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Tuesday, 12 February 2008 |
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A lack of trade interest in the privatisation of a major stake in Ukrtelecom opens the door to gangster capitalism…
The Ukraine government looks set to press ahead with the sale of 67.8% of fixed-network incumbent Ukrtelecom for an estimated US$7bn. This is not a new initiative: parliamentary backing for a sale was first given in July 2000 but just 7% rather than a planned stake of up to 50% was hived off, mostly to company employees.
Since then, the privatisation issue had drifted on and off the economic agenda of successive administrations in Kiev amid a raft of legal challenges. Problems include the usual vested local interests and controversy surrounding the possible involvement of a foreign strategic telco investor. In the early 1990s, prominent investors led by Deutsche Telekom, AT&T and KPN bought into Utel, a national backbone operator that has since been folded back into Ukrtelecom. Their decisions to sell their stakes back to the government in 2000 took place in somewhat grim circumstances.
Finding a trade buyer for a significant proportion of Ukrtelecom in 2008 may prove difficult. Political and economic instability in the country does not help, while many of the more obvious candidates from Russia and Europe are already significant investors in the country’s vibrant mobile market. Telekom Austria is the latest likely suspect to have ruled itself out.
This may clear the way for the sort of transaction all too frequently and depressingly associated with Ukraine and its giant neighbour, Russia. ‘Private equity’ is hardly popular in most of the world but in this region it takes on a whole new (and more sinister) meaning. This could create added problems for Viktor Yuschenko, the pro-western Ukranian PM whose reputation at home and abroad might hinge on a successful, transparent and above-board sale. Don’t bet on it.
Jim Chalmers
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