Cabinet Approves Ukrtelecom Privatization Conditions

Yesterday the Cabinet of Ministers approved conditions for the privatization of Ukrtelecom: the stake to be sold is 67.79%, the starting tender price for the stake is UAH 12 bln (USD 2.38 bln); social obligations for the investor: maintain the number of staff over the next three years, preserve employee privileges in line with their current agreement with Ukrtelecom, and provide universal telecommunication services. Additional conditions can be approved within the next three days: the most crucial still up in the air is if investors with state ownership of more than 25% are allowed to participate in the tender. According to the deputy head of the SPF, privatization of the 67.79% stake could occur in mid-July 2008. Alexander Paraschiy: Limiting the circle of participants to those with government stakes below 25% excludes potential candidates such as Russian Sviazinvest, Telekom Austria, France Telecom, and Telenor. We believe the most probable candidates to purchase Ukrtelecom, if this clause is approved, are Ukrainian SCM and Russian Sistema (MTS). Participation by Ukraine’s largest Ukrainian mobile operator, Kyivstar, could be blocked due to the conflict between its main shareholders, Telenor and Alfa. We estimate the probability of Ukrtelecom’s privatization in 2H08 as high.