IHS Global Insight Perspective | |
Significance | Telenor has become the first major operator to express its interest in the latest plan to privatise Ukrtelecom. |
Implications | Growth of its Ukrainian operations would represent a slight alteration of strategy from Telenor, which has recently cooled its interest in Eastern Europe and increased its focus on the emerging markets of Asia, but the lure of fixed broadband and 3G operations may yet tempt it to pursue Ukrtelecom. |
Outlook | Given Telenor's existing interest in Ukraine, where it holds a majority stake in leading operator Kyivstar and is set to consolidate its presence through the formation of VimpelCom Ltd., any move to acquire Ukrtelecom may be subject to regulatory inspection. |
Telenor has confirmed its interest in Ukrainian incumbent Ukrtelecom, but has indicated that it will only make a concrete decision once Ukrtelecom has revealed the conditions of its privatisation. The Telenor Group's Ukraine corporate commutations director, Anastasia Hoholeva, is quoted by Ukrainian News as indicating that her group will not rule out participation in the sale of the operator. Earlier this month, Ukraine’s State Property Fund (SPF) confirmed that plans were being outlined for a fresh attempt to privatise Ukrtelecom through the sale of a 67.79% stake, with a starting price of around 7 billion hryvnia (US$867.8 million—see Ukraine: 25 March 2010: Fresh Plans Unveiled for 2010 Privatisation of Ukrtelecom). Such a move would leave the state with a 25% share. Ukrtelecom is currently 92.9% owned by the state.
Outlook and Implications
- Nordic Interest Encouraging for Ukrainian State: Telenor is the first major operator to express its interest in Ukrtelecom since the SPF announced the newest strategy for its privatisation last week. When plans for a sale were mooted last year, Deutsche Telekom and Magyar Telekom were reportedly among the interested parties, but as the sale process became bogged down in political wrangling within Ukraine, momentum was lost. There have now been so many failed attempts to sell off a stake in Ukrtelecom that news of the latest attempt has inevitably been greeted with caution, but the interest of as established an operator as Ukrtelecom will be of great encouragement to the SPF and the Ukrainian government, as it suggests that despite the history of political difficulties that have tainted previous sale attempts, the operator retains its appeal to external parties.
- Telenor’s Growing Presence in Ukraine of Potential Regulatory Concern: Telenor already has some involvement in Ukraine through its 56.5% stake in leading mobile operator Kyivstar, and progress is being made on moves to form the new group VimpelCom Ltd., along with Alfa Group, the other Kyivstar shareholder. The formation of VimpelCom Ltd. has received regulatory approval and is now subject to minority shareholder approval. However, should it proceed as expected, any move by Telenor then to acquire Ukrtelecom may raise questions about the group’s market dominance, given that Ukrtelecom dominates the fixed-voice market, is broadband market leader, and owns the country’s only 3G licence.
- Ukrainian Interest a Slight Departure from Telenor’s Strategy: Telenor’s interest in Ukrtelecom represents something of a departure from its strategy, which has recently seen it increase its focus on the emerging markets of Asia as growth has slowed in Eastern Europe (see Norway: 10 February 2010: Telenor's Q4 Earnings Drop 15%, Hit by Eastern Europe Slump). Telenor is looking towards 4G services in its domestic Nordic markets to offset weak mobile performances in markets such as Ukraine and Hungary. However, although Ukraine’s mobile market has limited room for growth, the lure of fixed broadband and a mobile licence owned by Ukrtelecom might be enough to tempt it to increase its presence in the country through the expansion of its service portfolio.