MTS signals return to Turkmenistan

By bne IntelliNews May 3, 2012

Clare Nuttall in Almaty -

With relations between the two countries continuing to thaw, Russia's Mobile Tele Systems says it is planning to return to Turkmenistan close to 18 months after it's operations in the country were closed down by the authorities.

Majority shareholder Vladimir Evtushenkov announced the plan to return to the Central Asian country on Turkmen television on May 3 following a meeting with President Gurbanguly Berdymukhamedov in Ashgabat, RIA Novosti reports. The chairman of MTS parent Sistema said that the brand should relaunch operations within six months.

MTS officials are understood to have been in top-level talks with the Turkmen government over the resumption of its operations, which have been suspended since December 2010. Subsidiary Barash Communications Technologies, Inc.'s (BCTI) operations were effectively suspended by the Telecommunications Ministry on December 21, 2010 when it refused to extend the company's expired five-year license.

The ministry said the suspension would last just one month, but it has remained on hold for verging on 18 months now. State-owned Turkmentelecom also switched off all the communication channels leased by BCTI, setting up antagonistic talks.

Indeed, as recently as March 2012 it appeared that progress in negotiations to restart the operations had stalled. MTS official Oleg Raspopov told journalists that the company was unlikely to resume its business in Turkmenistan, despite the suspension having resulted in significant losses for the company.

Until the suspension, MTS had preformed well in Turkmenistan, seeing a rapid rise in subscriber numbers. As of 2008, it had an 85% share of the Turkmen mobile telecoms market. In just the first quarter of 2011, the suspension produced a $137.8m non-cash impairment loss for MTS, according to Prime-Tass.

MTS went on the war path, warning other potential investors of Turkmenistan's high risk in an open letter published just before the 2011 Turkmenistan Oil & Gas Road Show conference. The Russian company warned that the country's "unpredictability may lead to violations of international business practices, while socially conscious business is accompanied by significant risks."

Whilst there have been no hints from MTS or Turkmenistan as to the reasons behind the sudden agreement to relaunch the mobile brand in the country, it's likely no coincidence that it comes as relations between Russia and Turkmenistan are warming up after a particularly chilly spell during the worst of the crisis.

The suspension of MTS's licence came amidst tension sparked by Gazprom's decision to suspend gas imports from Turkmenistan in April 2009, which was followed by an explosion on Turkmenistan's main export pipeline. This dealt a severe blow to the Turkmen economy, and Ashgabat was swift to blame Russia.

However, relations have been gradually thawing in recent months. In October 2011, Russia said it would allow the transit of Turkmen gas to Ukraine, and Moscow has also given its backing to the planned Turkmenistan-Afghanistan-Pakistan-India gas pipeline.

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