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MTS files for Uzbek subsidiary bankruptcy


Russian operator group MTS has announced that its wholly-owned subsidiary in Uzbekistan has filed a petition to declare bankruptcy.

The company filed the petition in the Tashkent Commercial court due to the inability of its local arm (Uzdunrobita) to fulfil obligations related to a September verdict in a criminal case against its employees.

MTS had its Uzbek licence suspended by local authorities in July, ostensibly for non-payment of taxes and licence violations. The court ruling allowed the state to seize control of Uzdunrobita and impose prison terms on four Uzdunrobita managers.

The operator — which had 9.5 million customers in Uzbekistan — claimed it had been the target of “blatant harassment by Uzbek government authorities with the thinly-veiled purpose of destroying the business and expropriating its assets”.

An Appeals Court reversed the decision that allowed the state to take control of operations in November but determined that Uzdunrobita should pay fines and penalties of around $600 million.

Around $150 million has already been recovered from Uzdunrobita’s bank accounts by law enforcement agencies, according to MTS.

The company said it “reserves the right to use all legal options in the international arena in order to claim damages incurred as a result of an unwarranted attack on its subsidiary in Uzbekistan”. It added that Uzdunrobita will continue to defend its rights in accordance with the laws of Uzbekistan.

MTS recorded an impairment charge of $579 million against its assets attributable to Uzbekistan in its statement of operations for the three months ending in 30 June 2012. The company also put aside $500 million to cover tax, anti-monopoly and other liabilities believed to be the probable result from the various legal proceedings still taking place in Uzbekistan.

The charges led to MTS parent group Sistema reporting a net loss for the quarter.

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