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Rada to grill head of SPF over Ukrtelecom
Journal Staff Report

KIEV, March 15 Lawmakers summoned the head of Ukraines privatization agency for questioning on Friday after reports sparked controversy over who exactly had recently acquired the national phone company UkrTelecom.

Some 305 lawmakers in the 450-seat Parliament voted on Tuesday to support the inquiry, suggesting the issue had resonated with an overwhelming majority of lawmakers.

Oleksandr Riabchenko, the head of the State Property Fund, will appear on Friday in Parliament to answer questions over the recent privatization of the phone company.

ESU LLC, or Epic Services Ukraine, once described as a Ukrainian subsidiary of the Austrian investment fund EPIC, recently signed the agreement to acquire 92.7% in UkrTelecom for 10.57 billion hryvnias. The money is supposed to change hands within two months.

But the controversy rose on Tuesday after the report in Delo newspaper suggested that ownership of ESU LLC has changed two months before the company had submitted its bid for the Ukrainian assets.

ESU LLC is now apparently owned by Epic Telecom Invest Ltd., a Cyprus-registered company whose true owners are not known, according to the report. Before the change, ESU LLC was apparently owned by Epic Advisors Ltd., a 100% subsidiary of EPIC fund.

UkrTelecom was purchased to benefit the closest circle of President Viktor Yanukovych, Oleksandr Bondar, a former head of the SPF, now an opposition lawmaker, told Radio Liberty. Within the next few months we will find out who has purchased it.

ESU LLC appeared to be the only bidder for UkrTelecom despite earlier expectations that it would attract bids from major telecom companies.

Because there was no competitive bidding, the fair price of UkrTelecom had been figured out by a little known Kiev-based consulting company, Ostrov.

UkrTelecom reported net losses at 258.7 million hrynias on net revenue of 6.74 billion hryvnias in 2010. The losses narrowed 43.9% on the year and the revenue decined 1.7% on the year, according to the company.

System Capital Management, or SCM, a holding company owned by Rinat Akhmetov, the wealthiest Ukrainian businessman and a close ally of Yanukovych, has been widely expected by industry analysts to bid for UkrTelecom.

Although admitting that UkrTelecom has been an interesting asset, SCM has suddenly refused to submit abn official bid calling the phone company a very complex asset.

A major hurdle for the privatization of UkrTelecom was cleared in February after Credit Suisse First Boston and Deutsche Bank had withdrawn their demand for early repayment of the phone companys debt.

CSFB and Deutsche demanded the early payment of the remaining $222.2 million UkrTelecom owes on a $500 million credit raised in 2005, citing the upcoming changes in management.

Following the talks with the western banks, UkrTelecom paid out about $56 million payment due on Feb. 25 and the rest of the debt will be repaid in full by Aug. 24, 2012, which is in line with original agreements, according to industry sources. (tl/ez)




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