**UPDATE ON THE PRIVATIZATION OF UKRTELECOM**

** **

01 FEBRUARY 2000

SOURCE: US EMBASSY KIEV

 

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INTERNATIONAL COPYRIGHT, U.S. AND FOREIGN

COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 1999

ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

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1. SUMMARY: THE GOVERNMENT OF UKRAINE (GOU) RECENTLY

TOOK THE FIRST STEP NECESSARY TO PRIVATIZE THE STATE

TELECOM MONOPOLY BY REGISTERING IT AS A JOINT-STOCK

COMPANY. THE UKRTELECOM PRIVATIZATION PROPOSAL HAS

BEEN DRAFTED AND WILL BE SUBMITTED TO PARLIAMENT SOON.

THE PLAN CALLS FOR 25 PERCENT OF THE MONOPOLY, WORTH

AN ESTIMATED UAH 700 MILLION (APPROXIMATELY USD 130

MILLION), TO BE SOLD THIS YEAR.  THE GOVERNMENT

ESTIMATED UKRTELECOM'S TOTAL VALUE TO BE UAH 4.01

BILLION, USD 729 MILLION AT THE CURRENT OFFICIAL

EXCHANGE RATE OF UAH 5.5/USD 1. REPORTEDLY, GOU AND

EBRD ARE NEGOTIATING THE FINANCING SCHEME TO BE USED

IN PRE-PRIVATIZATION PREPARATIONS OF UKRTELECOM.

END SUMMARY.

 

2.  THEFUTURE PRIVATIZATION OF UKRTELECOM, THE STATE-

OWNED TELECOM GIANT, REMAINS A POTENTIAL FOREIGN

INVESTMENT OPPORTUNITY IN UKRAINE.  AS PRESENTLY

STRUCTURED, IN ADDITION TO THE ACTUAL MONOPOLY OF

OWNERSHIP OF 25 OBLAST LOCAL LOOPS, UKRTELECOM USUALLY

RECEIVES BY MANDATE OF THE UKRAINE GOVERNMENT A SHARE

IN ANY PRIVATE OR PUBLIC TELECOM COMPANY OPERATING IN

UKRAINE OR SIGNS A MEMORANDUM OF UNDERSTANDING WITH

THE FIRM. THE EXTENT OF CONTINUED MONOPOLY CONTROL

OVER THE LOCAL LOOPS AND PRIVATE TELECOM COMPANIES

AFTER PRIVATIZATION AND SALE OF UKRTELECOM IS STILL

UNKNOWN, AND WILL DEPEND ON HOW GOU BREAKS UP THE

COMPANY PRIOR TO SALE.

 

3. OPPOSITION FORCES IN THE NATIONAL PARLIAMENT (RADA)

HAVE DELAYED PRIVATIZATION OF UKRTELECOM.  FOUR DRAFT

LAWS ON PRIVATIZATION OF UKRTELECOM HAVE BEEN

SUBMITTED BY GOU TO THE PARLIAMENT. UKRAINIAN

OFFICIALS HAVE REPEATEDLY ANNOUNCED PLANS TO SELL 25

PERCENT OF UKRTELECOM SHARES AND DELEGATE THE

MANAGEMENT OF THE COMPANY TO THE INVESTOR WHO BUYS

THIS 25 PERCENT. HOWEVER, UNDER EXISTING LAWS ON SALE

OF STRATEGIC STATE PROPERTY, THE SALE PLAN CANNOT WORK

WITHOUT PARLIAMENT FIRST APPROVING.

 

4. GOU RECENTLY TOOK THE FIRST STEPS NECESSARY TO

PRIVATIZE THE STATE TELECOM MONOPOLY.  IN THE WEEK OF

JANUARY 7, THE GOU FINISHED INCORPORATING UKRTELECOM,

AND REGISTERED IT AS A JOINT-STOCK COMPANY.  THE

PREVIOUS WEEK, PRESIDENT KUCHMA ISSUED A DECREE

DESIGNED TO ACCELERATE THE PRIVATIZATION PROCESS; THE

DECREE INSTRUCTED THE CABINET OF MINISTERS TO SUBMIT

TO PARLIAMENT BY JANUARY 15 LEGISLATION THAT WOULD

LIFT THE BAN ON THE PRIVATIZATION OF UKRTELECOM.

