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December 15, 2017 www.intellinews.com I Page 22
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Nationalisation of Ukretelecom confirmed by appeal court
The nationalisation of leading Ukrainian telecoms compa-
ny Ukrtelecom was confirmed after the Kyiv Appellate Economic Court rejected an appeal against an earlier ruling on December 13, according to local reports.
The State Property Fund sold its 92.8% stake in Ukrtelecom for UAH10.6bn (c.$1.7bn at prevailing exchange rates) in 2011 to ESU, a company with unknown ownership, which was later purchased by the System Capital Management (SCM) business group that belongs to Rinat Akhmetov, Ukraine’s richest oligarch. After the EuroMaidan protest led to a regime change, in 2017, the fund brought a court case to cancel the privatisation deal.
This week the Kyiv Appellate Economic Court rejected an appeal filed by the owner of Ukrtelecom against the lower court ruling that cancelled the sales-purchase agreement of the telecom operator, the State Property Fund of Ukraine reported on December 12. In addition, the court ruled that Ukrtelecom's key shareholder has to pay $81.9mn in fines, the fund reported.
The reason for the cancellation was non-fulfilment by Ukrtelecom's buyer of a $450mn investment pledge as part of the privatisation deal that was supposed to be made over five years after privatisa- tion. Also SCM failed to spin off to the state Ukrtelecom’s special communication services for government agencies division.
“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 nationalisation 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 elec- tricity company despite an adverse ruling from Ukraine’s Supreme Court in 2008,” Alexander Paraschiy of Concorde Capital said in a note.
Among the benefits for Akhmetov from the possible nationalisation of Ukrtelecom is avoiding repaying loans from state Oschadbank and Ukreximbank that the company took out.
Also, Akhmetov may demand the return of the money he paid for Ukrtelecom back 2011. So while on the surface the undoing of dodgy privatisations looks like a good thing, in practice it could lead to a series of new headaches for the state. The nationalisation of PrivatBank, that belongs to another major oligarch Ihor Kolo- moisky, has also lead to welter of law suits.