Strategic thinking and macroeconomic regulation is a scarce resource in
Ukraine, but with it alone can we break the vicious circle of crises.
This idea has been confirmed by developments on the Ukrainian telecommunications
market.
European and Asian stock markets are also now selling state-owned shares
of telecommunications companies. Such companies could later become an influential
lever for positive dynamics in domestic stock markets. The returns on investments
in this industry are among the highest and almost equal the earnings from
power and fuel production. This is why telecommunications are considered
today one of the most attractive objects of world investment.
Today, the density of telephone lines in Ukraine is three times lower
than in Europe: there are 100 lines account for one operator, while in
European countries this figure is 300-350.
It would be only possible to reach European standards through Ukrtelekom
alone only in several decades. Ukrtelekom, due to the low solvency of its
clients, can put up on its own not more than 15-20% of the total investment
of $10 billion required for its modernization program scheduled for several
years. The rest can only be brought in by a strategic foreign investor.
Such investors were once found. Deutsche Telekom, the Dutch KRM and
the American AT&T, which were part of the UTEL Joint Venture, despite
continuous attempts to restrict their actions by all means possible, managed
to show their efficiency: their main investment obligations to the Ukrainian
government have been fulfilled, the enterprise has begun to return high
profits, displaying by far the highest productivity growth in Ukraine.
Unfortunately, now that it became possible to bring long-distance communications
to a qualitatively new level owing to heavy investments, Deutsche Telekom,
KRM, and AT&T are considering leaving the Ukrainian market.
The point is that a conflict of interests has come up between Ukrtelekom
and the State Telecommunications Committee, on the one hand, and UTEL,
on the other. The company is in no position to receive the profits it deserves:
the lion's share of communication services earnings goes right to Ukrtelekom,
and the latter company's inadequate regional payment collection does not
allow UTEL to get even a part of its profit.
The unwillingness of Ukrtelekom and the State Telecommunications Committee
to promptly resolve these problems and, moreover, their continuous pressure
on the controlling shareholders, are regarded by the investors as a lack
of desire to cooperate, and this makes them raise the question of getting
out of the game. The point is not only in selling their largest
investment in Ukrainian. The companies intend to leave the Ukrainian market
altogether.
Who stands to gain? First of all, Ukrtelekom and the Committee which,
without spending a penny, are thus getting rid of undesired rivals who
manage by far the most cost-effective business in telecommunications -
long-distance telephone communication. But the price of satisfying their
ambitions is too high: this country is losing serious investors potentially
capable of participating in the privatization of Ukrtelekom and establishment
of a wholesome investment climate in Ukraine. It should also be remembered
that their positive example encourages to a great extent other foreign
strategic investors to come to the Ukrainian market. And on the contrary,
the ousting of foreign investors by such methods makes Ukraine less attractive
for investment and gives the advantage to other countries hungry for investment.
It will also be recalled that these are the only investors able to pay
the price for stock expected by the government and the State Property Fund
of Ukraine, as well as to satisfy the investment requirements of Ukraine's
leading city telecommunications operator. For Ukraine, the privatization
of Ukrtelekom is also a potential chance to cover the budget deficit and
the state's current wage and pension arrears. This, however, is a blind
ally; the investments are primarily needed to upgrade the technical standards
of Ukrtelekom and to develop telecommunication services.
Is this not to the detriment of the national interest? The purchase
of UTEL may be regarded as slight-of-hand by a small group of politicians
and businesspeople, to get hold of a maverick business. For, given the
absence of competitors for Ukrtelekom which swallowed UTEL, the price of
the former will drop to a pre-arranged and much underrated level. Moreover,
they will try to make the state pay for their ambitions. For the Western
stake in UTEL cannot but compensate the financial and material expenses
borne by the shareholders during their stay on the Ukrainian market. And
this is a lot of money, paying which will make a big hole in the pocket
of each of our citizens.
Ukraine is now passing through a critical moment. We are in fact on
the eve of default. In these conditions, we must not only hold on to but
fight for a strategic, not speculative, investor. And this can only mean
cooperation with one according to the principles of fair and open partnership.







