Ukrainian government to privatise Ukrtelecom

Ukrainian government to privatise Ukrtelecom

As Ukraine’s economic situation worsens following the global financial crisis, the government has launched a privatisation tender of Ukrtelecom to raise $1.3 billion.


 Viktor Yanukovich, president of Ukraine

Ukrtelecom will be the first big privatisation sale controlled by Viktor Yanukovich, the recently-appointed president of Ukraine, who took office in February. The proposed deal underlines the government’s willingness to undertake economic reform, as required by the International Monetary Fund (IMF), after benefitting from a $15 billion assistance package from the IMF between 2008 and mid-2010. Ukrtelecom holds 80% of the fixed-line market in a country of 46 million people and holds Ukraine’s sole 3G licence. In 2009, the company generated revenue of approximately $864.5 million.

Paul Kwon, senior analyst for eastern Europe at research consultancy Buddecomm, believes the Ukrtelecom sale will provide an attractive proposition for European operators. He said: “Possible buyers include the western European regional players such as Deutsche Telekom or Telekom Austria as they already operate in neighbouring markets. Other potential bidders include mobile operators hoping to diversify into the fixed market.”

According to the Financial Times, it will be Russian operators and domestic billionaires most likely to secure a deal with the government because of Ukrainian telecoms regulation. Companies that have an existing 25% stake in the Ukrainian market, and global companies that are 25% government-owned will be restricted from bidding unless these controversial measures are revised. These provisions will affect interest from both Deutsche Telekom and Telenor.

“Given Ukraine’s ties with Russia, some interest from major Russian players such as Sistema can be expected,” added Kwon. “The importance of the Ukrainian market is due to its size and lack of competition in the fixed market, particularly in the residential market.”