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Nation hopes tourism ads will improve image

Despite the ongoing political chaos and economic crisis, Ukraine has taken to international airwaves to improve its image and promote itself as a tourist destination

Despite the ongoing political chaos and economic crisis, Ukraine has taken to international airwaves to improve its image and promote itself as a tourist destination.

A 30-second clip showing breathtaking views of the country’s tourist gems will be shown on CNN International 300 times over the next seven weeks, working out to about six showings every day.

It is not the first blitz television promotion of Ukraine, whose rancorous politics continue to sully the nation’s reputation across the world. But communications experts say such positive promotion is a much-needed step towards attracting tourists and improving Ukraine’s image internationally.

Starting Nov. 10, CNN International viewers are seeing a different picture of Ukraine. The ads show aerial and swooping crane shots of the medieval Monastery of the Caves in Kyiv, the Opera Theatre in Odesa, remains of the ancient Chersonesos Greek city, Lviv’s market square, windmills, castles and the picturesque Carpathian Mountains. When the ads conclude, viewers hear a British baritone voice saying “Ukraine, beautifully yours” to end the commercial.

Minister of Culture and Tourism Vasyl Vovkun said he hopes that an “influx of foreign tourists after the successful broadcast of this clip guarantees Ukraine a spot in the world arena.’

Vovkun was the one who provided artistic direction for the clips, according to the Culture Ministry statement. The statement also said a tender was held among “several foreign and wide-reaching television companies like BBC and CNN to find the best deal for broadcasting the ads.”

Kostyantyn Gridin, chief executive officer of Kyiv’s CFC consulting company, the exclusive representative of CNN in Ukraine, said his company received more than Hr 2.5 million ($416,000) to place the commercials. CFC claims to have won a tender that was announced in early autumn.

“We submitted our proposal, but had no great hopes of winning. We were a bit surprised when we won it,” Gridin said.

Gridin’s surprise is understandable, given his company’s past experience with state-solicited bids. In late 2005, CFC was one of five companies who submitted proposals for a government tender to create a positive image of Ukraine abroad. Five bids were tabled for a Hr 13 million ($2.5 million) contract that was awarded to an obscure company from Kharkiv called Konglomerat.

Three months later, the Foreign Ministry terminated the contract with Konglomerat, alleging the company had failed to perform any of the promised works. The ministry sued the company to no avail and the funds were never returned to the state.

This sort of corruption scandal is what contributes to an already bleak image of Ukraine abroad. Swiftly gaining the reputation of a sex-tourism Mecca and still fighting the legacy of the Chornobyl disaster, Ukraine needs help with its perception in the world.

“With the current internal [political] situation in the country, a little external ‘make up’ will not hurt,” Gridin said.

“Bad news hits the headlines and there has been a lot of it: political chaos, economic crisis, etc,” said Jock Mendoza-Wilson, international relations director at System Capital Management, the holding company of Ukraine’s richest man, Rinat Akhmetov. SCM ran a large-scale company image-improving campaign in Western media in 2005.

A British citizen, Mendoza-Wilson said Ukraine needs to show off its positive sides.

“As a non-Ukrainian who lives and works here, I can tell you there is more to the country than that. It’s clearly a good thing that Ukraine is making the effort to look after its image,” Mendoza-Wilson added.

But Gridin said the government-sponsored campaign has a chance to achieve multiple goals.

“With CNN International, we are targeting decision-makers and leaders. If the heads of foreign states see the ad on CNN – and they do watch CNN – one of them might say ‘I liked your commercial’ during a meeting with President [Victor] Yushchenko, for example,” Gridin explained.

He said Ukraine will get better bang for its buck with the new ad than during the first attempt to promote itself in winter last year.

Ukraine advertised itself as a tourist destination in 2007, spending $1.5 million on an integrated multimedia campaign, including “Ukraine: for snow lovers” commercials that were aired 80 times on Euronews and National Geographic television channels.

Ludwig Medyaniy, press secretary for the State Tourism and Resorts Service that had paid for the ad and airtime, said that his agency could not measure the effectiveness of last year’s advertising campaign.

But according to the State Border Service, the number of foreign tourists who visited Ukraine between January and September exceeded 20 million – an increase of 2.3 million people, or 12.5 percent over the same period in 2007.

“The world should know that Ukraine is more than borsch and potato dumplings. We have something to show,” Medyaniy said. “When you go to Egypt, for example, you see the sand and pyramids once and you’ve had enough.But in Ukraine, you can keep going back to Crimea or the Carpathians year after year.”

The three television ads mentioned in this story can be found on youtube.com:.

“Ukraine: Beautifully Yours” on CNN (2008) .

