Uzbekistan launches tax probe into Russia's Vimpelcom

By bne IntelliNews October 16, 2013

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Tashkent tax authorities have launched an investigation into Unitel, the Uzbek unit of Russian mobile telecoms giant Vimpelcom, according to the Russian press. The inspection follows a series of probes into compatriot MTS, which was forced to shut down its Uzbek operation in 2012 due to a huge tax claim.

Vimpelcom, which operates under the Beeline brand, is the subject of a new tax investigation in Uzbekistan, Kommersant reported on October 15. No reason has been given for the decision to investigate the company.

UralSib analysts wrote in a September 15 note that, the investigation was initiated "on information received from external sources" claiming potential violations. That, they note, could include other companies, government bodies or individuals. The probe is reportedly set to continue until the end of October.

"The initiation of an unscheduled tax inspection against VimpelCom in Uzbekistan highlights the risks of doing business in Central Asia, particularly in light of MTS's experience last year," the Moscow-based investment bank adds.

With over nine million subscribers, MTS subsidiary Uzdunrobita was Uzbekistan's largest mobile operator. However, its operating licence was suspended in July 2012, initially for ten days. This was later extended indefinitely, with the telecoms regulator citing "numerous and systematic violations" of operating procedures.

Two months later, the Tashkent Criminal Court ruled in favour of a request by the Uzbek state to confiscate Uzdunrobita's assets. After that ruling was overturned on appeal, the company was instead ordered to pay around $600m in damages. MTS ended up writing off its Uzbek business, but says it still hopes to get compensation.

Meanwhile, the Uzbek authorities have made several attempts to sell off Uzdunrobita's assets, but so far without success. Sources close to the company have claimed that Gulnara Karimova, the influential eldest daughter of President Islam Karimov, is behind its troubles.

Dubbed Uzbekistan's "robber baron," by US diplomatic dispatches, Karimova is reported to have connections to the country's other major mobile operator, which is run by Coscom, the local unit of Sweden's TeliaSonera. Swedish prosecutors opened an investigation in 2012 into claims that TeliaSonera paid a member of the president's family when it bought the licence for Coscom in 2007.

As one of Uzbekistan's big three mobile telecoms companies, Vimpelcom initially benefitted from the shutdown at MTS. Uzdunrobita customers flocked to Unitel and Coscom, which operates under the Ucell brand. However, there have been signs throughout the year that Vimpelcom - controlled by rapacious Russian oligarch Mikhail Fridman - could be next in the sights.

The Uzbek regulator reportedly prohibited the use of 460 base stations constructed this year, due to the lack of appropriate approvals. In September, a Tashkent court rejected an appeal from Unitel over its inclusion in Uzbekistan's monopoly registry. The same court released Coscom from such a definition. However, it was joined by Coscom in being fined by the State Committee for Competition in May for anti-competitive practices.

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