KIEV, March 20 – Ukrainian lawmakers may create a special commission to investigate privatization of national phone company UkrTelecom amid skepticism about the government’s story suggesting the company had been purchased by five Austrians.
Oleksandr Riabchenko, the head of the State Property Fund, told lawmakers on Friday UkrTelecom had been purchased by the five Austrian managers of a private investment house.
The assurances, however, did not quell the skepticism among some lawmakers that believe the phone company may have been actually acquired to benefit interests of President Viktor Yanukovych’s circle.
“Here is what I suggest: if we need to, let’s create the commission that would investigate this issue,” Volodymyr Lytvyn, the speaker of Parliament, told Channel 5 television Sunday. “When there are doubts, we should go parliamentary way to establish the truth instead of speaking with mysterious phrases.”
The developments cast more controversy on the privatization of UkrTelecom, the first major selling of state assets since Yanukovych had been sworn in as the president in February 2010.
Foreign investors have been watching the UkrTelecom privatization for clues of whether Yanukovych’s government would live up to its promises of holding transparent selling of state assets.
Epic Systems Ukraine LLC, or ESU, recently signed the agreement to acquire 92.7% in UkrTelecom for 10.57 billion hryvnias, or $1.3 billion. The money is supposed to change hands within two months.
But the controversy rose last week after a report in a newspaper suggested that ownership of ESU has changed two months before the company had submitted its bid for the Ukrainian assets.
“The buyer is owned by a Cyprus-based company, while the Cyprus-based company is owned by an Austrian company, while the Austrian company is owned by the five citizens of Austria,” Riabchenko tried to explain to lawmakers on Friday. “So, through the Cyprus-based company, which is not unknown, the buyer is owned by the citizens of Austria.”
The five Austrians include Peter Goldscheider, Brigitte Goldscheider, Gustav Wurmbock, Marina Wurmbock and Franz Lanschutzer, according to SPF papers.
Peter Goldscheider and Gustav Wurmbock created EPIC in 1989 as a financial advisory house focusing on investment in the newly emerging markets. The company described itself as a “dedicated team of professionals… that provides results to our clients.”
ESU appeared to be the only bidder for UkrTelecom assets after the government had announced restrictions that had barred Deutsche Telekom and Telenor, the two potential bidders. Other restrictions effectively barred Russian phone companies, such as Sistema and Beeline, that had earlier expressed interest in the assets.
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 declined 1.7% on the year, according to the company.
In addition to UkrTelecom being unprofitable, highly-bureaucratic and mismanaged company, Ukraine’s telecommunications sector remains overregulated by the government.
That makes the job of turning UkrTelecom around into a profitable business extremely difficult for the five Austrian citizens, making their investment extremely risky. That’s unless the five know for sure that the government’s action will not hurt their financial interests.
Serhiy Liovochkin, the chief of staff at the Yanukovych administration, on Thursday praised the government for selling UkrTelecom.
“There are no quality services, debts are huge, and the fact that [UkrTelecom] was sold for 10 billion [hryvnias], I believe this is a plus for the government,” Liovochkin said.
Asked whether he had any hidden interest in the UkrTelecom privatization, Liovochkin replied: “I have no any interest in the privatization.” (tl/ez)