But doubts arise whether the planned sale, whose proceeds will go mostly to the state, will attract an investor
ring whether the sale will actually attract a strategic buyer as the government hopes.
Though opinions differ, most point to Deutsche Telekom as a top potential contender for the company. However, a number of other leading European telecoms companies are steering well clear of the sale.
The government hopes privatization of Ukrtelekom will improve Ukraine’s poor image among overseas businesses and help attract foreign investment. Since some 60 percent of proceeds from the sale are to be channeled to state coffers, the sale is also seen as an emergency measure to help the government pay off heavy foreign debts.
However, analysts are now unsure whether the sale will actually lure an investor with expertise and experience in the area.
Officials at Danish telecoms company TeleDanmark told the Post the company is unlikely to bid for Ukrtelekom.
“We have a strategy of buying the companies where we have control only,” said an official at TeleDenmark who asked not to be identified. Dutch telecommunications giant KPN also announced earlier this year it was not going to take part in the sale. But that’s for internal reasons – the company is shifting its focus from fixed lines to other telecoms areas, such as data transmission.
“I’ve talked to many foreign companies, and I have not met any that are interested in buying Ukrtelekom,” said an independent analyst who asked his name be withheld. “Who would want to invest up to $1 billion having no control of the company?”
Such skeptics laren’t rare. But they are countered by financial experts who insist that the state juggernaut should lure experienced foreign firms.
“I’m sure there’ll be strategic investors interested [in Ukrtelekom] looking at the way the law [on Ukrtelekom’s privatization] looks right now,” said Kamil Goca, head of research at Dragon Capital brokerage.
After several failed attempts, parliament passed a final version of the law in July allowing the government to sell a stake of at least 25 percent in Ukrtelekom but retain a 50 percent plus 1 share in state ownership.
Though government officials have repeatedly hinted a buyer of the 25 percent stake in Ukrtelekom may be given another 25 percent stake in the company to manage, the odds of that happening are still unclear. The government said it hopes to raise about $550 million from the sale of Ukrtelekom, with more injections needed for upgrading the company’s aging infrastructure.
Analysts said the price targeted by the government is about the right figure.
“Sounds fine,” said Valery Antonov, head of research at Alfa Capital brokerage. “The price is realistic for such a company.”
Financial experts unanimously point to Deutsche Telekom as the prime candidate to purchase Ukrtelekom, citing the company’s recent plunge into central and Eastern Europe. German telecommunications giant took a majority stake, 59.5 percent, of Hungarian telecom monopoly Matav for $2.2 billion earlier this year and completed the deal to buy a 51 percent stake in the Slovak telecom monopoly Slovenske Telekomunikacie for about $1 billion.
Last year, Deutsche Telekom acquired a 35 percent stake in Croatian Telecom for $850 million. Market analysts said Deutsche Telekom has a lot of experience in making transition from monopoly company to liberalized marketplace. The company was battered by competition in Germany when the market was liberalized, they said, but is still doing well.
However, the government shouldn’t count on getting the kind of sums paid for phone monopolies in Central Europe, analysts said, as the Ukrainian market is much less developed.
Government officials and industry insiders have received mixed signals regarding Deutsche Telekom’s plans for the upcoming sale.
Telecoms Minister Oleh Shevchuk recently said that Deutsche Telekom was considering bidding for Ukrtelekom.
One industry insider, on the other hand, said the German company’s officials said they weren’t fascinated by the offer during their recent trip to Kyiv.
Deutsche Telekom’s representative in Kyiv, as well as the company’s officials in Bonn, declined to comment.
Analysts also noted the government’s moves to change the ownership structure in Ukrainian Mobile Communications(UMC) cellular phone company, where Ukrtelekom has a 51 percent stake, could harm the chances of selling Ukrtelekom to a strategic investor.
The State Communications Committee has asked the Cabinet to approve a plan for the sale of 25 percent of the government’s stake in UMC to foreign shareholders. Deutsche Telekom, TeleDanmark and Dutch KPN each own a 16.3 percent stake in UMC. According to government estimates, the 25 percent stake in UMC will be valued higher than its current 51 percent stake in a year.
“UMC is a big part of Ukrtelekom’s value,” said Dragon Capital’s Goca. “I don’t think it will be as easy to sell Ukrtelekom, if the government reduces its share in UMC.”
UMC, Ukraine’s largest mobile phone company, has about 300,000 subscribers. The company made a profit of $28.3 million in 1999, compared to $11.1 million a year before.
Analysts said Ukrtelekom’s diverse holdings will make the company look more attractive. The government plans to merge the long distance phone call provider Utel with Ukrtelekom in the first three months next year, a few months before the tender for a stake in Uktelekom is expected to be launched.
