MTS will return to Uzbekistan. If creates the joint venture with local authorities

MTS will return to Uzbekistan. If creates the joint venture with local authorities
The MTS company can return on the market of cellular communication of the Republic of Uzbekistan


MTS can return on the market of cellular communication of Uzbekistan where lost business two years ago, having written off at a loss 1,1 bln. dollars. Now MTS is ready to create cellular "daughter" where can receive control with the authorities of Uzbekistan.

The MTS mobile network operator which 53% AFK "Sistema" owns, can resume work in Uzbekistan until the end of the year. The chairman of the board of directors and the main owner AFK "Sistema" Vladimir Yevtushenkov reported about it on May 22 in a lobby of PMEF. "We with great pleasure will return to this country. It is the quite good market", – mister Yevtushenkov noted (the quote on MIA "Russia Today"). For work in Uzbekistan MTS can create the new company which minority package will receive the state. According to Vladimir Yevtushenkov, all conditions of resumption of work of MTS in the country are coordinated with the authorities of Uzbekistan practically; unresolved there was only "a vital issue connected with frequencies". In the press service of MTS did not begin to make comments on it.

MTS started working in Uzbekistan in 2004, having bought the local company "Uzdunrobita" in two stages for 271 mln. dollars. In 2011 the company gained 441 mln. dollars that made 3,6% of total sales of MTS for the reporting period. Then "Uzdunrobita" served 9,3 million subscribers – about 9% of base of MTS. Besides cellular assets of MTS controlled the owner of advertizing designs of Colorit Design Inc, largest in Uzbekistan. In 2009 MTS paid for Colorit Design Inc. nearly 39,7 mln. dollars that by 2,5 times exceeded size of the market of outdoor advertizing of Uzbekistan.

Problems with the Uzbek business at MTS appeared in the summer of 2012. In June, 2012 the authorities of Uzbekistan booked audit of "Uzdunrobita", and in July the communication and communication state agency stopped work of the company. The companies made a tax complaint more than for 900 mln. dollars later lowered to 669 mln. dollars, and now this dispute is complete, reported MTS in the annual report. Assets of "Uzdunrobita" were confiscated on criminal case about financial abuses against four of her top managers (later they were sentenced to probations and penalties). In April, 2013 "Uzdunrobit" underwent bankruptcy procedure then the authorities unsuccessfully tried to sell business at auction. According to MTS, now assets of "Uzdunrobita" are part of state "Uztelekom". MTS regarded an event as illegal confiscation of assets and in November, 2012 addressed the International center for settlement of investment disputes at the World bank. On April 22, 2013 consideration of the case by tribunal was frozen "by agreement of the parties". But in March, 2014 the Ministry of Justice and the Commission on securities and the exchanges of the USA became interested in Uzbekistan in activity of MTS. Investigation is at an early stage, and MTS cannot predict its outcome and the size of a possible penalty, reported MTS in April.

Following the results of last year in Uzbekistan 19,7 million subscribers of mobile communication were. The operator Unitel (VimpelCom Ltd belongs) serves 10,5 million subscribers, 8,5 million more are connected to the operator Ucell (TeliaSonera belongs). These two companies also are persons involved in criminal investigations of law enforcement agencies of the USA and the Netherlands. In particular, investigation concerning TeliaSonera began after a row of mass media in 2012 reported about possible bribes from TeliaSonera to structures, close to the leadership of Uzbekistan, at entry into the market of the country.

It is difficult to predict the size of a market share of MTS in case of return on the Uzbek market, the senior analyst "Sberbank-KIB" Anna Lepetukhina notes. According to her, it will depend on terms of agreement of the company with the authorities of the republic, its marketing policy, a communication quality and cost of tariff plans, and also on, whether will return MTS assets of "Uzdunrobita".



Maria Kolomychenko
Businessman
 No. 87 of 23.05.14