BISHKEK (TCA) — The State Property Management Fund of Kyrgyzstan (SPMF) has put on sale through auction 100% of the state-owned shares of Alfa Telecom CJSC (MegaCom trademark) for the third time.
The starting price has been decreased by almost 1 billion soms since the previous auction in December 2016, and is now 13.5 billion soms (about $195 million).
The auction will be held on June 5, 2017. There are no restrictions on participation in the auction for non-residents of Kyrgyzstan, as well as for residents who have foreign individuals and legal entities as founders (participants). Those wishing to participate in the auction, in addition to the standard package of documents, should pay a guarantee contribution worth 10% of the starting price. Applications for participation will be accepted until June 2.
The initial price of MegaCom shares was 19.7 billion soms (about $306 million) in May 2016. The price was reduced to 14.255 billion soms at the next auction because no applications were submitted, the SPMF head Bolsunbek Kazakov said at a press conference in Bishkek on March 7.
The previous auction was to be held on December 16, 2016. However, the SPMF received no applications from potential participants. The high price of the shares of the mobile operator in the conditions of the world crisis was among the main reasons for the failure of the first two auctions, the Government said.
Obstacles to development
According to Kazakov, the Law “On public procurement” hinders the development of state owned companies, including Alfa Telecom, which has to fulfill the requirements of the law that is not customized to entities operating in a competitive environment. According to the law, the company has to publish all information about its planned procurement, and it can be used by competitors to their advantage. At the same time, this requirement does not apply to private companies.
Companies from South Korea, Turkey and China have shown interest in the company, Kazakov said, adding that it is really the leading cellular company in Kyrgyzstan and will be profitable anyway.
Meanwhile, some experts doubt that the auction will take place. “The Government and the Prime Minister will decide whether I should leave my post or not,” Kazakov said at the press conference, when asked if he would resign if the auction fails.
After the failed auction in December 2016, the then SPMF head, Malis Mambetjanov, was forced to leave his post. Earlier, on December 1, 2016, Kyrgyz President Almazbek Atambayev recommended the Prime Minister to look for a new person for the position of Chairman of the State Property Management Fund, blaming Mambetjanov for the inability to sell the state-owned stake in Alfa Telecom.
Indeed, the auction scheduled for December 16, failed. However, it was quite predictable regardless of who headed the agency. The State has shifted too many risks to the company’s future buyer, including the risks on six lawsuits and three criminal cases involving the company.
However, Kazakov assured that the issues concerning the many lawsuits have been completed in Kyrgyzstan. Potential buyers of the company will be notified about possible international disputes in their invitations to the auction, he said, adding that some companies have claims against Alfa Telecom but there are no official court notices so far.
On February 25, 2017, the Prosecutor General’s Office of Kyrgyzstan initiated a criminal case against Omurbek Tekebayev, a Parliament deputy and leader of the Ata Meken opposition parliamentary faction, on charges of corruption and fraud. The case was initiated based on materials submitted by the State Committee for National Security (SCNS).
A Russian businessman, Leonid Maevsky, applied to the SCNS, saying that in 2010, Tekebayev, then deputy head of the interim government, received from Maevsky $1 million for admission to the management of Alfa Telecom.
In November 2016, Tekebayev submitted documents to the Parliament that contained information about the involvement of three MPs in the sale of 50 percent of Alfa Telecom shares through offshore companies of Maxim Bakiyev, the son of former President Kurmanbek Bakiyev. The authenticity of the documents is being questioned.
Many believe the charges against Tekebayev are politically motivated, as the authorities are trying to prevent Tekebayev from running for president in the elections scheduled for November 19.
At its congress on March 5, the Ata Meken party nominated Tekebayev, currently in custody, as its candidate for Kyrgyzstan’s presidency.
Background
Alfa Telecom CJSC was established in 2009 by Alexey Eliseyev, a close friend of Maxim Bakiyev. Assets of BiMoCom LTD, former owner of MegaCom trade mark, were transferred to Alfa Telecom. After the change of power in Kyrgyzstan in 2010, 49% of Alfa Telecom shares were nationalized by a decree of the interim government, and the remaining 51% remained belonging to two offshore companies.
In December 2013, the Bishkek Inter-district Court declared the purchase and sale of shares invalid, and 51% of shares were returned to Eliseyev. Later, the Osh City Court convicted Eliseyev and confiscated his property, including the stake in the company. In July 2014, the Supreme Court handed over 51% of Alfa Telecom shares to the State. Thus, the Government became the full owner of the company.
Alfa Telecom provides cellular services in GSM (2G), WCDMA/UMTS (3G) and LTE (4G) standards. The company covers 98% of Kyrgyzstan and serves more than 3 million subscribers.
