Appellate court reaffirms ruling to return Ukrtelecom to state

The Kyiv Appellate Economic Court rejected in full an appeal filed by the private owner of Ukrtelecom (UTLM UK) of a lower court ruling that cancelled the sales-purchase agreement of the telecom operator, the State Property Fund of Ukraine reported on Dec. 12. Besides the cancellation, the court ruled that Ukrtelecom's key owner should pay USD 81.9 mln in penalties, the Fund reported.

The State Property Fund sold its 92.8% stake in Ukrtelecom for UAH 10.6 bln in 2011 to ESU, a company with unconfirmed ownership, which was later purchased by the SCM business group of Rinat Akhmetov. In 2017, the Fund initiated a court hearing to cancel the privatization deal.

The reason for the cancellation was non-fulfilment by Ukrtelecom's buyer of a USD 450 mln investment plan in the five years after privatization, as well as failure to spin off to the state Uktelecom’s division that provides special communication services for government agencies.

Alexander Paraschiy: Although there is a chance for SCM’s successful cassation of the recent ruling, now the Ukrainian government has full authority to return Ukrtelecom to its ownership. There are little signs that SCM is trying to reverse this ruling, which leads us to believe that the loss of Ukrtelecom won’t be painful for its business. Otherwise, Akhmetov can do all his best to prevent the nationalization of Ukrtelecom, as he did with the contested privatization of power GenCo Dniproenergo in 2007. In that case, Akhmetov was able to retain control over the electricity company despite an adverse ruling from Ukraine’s Supreme Court in 2008.

Among straightforward benefits for Akhmetov from the possible nationalization of Ukrtelecom is ESU avoiding repaying loans from state Oschadbank and Ukreximbank. (In which case, we expect the banks will have more arguments to appeal to the state for new recapitalization.)

Also, Akhmetov may demand the return of money paid for Ukrtelecom in 2011. If the nationalization is completed, the government will get yet another headache -- the current legislation requires that the state resell Ukrtelecom in one year.

Источник: Конкорд Капитал