 

5. THE HEAD OF THE STATE COMMITTEE FOR COMMUNICATIONS

AND INFORMATION TECHNOLOGIES STATED THAT THE

UKRTELECOM PRIVATIZATION PROPOSAL HAS BEEN DRAFTED AND

WOULD BE SUBMITTED TO PARLIAMENT.  THE PLAN CALLED FOR

25 PERCENT OF THE MONOPOLY'S SHARES - WORTH AN

ESTIMATED UAH 700 MILLION - TO BE SOLD THIS YEAR.

(THE GOVERNMENT ESTIMATED UKRTELECOM'S TOTAL VALUE TO

BE UAH 4.01 BILLION, USD 729 MILLION AT THE CURRENT

(AS OF JAN. 26) OFFICIAL EXCHANGE RATE OF UAH 5.5/USD

1.)

 

6. ACCORDING TO INVESTMENT NEWS WEEKLY REPORT OF

JANUARY 26, THE STATE COMMUNICATIONS COMMITTEE AND

EBRD RECENTLY HELD A NEGOTIATING SESSION TO DISCUSS

POSSIBLE FINANCING SCHEMES TO BE USED IN PRE-

PRIVATIZATION PREPARATIONS OF UKRTELECOM. (THE OPTIONS

INCLUDE EXTENDING A LOAN WITH AN OPTION OF REPAYMENT

BY UKRTELECOM'S SHARES OR AN INTEREST-FREE LOAN

AGAINST AN OBLIGATION TO SELL UKRTELECOM'S SHARES FOR

THE LOAN AMOUNT TO THE EBRD AFTER THE COMPANY IS SOLD

TO A STRATEGIC INVESTOR).

 

7. U.S. INVESTORS AND EQUIPMENT SUPPLIERS ARE URGED TO

EXERCISE CAUTION BEFORE CONCLUDING INVESTMENTS IN

UKRAINE. POST SUGGESTS CONSULTING THE COUNTRY

COMMERCIAL GUIDE AVAILABLE AT: HTTP://WWW.USATRADE.GOV

AND DISCUSSING THE PROSPECTIVE INVESTMENTS WITH

EMBASSY STAFF, THE AMERICAN CHAMBER OF COMMERCE,

ACCOUNTING FIRMS, LEGAL COUNSEL AND OTHER SOURCES.

 

FOR DETAILED INFORMATION, PLEASE CONTACT YOUR NEAREST

USDOC EXPORT ASSISTANCE CENTER, WITH A COPY TO: DAVID

HUNTER, CS KIEV SENIOR COMMERCIAL OFFICER; AND RUBEN

BELIAEV, CS KIEV COMMERCIAL SPECIALIST,

E-MAIL: RUBEN [email protected]; THE COMMERCIAL

SERVICE, U.S. EMBASSY KIEV, 7, KUDRIAVSKY UZVIZ, KIEV

254053, UKRAINE, TEL: (380-44) 417-1413, 417-2669;

FAX: (380-44) 417-1419

 

ANOTHER VALUABLE SOURCE OF INFORMATION ON ALL CIS

COUNTRIES, INCLUDING UKRAINE, IS BISNIS, THE OFFICIAL

USG CLEARING HOUSE OF TRADE INFORMATION IN NIS. PLEASE

CONTACT TREVOR GUNN, DEPUTY DIRECTOR, OR JULIANA

KINAL, INTERNATIONAL TRADE SPECIALIST 

BUSINESS INFORMATION SERVICE FOR THE NEWLY INDEPENDENTSTATES

(BISNIS), IN WASHINGTON D.C. (202) 482-4655 OR BY

WRITING TO BISNIS, U.S. DEPARTMENT OF COMMERCE, ROOM

7413, WASHINGTON, D.C. 20230, OR FAX (202) 482-2293,

1-800/USA-TRADE

E-MAIL: [email protected]

HTTP://WWW.BISNIS.DOC.GOV