Russian mobile operator MTS mulls return to Uzbekistan

By bne IntelliNews May 26, 2014

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Russian mobile giant MTS is mulling a return to Uzbekistan's telecom market in return for ceding part of its business, which was seized in 2012, to the Uzbek government. The company's claim that Tashkent is keen to bring it back offers mixed signals to foreign investors.

Vladimir Yevtushenkov, the owner of the Sistema group which controls MTS, said the company - one of Russia's "big three" operators - may return to the Uzbek market as soon as this year, according to Novyy Vek. "We've agreed all conditions, except for one which is very significant for us," he said on the sidelines of the St Petersburg International Economic Forum, referring to the issue of frequencies. 

"They [the Uzbek authorities] want us to return very much. Should we agree [on the issue], we will return this year," the Russian adds. However, that would represent a very mixed signal for foreign - and especially Russian - investors. The head of another Russian company - one of the few remaining investors active in the country - has just fled to Moscow after reportedly suffering mistreatment during detention in Uzbekistan.

Cloak and dagger

"This will be a company with state involvement but we will have control," Yevtushenkov added. "We will return to this country with great pleasure. It's not a bad market." At the same time, Yevtushenkov suggests he feels far from secure in Uzbekistan, and says he can't rule out a repeat of the scenario which forced the company to leave the country.

In a story that ties into claims of a cloak and dagger battle amongst Uzbek elites to succeed long-term authoritarian leader President Islam Karimov, Uzdunrobita - MTS' local subsidiary - was Uzbekistan's largest mobile operator with some 9m subscribers in July 2012 when the authorities brought charges of tax evasion and illegal use of equipment. Tashkent swiftly revoked its operating licence and launched claims to the tune of $600m. 

The president's daughter is at the centre of a probe in Europe over her role in allowing rival telecoms operators into the market. Last year, Gulnara Karimova accused MTS of begin involved in pressuring Swiss prosectors to launch a corruption case into her role in the entry of Swedish telecom Teliasonora.

Meanwhile Uzdunrobita is currently working its way through the bankruptcy process, while MTS has resorted to international arbitrage to dispute the Uzbek authorities' actions. However, Karimova looks like she has now lost her footing; many of her businesses have since been closed down, and there are even reports she's under house arrest.

At the same time, while MTS is mulling a return to Uzbekistan, another Russian business has come under fire in the Central Asian country. Uzbek authorities accused Russian businessman Aleksandr Pozdeyev, president of Perm-based Zapadno-Uralskiy Machine-building Concern, of colluding with Uzbek companies in overstating the value of contracts during the construction of a $60m potassium fertiliser plant in the southern Kashkadarya region in 2010.

Pozdeyev was detained on May 13 when he arrived in Uzbekistan for questioning by prosecutors. While in detention, Pozdeyev's physical condition deteriorated and an Uzbek court on May 24 freed him on a pledge not to leave the country. The following day, the Russian embassy in Tashkent said that the businessman left the country for Moscow.

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