MTS drops litigation to re-enter Uzbek market through govt JV

1 Aug 2014

Russia’s Mobile TeleSystems (MTS) has signed a settlement agreement with Republic of Uzbekistan, under the terms of which the company will resume offering mobile services in Uzbekistan through a joint venture with the government. MTS’s re-entry to the market comes with the caveat that it must drop legal proceedings against the republic in the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). The joint venture will be held 50.01% by MTS, and 49.99% by a state-owned enterprise managed by the State Committee for Communications, Information and Telecommunication Technologies (CCITT). The new firm will utilise the assets of MTS’s former subsidiary, MTS Uzbekistan (also referred to as Uzdunrobita) which were confiscated by the state after the Russian company’s operating licences were cancelled in 2012. The settlement agreement also stipulated that the state would allocate the new provider licences for 2G, 3G and 4G Long Term Evolution (LTE), as well as the necessary spectrum and numbering resources. The new operator is set to launch operations before the end of 2014.

A joint press release from CCITT and MTS noted that the agreement was governed by English law and provides for any disputes to be settled by the International Court of Arbitration at the International Chamber of Commerce (ICC) in Paris.

In the wake of MTS Uzbekistan’s licence cancellation in 2012, MTS argued that it was the victim of a government-led ‘shakedown,’ accusing the nation’s notoriously corrupt political elite of using the authorities to extort funds or take control of the company – then the largest cellco by subscribers in the country. Such practices are not unheard of in Uzbekistan, and many foreign-owned companies are forced to become joint-ventures with state enterprises, with the latter taking a share of the earnings. Indeed, TeleGeography’s GlobalComms Database notes that MTS faced a similar situation in neighbouring Turkmenistan. After being ejected from the market in December 2010 under dubious circumstances, MTS went on to relaunch operations in July 2012, albeit with an obligation to hand over 30% of its net profits to the government.

Uzbekistan,Mobile TeleSystems (MTS), MTS Uzbekistan (Uzdunrobita), State Committee for ICT (CCITT),

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