 billion, but the tender failed to be carried out amidst Tymoshenko’s attempts to dismiss SPF chairwoman Valentyna Semeniuk-Samsonenko. The premier has also clashed with President Viktor Yushchenko over plans to sell off a range of state holdings, but the country is now looking at an accelerated privatisation programme as an essential source of funding due to worsening economic conditions. The International Monetary Fund (IMF) has also demanded the country step up its privatisation programme. An IMF mission currently in Kyiv is reportedly unhappy with Ukraine’s attempts to meet conditions for a second tranche of a USD15.5 billion stabilisation credit agreed in November.