June 22, 2011

Despite its recent privatization, UkrTelecom remains tied down in its role as Ukraine’s flagship provider of cheap fixed-line telephone services. The most recent quarterly results showed a net loss of USD 25mn for the company. UkrTelecom’s new ownership has decided to sell its mobile business to raise funds for more active development of internet services. We project that UkrTelecom’s revenue will creep up at a 2011-2017 CAGR of 3.5%, with results from expected cost-cutting reaching the bottom line only in 2012. We place a SELL rating on the UTLM stock with a target price of USD 0.065, implying a 14% downside.