Commission Suggests USD 2.38 bln Starting Price for 67.79% Stake in UTEL

Ukrtelecom’s (UTEL: HOLD) privatization commission suggested the government to approve a USD 2.38 bln starting price for a 67.79% stake in the company, according to Interfax. Approval of Ukrtelecom’s privatization plan is on the Cabinet of Ministers agenda today. The draft of privatization conditions also stipulate social obligations for tender candidates: to not decrease the company’s staff over the next three years, and preserve employee privileges in line with their current agreement with Ukrtelecom. In addition, potential strategic investors must submit a plan for Ukrtelecom’s development. Among other obligations, they also must finish digitalization of the national telephone network, provide universal telecommunication services, and divest the department of confidential state services within two years of privatization. Alexander Paraschiy: Ukrtelecom’s staring price is close to the current market price on the PFTS (USD 0.19 per share, which is our target price for Ukrtelecom) and a 19% discount to the price at which the SPF tried to place shares of Ukrtelecom in May-July of 2007. We believe the starting price is feasible for potential strategic investors. If the government approves the draft of Ukrtelecom privatization conditions today, we expect that privatization could occur in 2H08.