MTS Exits Uzbekistan Venture Following U.S. Corruption Probe

  • Majority stake in unit sold to Uzbek government agency
  • Russian carrier to write down 3 billion rubles with deal

Mobile TeleSystems PJSC, Russia’s largest wireless carrier, agreed to sell its majority stake in Uzbekistan’s Universal Mobile Systems to the Uzbek government, following a corruption probe by U.S. regulators.

Uzbekistan will now become the full owner after buying the 50.01 percent stake. MTS, as the Russian carrier is known, said it will write off about 3 billion rubles ($46 million) due to the sale in its third-quarter results.

“Due to a variety of business reasons and other circumstances, MTS decided to sell its stake in the joint venture UMS LLC,” MTS vice president Andrei Smelkov said in a statement on Friday.

The U.S. Department of Justice has investigated MTS, VimpelCom Ltd and Telia AB, alleging that all three carriers made payments to companies linked to Uzbek President Islam Karimov’s daughter to gain access to the country’s market. VimpelCom paid a $795 million fine in the U.S. to settle the issue earlier this year, while Telia made a 5.3 billion kronor ($622 million) writedown of its Uzbek operations.

MTS stayed away from the Uzbek market for two years starting in mid-2012 amid legal disputes with the local government. That may limit its exposure to possible fines, because fines over corruption in certain markets are typically linked to profits earned on these markets.

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