“Ukraine for snowlovers” on Euronews, National Geographic (2007).

System Capital Management on CNN, BBC, Euronews (2005).

Forbes: Follow-Through

Billionaires in Hot Water

The members of FORBES’ international billionaires list have been awash in financial challenges since the economic crisis hit this fall. Herewith, updates on billionaires we’ve profiled.

March 26, 2007 Hong Kong’s Richard Li, long one of Asia’s most eligible bachelors, may have dropped a notch in his appeal. The 42-year-old son of ports and property tycoon Li Ka-shing took an estimated hit of $300 million thanks to another botched attempt to sell a stake in Hong Kong’s biggest phone company, PCCW. Credit markets froze and investors questioned how private equity buyers could secure financing. By the time bidding closed in mid-October, PCCW’s share price had plunged 45% and the auction was canceled. Since Li, worth $1.4 billion earlier this year, bought Hong Kong’s biggest telecom in 2000, its shares have tumbled 97%. His latest reported plan: take PCCW private. –Deborah Orr

March 28, 2005 The October collapse and government seizure of Iceland’s second-largest bank, Landsbanki Island HF, put the fortunes of the nation’s only two billionaires on ice. Through their holding company Samson, Bjorgolfur Bjorgolfsson, known as Thor, and his father, Bjorgolfur Gudmundsson, own a combined 42% stake in Landsbanki, worth $3.1 billion at its peak in October 2007. That investment is now worth zero. The personal fortune of Gudmundsson, 67, was largely tied up in the bank. Son Thor, 41, was worth three times as much as his father in March. Last month Thor’s investment firm Novator sold a stake in Finnish telecom outfit Elisa for $310 million so that he could pay off debts. Thor’s other holdings, including majority stakes in Play, a Polish telecom group he started, and Actavis, an Icelandic generic drug firm, may prove valuable enough to keep him on the billionaires’ list. –Luisa Kroll

Fire Sale

The credit crunch has excised its pound of flesh from the world’s billionaires. Here are five who were hit with margin calls:

–Aubrey McClendon of Oklahoma City sold most of his shares in Chesapeake Energy for about $620 million; those shares were worth $2.3 billion in July.

–Sumner Redstone, Beverly Hills media tycoon, sold $230 million worth of shares in Viacom and CBS; those shares were worth $420 million in early October.

–Oleg Deripaska, Russian aluminum magnate, sold $1.5 billion of holdings in Canadian auto parts maker Magna International and Hochtief, a German construction company; those holdings were worth $2.1 billion in February.

–Alisher Usmanov, Russian mining and telecom oligarch, is being forced to give back a stake now worth $700 million in energy producer Gazprom; that stake was worth $2.8 billion in February.

Kostyantin Zhevago, Ukrainian banking and mining billionaire, sold 21% of Ferrexpo for $160 million; those assets were worth $675 million in February. – Tatiana Serafin

Consumers suffer as Ukrtelecom lags

The monopoly by held by Ukrtelecom limits competition and quality of 3G service

Millions of people around the world are using their cell phones to hold video conferences, surf the internet at fast speeds and to watch TV using the latest and greatest technology, so-called third generation (3G) communication.

But in Ukraine, such conveniences appear to be distant or expensive realities due to the lack of competition caused by the state’s go-slow strategy. That means consumers appear destined to suffer from low quality and a lack of choices.

Government officials have their reasons for taking this tack. They are trying to beef up the market value of state-owned Ukrtelecom, the only 3G license holder and one of the nation’s most valuable enterprises not yet privatized.

On July 16, a court stripped Ukraine’s largest mobile phone company, Kyivstar, of the right to attain a license offering third-generation telecommunications, leaving the state’s fixed-line telephone company, Ukrtelecom, with a monopoly. Experts say the decision will put off Kyivstar’s plans to kick start 3G mobile phone, internet and data communication service to thousands of subscribers this year.

The monopoly held by Ukrtelecom will limit competition and, therefore quality, of this hi-tech service that has grown in popularity in other countries. The company officially launched its 3G service late last year under the Utel brand, and claims its network is available in Ukraine’s largest cities.

But Ukrtelecom officials claim their 3G business is growing steadily, 20 percent each month, and currently has some 20,000 end subscribers of its own for 3G services.

Other companies that market 3G service in Ukraine use a less advanced CDMA technology, but Kyivstar and other leading privately-owned telecoms have pushed for regulators to open up the market so that Ukrainians could get a taste of real 3G, which includes video calling, mobile television services and high-speed internet connections in the 3.6-megabit range.

Their most recent effort in the two-year battle against Ukrtelecom’s monopoly license rights hit another snag this month.

