Ukrtelecom to Go on Auction Block

KIEV -- Ukraine's government has decided to sell 67 percent of Ukrtelecom, the latest move in 10 years of attempts to privatize a major stake in the dominant fixed-lined telecoms operator.

Russian telecoms operators welcomed the move, though with already large stakes in Ukraine's quickly growing mobile phone sector, few seemed interested in buying the chiefly fixed-line company.

Transport and Communications Minister Yosip Vinsky, who said last month that there was no need for a sell-off yet, said the sale would take place at an open auction.

"[The government has] decided on a list of privatizations, including Ukrtelecom -- 67 percent," Vinsky said after a regular Cabinet meeting Wednesday.

The list of firms for sale also includes the Odessa Pre-port Plant, a major chemicals producer that was also put up for sale last year, and six small regional energy firms.

Last year, the previous government tried to sell five parcels of 1 percent stakes in Ukrtelecom on the domestic market to test the water for a 38 percent stake sale abroad but was stymied by legal action.

In 2000 and 2001, the government sold 7.14 percent of Ukrtelecom to the firm's workers and foreign investors. Some of that stake is now traded on Ukraine's illiquid stock exchange.

Ukrtelecom, which became the sixth firm to enter Ukraine's mobile telephone market in November, estimated its 2007 revenues at 7.77 billion hryvna ($1.55 billion) from fixed-line services, below the 7.88 billion hryvna it earned in 2006.

Moscow-based VimpelCom said it was interested in all telecommunications assets of the former Soviet states but that it had not yet considered Ukrtelecom.

Telenor Ukraine said it would not bid for Ukrtelecom.

"We are not interested, because it's not our strategy to acquire fixed-line telecom businesses, and we already own a major telecom asset in Ukraine which we want to develop further," said Trond Moe, head of Telenor Ukraine.

The auction of the Odessa Pre-port Plant, expected to fetch more than its $500 million price tag, was halted by President Viktor Yushchenko shortly after it was announced because he said it would hand the buyer an unfair advantage in chemical exports.

Because of delays in both the Ukrtelecom and Odessa sales, the government of former Prime Minister Viktor Yanukovych undershot its 2007 target for privatization revenues, earning just $475 million from an anticipated $2.1 billion.

The new government of Yulia Tymoshenko said this week that it was convinced it would more than achieve its target of $1.6 billion this year.

"The government will sell [the assets] via open auctions ... to receive the maximum amount of revenues. This year we will receive significantly higher revenues than is envisaged in the [2008] budget," Finance Minister Viktor Pynzenyk said.