Ukrtelekom to be Sold to Pay Pensions

In addition, the President sees one of the possibilities to pay such debts in selling public property, namely the Ukrtelekom state-run telecommunications association. However, insisting on its sale he probably does not know that this is a sure way to a vicious circle. Leading economists (among them George Soros) admit that Ukraine can sell Ukrtelekom, but will receive very little in return because of the hryvnia decline. Its cost can be increased only if the government takes back possession of Utel.

49% foreign interest in Utel's statutory fund (e.g., 19.5% held by AT&T; 19.5% by the Deutsche Telekom, and 10% by the Dutch PTT Telekom) will be redeemed within three months, The Day was told by Oleksandr Riabchenko, Chairman of the Verkhovna Rada Ad Hoc Oversight Commission, adding that the decision was made by a working group preparing a bill on overcoming crisis in telecommunications.

Mr. Riabchenko continued that the draft instructs the Cabinet to support Ukrtelekom in buying out Utel. The foreign companies will be paid pro rata their respective interest plus the dividends due and the credit they gave Utel previously. And that acquiring Utel's full block of shares will raise Ukrtelekom's cost by 30%. Of course, Utel is worth considerably less than 30% of Ukrtelekom, Mr. Riabchenko pointed out, but after the latter becomes a powerful entity uniting all Ukraine's telecommunications, and not only mobile phone networks, its worth and attractiveness will increase in the buyer's eyes.

In the meantime, confidential sources advise that the talks with the foreign companies holding Utel shares are anything but easy. They want to secure certain future advantages and are not sure that the Ukrainian government will be able to finance the redemption (e.g., by officially guaranteeing payments). Last but not least, they must be concerned about Mr. Kuchma's oral ban on any budget spending except for social needs.

There are also people in Ukraine opposed to the Utel buyout. Boris Soboliev, Chairman of the Board of the First Investment Bank, told The Day that the Utel project will further dampen Ukraine's image in foreign investor's eyes and mean Utel stock falling into the hands of incompetent bureaucrats. In a word, whether this scheme will actually be effective in paying back pensions remains an open question.