Last December, Kyiv’s District Administrative Court ruled in favor of a Kyivstar appeal, arguing in its decision that the company should have the right to acquire a 3G license. But no license has since been granted and an appeal from Ukraine’s telecoms market regulator, the National Communications Regulatory Commission, was upheld on July 16. The Kyiv Administrative Appeal Court has ruled in favor of the national regulatory commission, reversing the previous court ruling that argued that Kyivstar should have a right to a license.

Meanwhile, it is unclear when Ukrtelecom will be sold by the government.

The sale of the telecommunications giant was first approved in 2000. But it has been mired in political squabbles.

The government’s most recent attempt to sell Ukrtelecom came in April this year, when it approved a $2.4 billion starting bid to privatize a 68 percent stake of the company.

The privatization, scheduled for this year, attracted a handful of big potential buyers, including Rinat Akhmetov’s System Capital Management, Russia’s Sistema (MTS) and Alfa Group, Turkcell, Magyar Telecom, Telecom Austria and Transtelecom.

Ukrtelecom has almost 80 percent of Ukraine’s fixed line market with subscriber base of 10 million people. More than 92 percent of the company’s stock is owned by the government, while another 7 percent belongs to the company’s employees.

Since 2005, Ukrtelecom exclusively owns third generation connection license in UMTS standard.

After repeated protests from privately-owned telecom competitors, officials last year approved tender procedures to sell additional 3G licenses, but the process was again hung up in bureaucratic delays.

Serhiy Konnov, senior partner at Konnov & Sozanovsky law firm, believes that the state’s tactics of blocking 3G licenses are simply designed to maximize the value of Ukrtelecom ahead of privatization.

“The situation definitely has a political motive. Government wants to increase Ukrtelecom’s capitalization by means of such non-material assets for its further privatization. Its [Ukrtelecom’s] position of the monopoly 3G license holder raises its market value,” Konnov said.

Officials at Kyivstar, Ukraine’s largest mobile communication provider in terms of subscribers, said their company will now face more uphill court battles to defend its rights for a 3G license. Yulia Shilina, the head of Kyivstar’s public relations office, said that the company plans to appeal to a higher court.

Until it wins a license, Kyivstar and other operators will need to offer 3G services to customers via Ukrtelelcom’s network, paying a fee for access.

Maksym Blahonravin, a telecoms expert, said Ukrtelecom’s monopoly hampers development.

Today third generation connection is provided by several operators in Ukraine. With service cost ranging from $5 to $60, the companies provide 3G connection based on CDMA technology. Kyivstar and Beeline provide this service through the only available UMTS 3G network operated by Ukrtelecom.

“We currently provide our 3G services through Utel’s network. As a result, our 3G service development is limited by Utel’s resources, which as you know, are quite limited,” Shilina said. If we would have our own license, we would be able to cover about 99 percent of the country, because our network is very well developed,” Shilina said.

According to a report by Advanced Communications & Media (AC&M), a research and consulting agency, the mobile telecommunication market has reached saturation and requires massive investment into new technologies, such as 3G.

Mobile phone subscribers have now reached 55 million. Future revenue growth is dependent on operators’ ability to offer new services. In two years, estimates are that 30 percent of the world’s mobile subscribers will be 3G users.

For now, consumers in Ukraine are wanting for competitive and quality 3G services to be made available in Ukraine. Dariya Polishchuk, a 3G subscriber for almost a year, said “the connectivity is not very good, the price is quite high.  [Western European] 3G services are…much better,’” she added.

Mid-sized domestic market researchers fill emerging niches

The growing sophistication of Ukrainian businesses is propelling demand for detailed market information and specialized studies. This means booming business for market research firms. With annual revenue growth of 25 to 30 percent, this segment of the economy is one of the fastest­growing in Europe, according to the Ukrainian Association of Marketing.

“Although, if we would consider 17 percent inflation, then the real growth would be 13 percent,” cautioned Dmitri Rodenko, director of International Marketing Group Ukraine.

 

Alexander Fedorishin, director of GfK Ukraine.

“Now we are talking about many medium­sized market research businesses entering the market,”

says Alexander Fedorishin, director of GfK Ukraine.

“Today, 60 percent of the market is controlled by international outfits, the remainder by domestic firms.”

The structure of the market has evolved since the late 1990s when it was dominated by large international firms. “Now we are talking about many medium­sized market research businesses entering the market,” says Alexander Fedorishin, director of GfK Ukraine. “Today, 60 percent of the market is controlled by international outfits, the remainder by domestic firms.”

