Kyrgyzstan launches new bid to offload Megacom

By bne IntelliNews April 20, 2012

Clare Nuttall in Almaty -

Kyrgyzstan's state property management fund has set May 22 as the date for its latest attempt to auction off the government's 49% stake in Alfa Telecom, operator of the country's largest mobile telecom network Megacom.

The fund is to set a reserve price of KGS4bn ($85.6m) for the stake, one of several assets that were nationalised after President Kurmanbek Bakiyev was ousted in the April 2010 revolution. Kyrgyzstan previously tried to sell off Alfa in November, but with only one bidder - Sweden's TeliaSonera - coming forward, that auction was cancelled.

Megacom is Kyrgyzstan's largest mobile telecoms company, with a network covering 90% of the country. It has almost 2.5m subscribers, in a country with a population of just over 5.3m. However, continuing uncertainty over ownership mars the company's attractiveness.

The Megacom network was taken over by Alfa Telecom, a company allegedly affiliated with Maxim Bakiyev - the former president's son - in October 2009. After the April 2010 revolution, the government took a 49% stake, whilst Russia's Eventis Telecom reasserted control over the remaining 51%. The government's hopes of taking over the whole of the company were thwarted by a Supreme Court ruling on June 21, and it then decided to sell its minority stake. However, several Kyrgyz MPs continue to push for the company to be fully nationalised.

The prospect of taking a minority stake in the company, especially with questions still hanging over the future ownership of the controlling stake, has, unsurprisingly, deterred investors. On top of that, whilst few inside Kyrgyzstan have the cash to buy the stake, international investors are also put off by the country's wider political instability, which has seen two revolutions in the last eight years and the forced nationalisation of numerous assets - the latest example being the country's largest bank, AsiaUniversalBank, in 2012.

In a sign of the continuing instability at Alfa, in January Kyrgyzstan's GKNB security service raided the company's offices and arrested several senior managers. The company's director general Azamat Murzaliev has been charged with embezzlement, abuse of authority and fraud. There is speculation that the raid was politically motivated.

However, the state property management fund is pushing ahead with the privatisation of the telecom operator, as well as several other nationalised assets including the Dostyk Hotel in Bishkek and some of the personal real estate holdings of the Bakiyev family.

Meanwhile, the government is still considering what to do with the many other companies and real estate it took over ownership in following the revolution. While five assets were sold off in 2011, several other auctions, including those of Alfa, AUB and the Chaken Hydropower Plant, failed and 47 remain in government hands.

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