Cabinet Approves Ukrtelecom Privatization Plan

The Cabinet has approved a plan to prepare Ukrtelecom (UTEL: HOLD) for privatization. According to the plan, the National Communications Regulation Commission (NCRC) must give UTEL a G3 mobile license in September 2005. In addition, a scheme to compensate for UTEL?s universal service obligations must be worked out, and its debt accounts must be cleared. All this, according to the Cabinet, must lead to improvement of UTEL?s market capitalization. Privatization will begin in 2Q06.Concorde Capital: A G3 mobile license would not necessarily benefit UTEL, but a plan to compensate for UTEL for providing universal telecom services below cost would be a valuable gift to the company. This could release the company from its cross subsidization of local communication services at the costs of LD, making UTEL more competitive on LD market.