The head of Ukrtelekom said his company was in crisis as the government announced scaled back ambitions for next year's privatization of the firm
nt announced scaled back ambitions for next year’s privatization of the firm, one of Ukraine’s crown jewels.
Ukraine now hopes to raise some $500 million from selling an around 42 percent stake in national telecoms monopoly Ukrtelekom next year, Oleksandr Bondar, head of the State Property Fund, told a news conference late on Monday.
The government, which had previously announced plans to raise $548 million by selling a 25 percent stake in the company, considerably lowered its target in hopes the sale would help the company out of its current crisis and bring further investment.
Stanislav Dovhy, Ukrtelekom’s chairman of the board, told the same news conference around eight percent of shares would be sold to employees and management of the company. The state would keep a 50 percent plus one share stake.
The government hopes to use money raised from Ukrtelekom’s sale to help service its crushing foreign debt obligations. The company tops the list of major state assets which foreign lenders want to be privatized as soon as possible.
Success of the sale is also vital to help Ukrtelekom improve its financial situation and fuel investment in potentially lucrative industry, Dovhy said.
“We can characterise current situation in the company as a crisis,” Dovhy said. “The company’s solvency had deteriorated considerably, we suffer from insufficient liquidity.”
Ukraine has arranged to buy back shares in long distance provider Utel from AT&T Corp , Deutsche Telekom and Dutch KPN , which it expects to hand over to Ukrtelekom to improve the sell-off’s potential.
Ukrtelekom already holds a 51 percent stake in Utel.
Dovhy said Ukrtelekom had been hit hard by the hryvna’s depreciation since tariffs had only been raised once in the last three years, while Ukrtelekom had to pay for equipment and repay loans in hard currency.
Customers owed billions of hryvnas and thieves stole equipment for scrap metal: “Only recently 48 rural telephone stations were robbed… since the start of the year we have lost 725 kilometres of cables,” he said.
A foreign investor would help modernize the sector, which is falling ever farther behind the competition, he added.
There are only 20 telephone lines per 100 people in the state of about 50 million people, compared to 40-50 telephone lines per 100 people in Western Europe.
Dovhy said the privatization success also was vital to improving the firm’s financial position and fuel investment.
The state will share spoils of the sale with the company, 60 percent to 30 percent, with the last 10 percent earmarked for defense communications.
