Total privatization revenues constituted UAH 192.5 million in the first quarter of 2002, with the greatest portion of this amount, UAH 112 million, raised by a privileged sale of the Ukrtelekom shares that ended on February 1. Out of the 13% of shares offered for sale to company employees and pensioners, 7.14% were sold. According to Stanislav Dovhy, chairman of the State Committee for Telecommunications and Informatization, this resulted in a unique situation, when the number of shareholders reached 160,000.
A debate is going on over the still to be carried out privileged subscription to a 5.9% interest: whether to sell it on the stock market or to add it to the 37% stake to be sold to a strategic investor. The government favors bringing the basic stake up to 42.9%, which necessitates alterations in the Ukrtelekom share placement plan. This decision is being opposed by the First Stock Exchange System (FSES), which has asked the president and the premier not to increase the stake because this “does not serve the national interests of Ukraine.” Simultaneously, the FSES believes that selling 5.9% of Ukrtelekom shares at the stock market will make the latter more capital-intensive and liquid. Meanwhile, State Property Fund of Ukraine Chairman Oleksandr Bondar thinks this is a senseless dispute, for the law that governs the Ukrtelekom privatization provides in no uncertain terms that the remaining shares should only be sold at an open tender. He is skeptical about revitalizing the stock market at the expense of Ukrtelekom shares, “The portfolio investors left in 1998 and never came back. At the stock exchange, shares are sure to be sold at below market prices.”
Although the first stage of the privatization of the nation’s telecommunications operator is over, the question of selling Ukrtelekom’s main interest to a strategic investor this year (50%+1 share are state-owned) still remains open. Prime Minister Anatoly Kinakh said recently that Ukrtelekom should be privatized in 2002 because the funds to be raised from this sale are part of the 2002 state budget. At the same time he emphasized that the government would monitor the foreign market situation to forestall selling the enterprise at an underrated price. This country’s privatization chief Bondar also pins some hope on Ukrtelekom: in his opinion, it is possible to add another 5.8 billion hryvnias to the budget only at the expense of electric companies or Ukrtelekom. The privatization of Ukrtelekom was originally conceived as an investment breakthrough that will encourage other large enterprises to opt for denationalization. Yet, we should not throw caution to the winds: as Mr. Dovhy repeatedly said, it sometimes took Eastern European countries as long as ten years to privatize their telecommunication facilities.
Still unsolved remain problems of legislative nature. According to Interfax-Ukraine, Oleh Prozhyvalsky, deputy chairman of the State Committee for Telecommunications and Informatization, thinks that Ukrtelekom cannot be privatized until the law On Telecommunications is passed. According to him, what also matters for the investor is the fact that the existing Ukrainian local upper limit charges for telecommunications are underrated against the cost, while international telecommunication charges are, on the contrary, overrated. Last year the world telecommunications market situation was assessed as unfavorable to privatization. Nobody so far is in any hurry to assess the current situation – neither the Ukrtelekom privatization commission nor the collective advisor in the person of Squire Sander & Dempsey LLP, Millennium Financial Services, and Mason Communications. Yet, commission chairman Vasyl Rohovy has promised to make public the company sale strategy in mid-April and attributed his vow of silence to an agreement with the advisor to disclose no details before that date. This date is fast approaching.
