Ukrtelecom’s privatization requires an additional UAH 1 - 1.5 bln spending by the new owner

Privatization conditions do not allow Kyivstar to bid for Ukrtelecom since the company controls more than 25% of the Ukrainian telecom market. Yegor Samusenko: This is positive news for minority shareholders since any mobile operator buying Ukrtelecom will close its current mobile business. Another restriction prevents companies with more than 25% state participation in share capital to bid for Ukrtelecom, which leaves out Russian Svyazinvest and German Deutsche Telekom. A bidder will have to repay ~UAH 100 mln of dividends due to the state as well as significant retirement compensation. Given the huge personnel costs for Ukrtelecom, we estimate the new owner will be required to pay UAH 700 – 1000 mln in retirement compensation if it decides to reduce its staff by 25%. Additionally, the new owner will have to build a special telecomunication network and transfer the network to the state at no charge, which we estimate will cost UAH 200 – 400 mln.