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SCM agrees Ukrtelecom takeover

6 Jun 2013

Ukrainian conglomerate SCM Group, owned by the country’s wealthiest man Rinat Akhmetov, on 3 June 2013 signed an agreement to purchase control of Ukraine’s fixed line incumbent telco Ukrtelecom from its current owner, Epic Services Ukraine (ESU), a unit of Austrian investment fund Epic. In a statement released on 5 June the companies disclosed that they signed a contract for acquisition of 100% of shares in UA Telecominvest Ltd (Cyprus), which in turn owns 100% interest in ESU (Ukraine), the owner of 92.79% of shares in Ukrtelecom, which is also the country’s only 3G W-CDMA/HSPA network operator via its TriMob unit. Completion of the deal is contingent on permission from agencies including the Ukrainian Antimonopoly Committee. The statement did not reveal any other details of the transaction, such as the price.

SCM Group already owns Ukraine’s second largest fixed line telephony provider Vega, plus a stake in the country’s third largest cellco Astelit (Life:)), the latter in partnership with Turkcell. The Ukrainian financial and industrial group had consolidated revenues of USD23.47 billion in 2012. The group’s holding company SCM Holdings Ltd is 100% owned by Rinat Akhmetov (99% directly and 1% by SCM which is itself wholly owned by Akhmetov).

Peter Goldscheider, managing partner, Epic, said: ‘Epic has been driven by the challenge of a huge restructuring effort and commercial motives. As we found SCM to be a very logical buyer, we decided to sell our shareholding in Ukrtelecom… This transaction makes compelling sense for all parties. SCM has the necessary resources for further development of the company, including extensive regional, industrial and managerial expertise. We wish all stakeholders of Ukrtelecom and SCM the best possible future and look back with satisfaction to our involvement.’

Ilya Arkhipov, managing director, SCM Advisors, added: ‘For SCM Group the purchase of Ukrtelecom is a promising investment project in the telecommunications industry… SCM is happy to have this opportunity to use the experience we have accumulated as well as the synergy with other telecom businesses of the group to offer new products and services to the existing customers, to attract new clients and build a more advanced telecommunication infrastructure in Ukraine. We believe that the improved efficiency and client focus of Ukrtelecom will benefit the industry and end customers.’

Astelit CEO Oleksandr Barinov was quoted by the Kyiv Post as saying that SCM’s purchase of Ukrtelecom will facilitate the arrival of new technologies on the market such as converged fixed/mobile offerings.

In March 2011 Epic completed the acquisition of 92.79% of Ukrtelecom for UAH10.58 billion (USD1.32 billion at that date, and USD1.28 billion at the current exchange rate), from the State Property Fund (SPF), which declared that the stake cannot be resold until the buyer fulfils investment obligations, and not without the SPF’s consent, according to TeleGeography’s GlobalComms Database.

It was reported yesterday that the SPF and the Antimonopoly Committee were waiting to receive documentation for approval of the proposed sale of Ukrtelecom to SCM, according to ProIT quoting the heads of the state fund and the antitrust agency, Oleksandr Ryabchenko and Vasily Tsushko.

Ukrtelecom has seen its market capital value halved to around UAH5.2 billion (USD630 million) since privatization, although local commentators still expect the group to fetch a total sale price closer to USD1 billion. Having failed to sell off mobile unit TriMob – with suitors including MTS, Kyivstar and Rostelecom unsatisfied with the prospective purchase price range – Epic and SCM were rumoured in October 2012 to have already privately reached an agreement in principle on the sale of a stake in Ukrtelecom. Meanwhile an alternative plan for the telco was aired in January 2013 when a draft law initiated by People’s Deputy Serhiy Vlasenko was registered, proposing the renationalisation of Ukrtelecom via the return of its 92.79% controlling stake to state ownership, CommsUpdate reported.

Ukraine, Lifecell (Ukraine), Ukrtelecom (incl. TriMob), Vega (owned by Vodafone Ukraine)

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