HiTech.Expert

In February, revenues of enterprises from provision of communication services decreased by 6.2% compared with January, from UAH 3,963.498 million to UAH 3,717.381 million, the State Statistics Service has informed Ukrainian News. The general decrease in the revenues was caused by a decrease in revenues from mobile cellular communications services. Operators revenues from provision of mobile cellular communications services went down by 7.9%, the stake of revenues was 59.1%. In January-February, total revenues of enterprises from communications services made up UAH 7,666.914 million. As Ukrainian News earlier reported, in January 2011, revenues of enterprises from provision of communication services fell by 2.5% compared with December 2010, from UAH 4,067.125 million to UAH 3,963.498 million. In 2010, revenues of enterprises from provision of communication services made up UAH 47,432.675 million.

Experts believe that the investment priority of the new owner of the Ukrtelecom telecommunications company is broadband Internet services. "I think that (investments will be directed) primarily toward development of the Internet. This is the segment that is developing most dynamically. In addition, computer communication requires less investment than mobile communications," said Viacheslav Ivanyshyn, an analyst with the TASK investment group. At the same time, Ivanyshyn believes that there will be no fundamental change in Ukrtelecom following its acquisition and that the company will remain unprofitable. According to Ivanyshyn, the biggest problem of Ukrtelecom is that it has too many employees, but he does not expect a significant reduction in the number of its employees. Yehor Samusenko, an analyst with the Concorde Capital investment company, believes that one of the first steps of the new owner of Ukrtelecom will be a 30-40% staff reduction and estimates the payouts related to the staff reduction at approximately UAH 900 million. Samusenko also shares the view that the main focus of investments will be Internet access services. Regarding Ukrtelecom's UMTS (3G) mobile communications network, Samusenko said that the following development scenario was possible: the participants on the market of mobile communications services could agree on joint development of this network, regardless of whether they obtain 3G licenses this year. Volodymyr Klymenko, the director of the Sokrat investment and banking group, also believes that the investments of the new owner of Ukrtelecom will focus on development of broadband internet and third-generation mobile communications services. "In our opinion, investments could primarily be made in development of promising area of business, in particular 3G and Internet services," Klymenko said. According to Klymenko, the new owner will focus on increasing the profitability of Ukrtelecom and restructuring the company. According to him, the restructuring will involve, in particular, changing and reducing the company's management structure, as well as separation of its non-core assets with a possible subsequent sale. As Ukrainian News earlier reported, the State Property Fund and the ESU company (Kyiv) signed an agreement on sale of 92.79% of the shares in the Ukrtelecom telecommunications company for UAH 10.575 billion on March 11. ESU is a subsidiary of the EPIC investment and financial consortium (Austria).

Experts expects Initial Public Offering of Ukrtelecom, the largest telecommunication company in Ukraine, on foreign exchanges in the 2014-2016 period. "If the company takes the path of restructuring, which is probable, IPO would be rational in three years," said Volodymyr Klymenko, director of the investment-banking department of the Socrat investment group. Yehor Samusenko, an analyst of the Concorde Capital investment company, also expects IPO of Ukrtelecom no sooner than in three years. He noted that IPO is an alternative to the sale of the company to a strategic investor. Viacheslav Ivanishyn, an analyst of the TASK Investment Group, sees as equal two options: IPO of Ukrtelecom (in three or five years) and sale of the company to a strategic investor. Ivanishyn added that one of the companies that could not take part in the tender for restrictions of the privatization terms (such as Deutsche Telekom) can show interest in purchasing Ukrtelecom. As Ukrainian News reported, the State Property Fund of Ukraine on March 11 sold 92.79% in Ukrtelecom to the ESU Company (Kyiv), a subsidiary of the Austrian Investment-Financial Consortium EPIC, for UAH 10.575 billion.

Stock market players notice insignificant influence of the sale by the State Property Fund of 92.8% of shares in Ukrtelecom, Ukraine's biggest telecommunication company, to ESU (Kyiv; subsidiary of the European Privatisation and Investment Corporation, EPIC, Austria) on Ukrtelecom quotations. "The trading in Ukrtelecom shares opened at 57 kopecks a share. The peak was at the level of 58.8 at about 11:20. And then Ukrtelecom slid down abruptly and by noon reached 56.6 kopecks a share. It now trades in this range," said Andrii Tarasenko, the head of the investment consulting department at Upras Capital. In his opinion, they expect no split-off or separation of some of the company assets after its privatisation, as this is not allowed by the privatisation conditions. Viacheslav Ivanyshyn, an analyst at the TASK Investing Group, says that a slight growth of Ukrtelecom quotations was observed right next to the announcement of the sale of the 92.8-percent stake in the company, although soon the upward movement changed for a fall in the price of the stock. "Was a little growth upwards, and then Ukrtelecom shares 'fell in' again. This means the stock market players don't believe in further runup of the company shares," he said. Ivanyshyn also takes as unlikely split-off of the telecom company after the sale of 92.8% of shares in it. Mykhailo Roiko, the president of equity firms at Amadeus Asset Management (Kyiv), has stressed that the dynamics of the cost of Ukrtelecom shares coincide with the general dynamics of the market, which testified to insignificant influence of the sale 92.8% of shares in the company on quotations of its securities. As Ukrainian News earlier reported, the State Property Fund of Ukraine on March 11 sold 92.79% of shares in Ukrtelecom to ESU for UAH 10.575 billion.

The State Property Fund of Ukraine sold 92.79% of shares in Ukrtelecom, Ukraine's biggest telecommunication company, to ESU (Kyiv; subsidiary of the European Privatisation and Investment Corporation, EPIC, Austria) for UAH 10.575 billion. From the Property Fund side it was signed by its Chairman, Oleksandr Riabchenko, from the EPIC side by Wolfgang Heritsch, authorised by the ESU subsidiary company. As to Riabchenko, the buyer has to pay the total sum in sixty days (half in thirty days and the other half over the next thirty). He says that Ukrtelecom has USD 160 million and UAH 3.7 billion of debt liabilities as of March 11. The Property Fund Chairman underlines, one of the investment obligations of the new owner of the company is building a special communication system within two years (approximate investments in this system make about USD 200 million). On the whole Riabchenko is positive about the sale of the operator, noting that if Ukrtelecom were sold a year later its cost would be lower. As Ukrainian News earlier reported, ESU in February officially affirmed its agreement to acquire 92.79% of the shares in Ukrtelecom for UAH 10.575 billion, the price the State Property Fund quoted basing on results of an expert appraisal. ESU was the only bidder for the acquisition of the 92.8-percent stake in Ukrtelecom, which was the reason for the Fund to apply the procedure of appraising the value of the shares in the company. The expert appraisal was UAH 75 million higher that the starting price set by the Property Fund for the privatisation competition, which had been scheduled for December 28, 2010.