Ukrtelecom sale agreement to be signed by February 25

The State Property Fund expects to sign a selling agreement for the 92.8% stake in Ukrtelecom (UX: UTLM UK) by February 25, fund spokesman Oleksandr Ryabchenko said yesterday, adding that the fund has already received an oral agreement from the buyer. The stake is being offered for UAH 10,575 mln, or UAH 0,609 per share. Yegor Samusenko: Though there is no official disclosure of hose interests Epic represents in this deal, the market believes that current head of the presidential administration and current CEO of the company are behind the deal. We expect the new shareholder to have strong lobbying power to affect regulated tariffs for fixed-line telephony and have enough knowledge to transform the company from the current 19% EBITDA margin in 2010 to 40% within three years. Commenting to the press, an Epic spokesman said they are planning to sell the company in 3-4 years to a strategic buyer. We stick to our BUY recommendation for the stock with a two-year target of UAH 1.1 per share, implying 100% upside.