Bloomberg News

Russia's Comstar Is Interested in UkrTelecom Stake

February 06, 2007

OAO Comstar United Telesystems, a telecommunications operator owned by Russian billionaire Vladimir Yevtushenkov, said it is interested in the planned share sale of Ukraine's national phone company.

``UkrTelecom interests us very much,'' Comstar Chief Executive Officer Eric Franke told reporters in Moscow today. ``We are interested in the privatization of big fixed-line operators.''

Comstar last year paid $1.3 billion for a 25 percent stake plus one share in OAO Svyazinvest. Svyazinvest, Russia's fixed- line monopoly, counts 38 million fixed-line subscribers through its seven subsidiaries spread across 11 time zones. Ukraine's state property fund said Jan. 31 it will offer a 10 percent stake in VAT UkrTelecom on Feb. 21 on the domestic stock market.

Ukrainian President Viktor Yushchenko wants to sell the state's entire holdings in UkrTelecom to attract foreign investors. He pledged in 2005 to sell some of the nation's biggest companies, including UkrTelecom, in 2006 to cover the budget deficit.

Franke said that Comstar hadn't yet decided whether it will buy UkrTelecom shares, adding that he was skeptical about the sale. ``It is a political process,'' he said.

UkrTelecom provides local, long-distance and international telephone services across Ukraine. The government, which owns 92.8 percent of the company, has stalled plans to sell a larger stake for almost a decade.

Acquisition Mode

Franke said Comstar will pursue its acquisition policy even after the Svyazinvest purchase last year. It is still looking to buy assets or start greenfield operations in 20 regions of Russia, the former Soviet countries and eastern Europe. For this the company may use about $300 million of its own resources and is capable of attracting $800 million in loans, he said.

Comstar expects to get the approval from Greek authorities to complete the acquisition of 51 percent in fixed-line operator and Internet provider Hellas On Line SA within 30 days, Franke said. Comstar announced last December it agreed to get control of the company for 47.9 million euros ($62 million).

The board of Comstar recently agreed to set up a new business unit, Comstar International, that will deal with its assets outside Russia, said Franke. The company has short-listed three candidates to head the unit and will sign a contract with one of them by the end of this month, he said.

To contact the reporter on this story: Lyubov Pronina in Moscow at lpronina@bloomberg.net.

To contact the editor responsible for this story: Lars Klemming at lklemming@bloomberg.net.


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