U.S. Lawmakers Appeal to Uzbek Leader Over Raid on MTS

U.S. lawmakers urged Uzbekistan’s president to resolve a conflict over New York-listed OAO Mobile TeleSystems (MBT), the Russian phone operator that had its local license withdrawn and employees detained, warning investment in the Central Asian state may suffer.

“If not resolved in a timely and transparent manner, this situation will negatively impact the perception of Uzbekistan’s business climate,” five U.S. congressmen, led by Representative Dan Burton of Indiana, wrote in the letter to President Islam Karimov, dated Aug. 27 and obtained by Bloomberg. “The detention of employees may be particularly damaging to investment in the technology sector.”

A U.S. delegation recently visited Uzbekistan as the country, ruled by Karimov since 1990, seeks investment in technology, according to the letter.

Shares in MTS, as the biggest wireless phone operator in Russia is known, have lost 7.7 percent from the high this year on May 2 in New York, trimming its value to $18.8 billion, based on yesterday’s close. U.S. investors in the company include “funds representing government employees, teachers and members of the military,” according to the letter.

Tax Claims

In June, Uzbekistan arrested MTS’s interim general director, who was later freed, and four local executives. MTS’s Uzdunrobita unit had its license withdrawn and faces about $1.2 billion of claims from the state, including tax and antitrust claims.

“We’re very pleased the seriousness of the situation has been noticed by international governments,” Josh Tulgan, director of investor relations at MTS in Moscow, said by phone.

MTS reported a second-quarter net loss of $682 million on Aug. 28, following a $1.08 billion writedown on its assets in Uzbekistan. Renaissance Capital, Otkritie Capital and Deutsche Bank cut their stock recommendations for MTS over the past two weeks before the earnings on expectations of the Uzbekistan writedown.

The loss of business in Uzbekistan has “mostly” been reflected in MTS’s share price and there’s “little downside” potential, Sergey Libin, a Moscow-based analyst at Raiffeisen Bank, said by e-mail. “Any positive news coming out of Uzbekistan should be well-received by the market.”

MTS rose 0.7 percent to 242.61 rubles by 4:52 p.m. in Moscow.

To contact the reporters on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net; Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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