The industry restructured because Ukrainian companies are becoming market savvy and require specialized research. It’s the smaller companies that provide the tailored services. “Ukrainian research companies are filling the new narrowly defined niches,” says Rodenko. The examples of niches new in the Ukrainian market are automotive lubricants, construction materials, entertainment and leisure research. “The companies in these niches use sophisticated methods such as price elasticity studies and customer satisfaction indexes (CSI),” said Tatyana Zheltomyrska, managing partner at TouchPoll Research.

That doesn’t mean the firms focusing on traditional market sectors are suffering. Large market leaders are flourishing with the rising demand for research in traditional sectors such as fast­moving consumer goods and media, both of which are experiencing tremendous growth.

The market is still dominated by a handful of firms, which control nearly 75 percent of the market. “Today, 25 percent Ukraine’s market is controlled by GfK, 14 percent belongs to The Nelson Company retail research specialist, and UP and TNS control 13 and 12 percent respectively,” Fedorishin said.

The possible merger of international giants GfK and TNS will have little impact on the local market, said Fedorishin, although it will strengthen his company’s hold on the market here and make GfK “overall, the number one research company in the world.”

But the merger remains merely a possibility. WPP, one of the largest market research firms in the world, held up GfK’s TNS buyout by offering to purchase the company for almost $2.1 billion. Since then, TNS has been courting other potential buyers. At this point, Fedorishin says “we definitely will not merge with TNS, but someone will buy TNS,” adding, “whether it will be us or WPP will be determined through negotiations.”

Experts forecast that intensifying competition and the growing number of research firms will only benefit industry clients. Over time, companies will implement more modern techniques that allow yet more tailored research. “Of course, Ukraine will follow the international trend of using online surveys and internet panels,” said Olena Zhytnyk, marketing director at InMind market research agency.

Insiders see only more robust growth ahead. “In 2009, we can expect 30-­35 percent growth,” said Serhiy Golub, head of analytics department at Kanzas Research Company. Demand from real estate, pharmaceutical and automotive sectors “will be the leading trend for research companies in Ukraine over the next three to five years,” Rodenko said.

Forbes Special Report “The World’s Billionaires”: ukrainians

Rank Name Citizenship Age Net Worth ($bil) Residence
127 Rinat Akhmetov Ukraine 41 7.3 Ukraine
203 Victor Pinchuk Ukraine 47 5.0 Ukraine
253 Ihor Kolomoyskyy Ukraine NA 4.2 Ukraine
260 Henadiy Boholyubov Ukraine 46 4.0 Ukraine
327 Kostyantin Zhevago Ukraine 34 3.4 Ukraine
428 Vitaliy Hayduk Ukraine 50 2.7 Ukraine
428 Serhiy Taruta Ukraine 53 2.7 Ukraine

For billionaires with publicly traded fortunes, net worths were calculated using share prices and exchange rates from February 11, 2008.


Rinat Akhmetov

#127 Rinat Akhmetov

Age: 41

Fortune: self made

Source: steel, coal mines

Net Worth: $7.3 bil

Country Of Citizenship: Ukraine

Residence: Donetsk , Ukraine, Europe & Russia

Industry: Diversified

Marital Status: married, 2 children

Education: Donetsk National Technical University, Bachelor of Arts / Science

Son of a coal miner, built his Ukrainian coal-and-steel empire in the mid-1990s by forging ties with then prime minister Viktor Yanukovych. After his ally lost 2004 presidential election, had his key asset, Ukraine’s largest steel company, Kryvorizhstal, reprivatized. Things were looking up when his Party of Regions briefly was back in the majority for part of 2006 and 2007; but that changed this fall when the opposition, led by Yulia Tymoshenko, won elections and almost immediately began reviewing his energy holdings. Continues to reorganize assets for potential public offering. In December his metal-and-mining holding company Metinvest finalized plans to merge assets with SMART holding company; Akhmetov will retain a 75% stake in Metinvest. Pledged $50 million to Ukraine’s Foundation for Effective Governance.


