Epic finalises Ukrtelecom purchase; Timoshenko attacks deal

14 Mar 2011

On Friday 11 March Ukraine’s State Property Fund (SPF) and Austrian private equity firm Epic signed off on a deal under which the latter agreed to buy a 92.79% stake in incumbent telco Ukrtelecom for UAH10.58 billion (USD1.3 billion). Epic, which carried out the purchase through subsidiary Epic Services Ukraine (ESU), previously deposited UAH1.05 billion when bidding for Ukrtelecom at the end of December 2010, and must pay the remaining UAH9.53 billion by 7 June 2011. ‘The money will be in the state budget in 60 days from now,’ said the investment fund’s head Oleksandr Ryabchenko, whilst confirming that the deal was now finalised.

The news was accompanied by the Ukrainian opposition leader, former prime minister Yulia Timoshenko, criticising the privatisation deal for pricing the fixed line, broadband and mobile operator too low – by ‘USD3 billion-USD4 billion’ in her estimation – due to what she called a sale ‘by arrangement’. The auction attracted just one qualified bidder – Epic – resulting in the telco changing hands for a fraction above its starting bid price. Major international telecoms groups with potential interest in the sale, including Telenor, Deutsche Telekom and Vimpelcom, were excluded from bidding by strict auction rules, which banned companies with 25%-or-more state ownership (direct or indirect) and also players with a share of over 25% of Ukraine’s overall telecoms revenues. Furthermore, there remains uncertainty over Epic due to persistent speculation that the fund is acting as a front for another, non-disclosed party, previously rumoured to be connected to cellular group MTS, part of Russian conglomerate Sistema, which operates in Russia, Ukraine and other CIS countries. MTS claimed it did not bid for Ukrtelecom as it considered the minimum price was too high – ‘exceeding its return-on-investment criteria.’

Ukraine, Ukrtelecom (incl. TriMob)