Draft Of New Law On Ukrtelcom Privatization Registered In Rada.

The main points of the law draft on Ukrtelecom’s (UTEL: HOLD) privatization:

–        Before privatization, the department of confidential state communication is to be separated from UTEL

–        UTEL’s assets will be revalued and its charter fund will be adjusted accordingly

–        The exact size of the state’s stake is not stated explicitly. However the draft says the state’s stake must not be fragmented

–        UTEL is to be sold to a strategic investor, at open tender, with at least two participants

–        All telecom tariffs are to be frozen for two years following privatization

–        The investor is not allowed to cut the work force by more than 10% annually

–        UTEL is required to provide universal service until a compensation scheme is worked out

Concorde Capital: We would prefer to see the size of the block for sale. Additionally the freezing of tariffs raises concerns, as the rigidity of fixed tariffs is the main reason why UTEL is losing its share in the telecom market. In our opinion, the adoption of the law by Rada in this form looks questionable.