Victor Pinchuk

#203 Victor Pinchuk

Age: 47

Fortune: self made

Source: steel pipes

Net Worth: $5.0 bil

Country Of Citizenship: Ukraine

Residence: Dniepropetrovsk , Ukraine, Europe & Russia

Industry: Diversified

Marital Status: married, 2 children

Education: NA
Dniepropetrovsk Metallurgical Institute, Doctorate
Son-in-law of ex-president Leonid Kuchma, used his Ph.D. in pipe design to found Interpipe in 1990, now one of the world’s largest producers of steel pipes. Owned Ukraine’s largest steel company, Kryvorizhstal, with fellow billionaire Rinat Akhmetov until it was reprivatized in 2005. This year finalized sale of his Ukrsotsbank to Italy’s UniCredit Group for $2.2 billion. Planning to list 25% of Interpipe on the London Stock Exchange this spring after rumored talks to merge with steel pipe maker TMK fell through. Owns multimillion-dollar art collection that includes works by Damian Hirst, Jeff Koons and Andreas Gursky


Ihor Kolomoyskyy

#253 Ihor Kolomoyskyy

Age: NA

Fortune: self made

Source: banking, investments

Net Worth: $4.2 bil

Country Of Citizenship: Ukraine

Residence: Kiev , Ukraine, Europe & Russia

Industry: Diversified

Marital Status: married, 2 children

Education: NA
Dniepropetrovsk Metallurgical Institute, Master of Science
With partner and fellow billionaire Henadiy Boholyubov controls Privat group, a banking and industrial conglomerate. Began with Privatbank, which was founded with $1 million of capital in the early 1990s; today bank is estimated to be worth $4 billion. This year sold iron ore and coke interests to Lanebrook Ltd., the major shareholder of Russian miner and steelmaker Evraz Group; received cash and shares in Evraz. Battling with government over stake in oil company, Ukrnafta; wants to either buy the government’s share or get the government to buy Privat’s share back. Trying to gain control of 1+1, one of Ukraine’s top television channels, in partnership with American billionaire Ronald Lauder’s Central Media Enterprises.


Henadiy Boholyubov

#260 Henadiy Boholyubov

Age: 46

Fortune: self made

Source: banking, investments

Net Worth: $4.0 bil

Country Of Citizenship: Ukraine

Residence: Dneptopetrovsk , Ukraine, Europe & Russia

Industry: Diversified

Marital Status: married, 2 children

Education: NA

With partner and fellow billionaire Ihor Kolomoyskyy controls Privat group, a banking and industrial conglomerate. Began with Privatbank, which was founded with $1 million of capital in the early 1990s; today the bank is estimated to be worth $4 billion. This year sold iron ore and coke interests to Lanebrook Ltd, the major shareholder of Russian miner and steelmaker Evraz Group; received cash and shares in Evraz. Battling with government over stake in oil company, Ukrnafta; wants either to buy the government’s share or get the government to buy Privat’s share back. Via his private company, Palmary Enterprises, won control over Australia’s manganese ore miner Minerals.


Kostyantin Zhevago

#327 Kostyantin Zhevago

Age: 34

Fortune: self made

Source: banking, mining

Net Worth: $3.4 bil

Country Of Citizenship: Ukraine

Residence: Kiev , Ukraine, Europe & Russia

Industry: Diversified

Marital Status: married, 2 children

Education: NA
Doctorate
Ukraine’s youngest billionaire started out as finance director of bank Finance & Credit in 1992 when he was just 19. Eventually gained a majority stake in its holding company, Finance & Credit Group. Planning to take public Finance & Credit Bank in the next two years; this follows the successful initial offering of iron ore producer Ferrexpo in London in May 2007. Also a deputy in Ukraine’s parliament; ally of current Prime Minister Yulia Tymoshenko.


Vitaliy Hayduk

#428 Vitaliy Hayduk

Age: 50

Fortune: self made

Source: steel, coal

Net Worth: $2.7 bil

Country Of Citizenship: Ukraine

Residence: Kiev , Ukraine, Europe & Russia

Industry: Diversified

Marital Status: married, 2 children

Education: NA
Doctorate
With partner and fellow billionaire Serhiy Taruta controls steel, coal and energy conglomerate Donbass Industrial Union. The company was originally formed to supply gas to Donbass plants through highly lucrative barter arrangements; partners later bought shares in plants during privatization drive. Last year’s merger talks with Russia’s Gazmetall appear to have fizzled; but initial offering plans continue to be discussed. Reportedly considering selling shares to partner Taruta if his appointment to deputy prime minister for energy issues is approved.


Serhiy Taruta

#428 Serhiy Taruta

Age: 53

Fortune: self made

Source: steel, coal

Net Worth: $2.7 bil

Country Of Citizenship: Ukraine

Residence: Donetsk , Ukraine, Europe & Russia

Industry: Diversified

Marital Status: married, 2 children

Education: NA

With partner and fellow billionaire Vitaliy Hayduk controls steel, coal and energy conglomerate Donbass Industrial Union, which he joined in 1995. The company was originally formed to supply gas to Donbass plants through highly lucrative barter arrangements; partners later bought shares in plants during privatization drive. Last year’s merger talks with Russia’s Gazmetall appear to have fizzled; but a public offering is still being discussed.

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