For Russian Mobile Giant, Uzbekistan is Hard-Knocks Déjà Vu

If you’re Russian mobile operator MTS, finding yourself threatened by another hostile Central Asian dictatorship must feel like a sick joke. But this time it’s Uzbekistan -- not Turkmenistan -- where MTS faces the unpredictable business culture of an authoritarian country.

The sequel to Mobile TeleSystems’ 2010 Turkmenistan troubles began in mid-June when authorities in Tashkent announced they were searching for Bekzod Akhmedov, the head of MTS Uzbekistan. Akhmedov, authorities said, fled when they accused him of theft and tax evasion.

Uzbekistan’s mobile-connection inspector (GIS) then announced it was investigating MTS Uzbekistan for illegally using 48 cell base stations and for user reports of poor service. GIS threatened to suspend the company’s operating license. MTS promptly denied the allegations, saying that in 2012 alone the company has delegated $150 million dollars to construction of new cell towers.

Finally, on June 28 the Prosecutor General’s office said it was investigating MTS Uzbekistan for “tax evasion, money laundering, being involved in illegal activities, etc.”

The prosecutor claims it has received letters signed by the head of MTS, Andrei Dubovskov, asking the government to investigate MTS Uzbekistan’s “questionable and illegal schemes to hide funds and evade taxes,” and for help locating Akhmedov, the missing head of MTS Uzbekistan. 

MTS hasn’t publicly commented on the alleged letters. But the same day the Prosecutor General announced its investigation, MTS said the Uzbek government’s actions violated Uzbek law and could result in MTS cutting operations in the country. MTS also called unlawful the detention of at least two of its managers, Temirmalik Alimov and Russian citizen Radik Dautov. 

MTS purchased Uzdunrobita in 2004 and rebranded it MTS Uzbekistan. The company – which registered $441 million in gross profits last year – is one of four cell providers in the country and has about 9.5 million subscribers. 

Could the Uzbek authorities be investigating a legitimate crime? Sure. But given the penchant some people in Tashkent have for seizing others’ assets, the case is unlikely to do much to bolster Uzbekistan’s image as a smart investment.