Anti-corruption authorities in the US and the Netherlands have launched investigations into Russian mobile operator Vimpelcom over its operations in Uzbekistan, the company announced on March 12.
On the same day, Swiss prosecutors confirmed that Gulnara Karimova, daughter of Uzbek President Islam Karimov, is now officially a suspect in an ongoing investigation connected to a "Swedish telecoms firm". Around CHF800m ($914m) in assets linked to the probe have been frozen, the prosecutor general added.
Scandinavian telecoms giant TeliaSonera is being probed over claims that it made payments to Takilant, a Gibraltar-based company allegedly linked to Karimova, when it entered Uzbekistan. Takilant was formerly a minority shareholder in Vimpelcom.
The Russian company, controlled by rapacious oligarch Mikhail Fridman, is listed on the US NASDAQ index. It said in a statement that it is under investigation by the Securities and Exchange Commission (SEC). It says it received a letter from the SEC on March 11, "stating that they are conducting an investigation related to VimpelCom and requesting documents".
The same day, the Dutch authorities visited VimpelCom's Amsterdam headquarters, the company said. Officials removed documents and said that the company is "the focus of a criminal investigation in the Netherlands".
"The investigations appear to be concerned with the company's operations in Uzbekistan," VimpelCom's statement says. "The company intends to fully cooperate with these investigations."
"While we do not expect the investigation to have a significant direct financial impact on VimpelCom (although a fine cannot be ruled out), it might have notable indirect repercussions," writes VTB analyst Ivan Kim in a March 12 note. "[T]he investigation will ... distract management, which is currently trying to fix the business. We also should not rule out certain management changes, as was the case with TeliaSonera."
Cloak and Dagger
Vimpelcom is the second major international telecoms company to come under investigation internationally because of its activities in Uzbekistan. Scandinavian telecoms giant TeliaSonera has also been probed by Swedish and Swiss prosecutors after revelations that the company paid around $350m to Takilant in relation to the acquisition of its 3G licence in the country.
The investigation has claimed the heads of several TeliaSonera executives, including former CEO Lars Nyberg. A probe commissioned by the Scandinavian telecoms giant itself in 2012 said it found no evidence of bribery or money laundering, but criticised the company's investment process and said that insufficient effort had been made to investigate its local partner in Uzbekistan.
When TeliaSonera first came under scrutiny for its dealings with Takilant two years ago, Vimpelcom said it did not rule out that it could also be investigated. In the Russian company's annual filing to the SEC in March 2013, it said Takilant had held a minority interest in the Uzbek operations between 2007 and 2009, and had worked with Vimpelcom in its bid to acquire frequency spectrum, according to the Financial Times.
There is some speculation that the sudden acceleration of the probe into Vimpelcom is connected to the ongoing crisis in Ukraine. With the US and EU seeking to push Moscow into negotiations over its military incursion into Crimea, avenues to apply pressure without direct confrontation are being explored. Some suggest that authorities in the West could simply press for tighter compliance with the letter of the law when it comes to Russian corporates.
At the same time, the action is part of an ongoing cloak and dagger tussle among Uzbekistan's elite, with the telecoms sector front and centre. The struggle for position to succeed Karimov - who has ruled with an iron fist since independence - has recently seen Karimova losing her footing, with businesses and allies meeting difficulties with authorities.
Swiss public prosecutors say that the money laundering probe into TeliaSonera now includes Karimova personally. The president's daughter has been under investigation in Switzerland since September, prosecutors said.
The power struggle has hit others in the telecoms sector. Vimpelcom's compatriot MTS - formerly one of Uzbekistan's big three operators - fell into difficulties in mid-2012. Local unit Uzdunrobita was the largest player in the market at the time, with around 9m subscribers. However, it lost its operating licence due to "numerous and systematic violations" of operating procedures, the Uzbek authorities said.
Following a threat of asset seizure and $600m fine, MTS wrote off its Uzbek business. After several failed attempts to find a buyer, Uzdunrobia's assets were handed to Uzmobile, a subsidiary of UzbekTelecom.
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