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UkrTelecom 2006 net falls as clients move to mobiles

VAT UkrTelecom, Ukraine's national phone company, said profit fell as customers increasingly used mobile handsets rather than fixed-line phones.

VAT Ukrtelecom's net income fell 16% to 513 million hryvnias ($102 million), CEO Heorhiy Dzekon told reporters in Kiev today. Dzekon said the company will start offering mobile-phone services in the Q2 of this year, seeking to expand and win more clients. Kiev-based Ukrtelecom will have to compete with ZAT Kyivstar GSM, the country's largest mobile-phone company, and LCC Astelit, as well as Russia's Ukrainian Mobile Communications and OAO VimpelCom. „The mobile network has been built already and now it is being tested,” Dzekon said.

„We clearly understand that fixed phones are replaced by cell phones, so we want to offer our mobile service as soon as possible.” The company also wants to add Internet users and increase call fees to raise its revenue this year. „We will ask the government to allow us to raise fees for our calls at least by 50% at the end of March,” Dzekon said. „We can easily prove that fees must be raised.” Ukrtelecom, which provides local, long-distance and international phone services across Ukraine, plans to invest as much as $317 million this year in its development, Dzekon said. The company has also cut 3,000 jobs to reduce costs, Dzekon said.

The government, which owns 92.8% of the company, has stalled plans to sell its stake for a decade because of disputes between state agencies. The state property fund wants to sell a 42.8% stake in Ukrtelecom, while keeping 50% plus one share. It has initially suggested selling a 5% stake on the domestic stock market and the rest overseas. Ukraine's state property fund said it will announce the sale of 1% of Ukrtelecom on March 28, to gauge „the market price.” „We plan to announce the bids in two weeks,”

Nina Burlyuk, a spokeswoman at the fund, said today via phone from Kiev. „We will invite bids 30 days after that through the Ukrainian stock market.” President Viktor Yushchenko wants to sell the state's entire holdings as soon as possible to attract foreign investors. Still, the government will probably delay the Ukrtelecom sale until 2008 because „the company is not ready,” Economy Minister Volodymyr Makukha said on March 3. (Bloomberg)