Government to sell Ukrtelecom in May

According to the Minister of Transportation and Communications Josyp Vinsky, the government will announce the tender to privatize a 67.79% stake in Ukrtelecom (UTEL) next week. The tender is scheduled to be held in May-June 2009. Vinsky estimates the starting price of Ukrtelecom at UAH 25 bln (USD 3.2 bln). Alexander Paraschiy: Vinsky’s price implies a 2008 EV/S of 6.0 – it looks too high for a company that will report losses for FY2008. We believe the price for the stake will not exceed UAH 15 bln. We consider the probability of a successful privatization as low – first, President Yushchenko is likely to ban the privatization, as he did in 2008; second, it seems like it will be difficult to find an investor for the company today. The only thing that raises the chance of privatization this year is need to fill the stabilization fund of the state budget, which is planned to be UAH 20 bln: Ukrtelecom’s sale could raise up to 60% of that amount. Given this, the government may agree to lower the starting price.