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MTS Will Return to Uzbek Mobile Market After Two-Year Hiatus

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July 31 (Bloomberg) -- OAO Mobile TeleSystems, Russia’s largest mobile operator, said it will return to Uzbekistan’s wireless market after a two-year shutdown caused by a dispute with local government.

MTS, controlled by Russian billionaire Vladimir Evtushenkov, agreed to form a joint venture with the Uzbek government to resume operations in the ex-Soviet republic by the end of the year, it said today in a statement. MTS will have a 50.01 percent stake in the partnership, while Uzbekistan will hold 49.99 percent.

The venture will use network equipment seized by the government in 2012 amid a legal dispute with MTS over the unit’s ownership. The joint company will get all necessary permits and spectrum licenses, including for faster 4G networks, according to the settlement terms.

“The news is rather neutral for Mobile TeleSystems” as long as Uzbek laws prohibit paying dividends to foreign companies, Anna Lepetukhina, an analyst at Sberbank CIB, said by phone. “On the other hand, the market in Uzbekistan has a good potential for growth, and legislation may be changed one day, so this agreement may be positive for the company in the longer term.”

MTS, formerly the largest operator in Uzbekistan, wrote off more than $1 billion in impairment and tax claims for its Uzbek assets when it ceased business in the country. It lost 9 million Uzbek users to competitors including VimpelCom Ltd. after local authorities withdrew its licenses.

MTS had revenue of $441 million from Uzbekistan in 2011 with a 53 percent margin for operating income before depreciation and amortization. It was the company’s third-biggest market after Russia and Ukraine.

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net David Risser, Robert Valpuesta

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