Ukraine’s State Property Fund (SPF) initiated a court hearing aimed at cancelling the 2011 sale-purchase agreement (SPA) of a 92.8% stake of Ukrtelecom, the country's largest fixed line operator and internet provider, the Fund’s media office said in a statement on May 16.

The Fund is also seeking to charge a UAH2.17bn (€74mn) penalty, though without specifying the payer of this penalty. According to the SPF, the buyer of the Ukrtelecom stake failed to fulfill its post-privatisation obligations, as agreed in the SPA.

The 92.8% stake in Ukrtelecom was purchased by a company named ESU for UAH10.575bn (€361mn), while the SCM holding of oligarch Rinat Akhmetov went on to become the owner of ESU.

The statement followed April's ruling by a Kyiv court to back a petition of the Ukrainian Prosecutor General's Office (PGO) to arrest shares of Ukrtelecom and its subsidiary 3G/UMTS mobile operator TriMob, both controlled by SCM Group.

Prosecutor General Yuriy Lutsenko said his office was investigating "the privatisation of 93% of shares in Ukrtelecom at a price setting lower by UAH1.6bn (€56.1mn)" of its actual value in 2011, as well as "the unlawful provision of UAH220mn (€7.7mn) from the Ukrainian national budget at the instruction of [ex-President Viktor] Yanukovych".

On April 14, SCM Group said in a statement that it is ready to go to court to protect its ownership rights to shares and corporate rights in Ukrtelecom and TriMob.

"Among the possible reasons for the SPF to initiate the cancellation of the SPA could be inability of Ukrtelecom to spin off a separate entity responsible for the special communication of state bodies, as was stipulated during the privatisation," Alexander Paraschiy at the Concorde Capital brokerage in Kyiv wrote in a research note.

The possible nationalisation of Ukrtelecom is indifferent for SCM and potentially loss-making for the state, as the fair value of Ukrtelecom is now below its privatisation value, according to Paraschiy. "At the same time, the penalty of UAH2.17bn, if charged against ESU, could compensate for most of potential loss of value," he added.