Telecom

This report presents coverage of the most recent trends affecting Ukrtelecom, which was analyzed in our “3rd Gen Mobile: UTEL – the Hard Sell”. Declining fixed-line traffic, inability to meet its first quarter 3G development plans, and uncertainty with privatization make Ukrtelecom a delicate stock to play. On the brighter side, the company plans to significantly increase its internet, data, and channel rent revenues in 2007-2010 and to become a leading player on the mobile communications market. The future will show whether such optimism is warranted.

Whereas many investors have set their minds on the advantages of privatization and potential success of 3G for Ukrtelecom, we see many risks, both internal to the company (maîtrise of the technology, marketing capabilities, company-wide consistency of the offer) as well as external (mobile voice price wars and additional license offerings). What’s clear to us is that there are exciting opportunities for Ukrtelecom to benefit favorably from the aforementioned factors sparking up the value of the company in the coming years. The jury is out.