Uzbekistan: Russian Telecoms Giant Files for Bankruptcy

Russian telecoms giant MTS has filed for bankruptcy in Tashkent amid its long-running dispute with the Uzbek government, which is currently embroiled in telecoms scandals on several fronts. 

MTS’s Uzbekistan subsidiary O’zdunrobita has petitioned for bankruptcy due to its “inability” to carry out a November court ruling ordering it to pay fines and penalties of $600 million, MTS said in a January 16 statement. 

The company’s troubles began last July, when Tashkent accused it of using equipment illegally, then brought tax evasion charges, and finally shut it down. 

In September, a court ordered MTS’s assets in Uzbekistan seized. To the surprise of many, that ruling was overturned on appeal in November. But with the good news came a catch: The court that overturned the assets seizure ordered MTS to pay penalties of $600 million – the approximate value of the assets the court had just returned. Some $150 million has already been seized from its bank accounts in Uzbekistan, MTS says. 

MTS has protested its innocence, condemning the affair as the kind of assets grab not uncommon in Uzbekistan’s murky business climate – a charge Tashkent denies.

O’zdunrobita “continues to defend its rights” under Uzbek law, the statement said. “MTS reserves the right to use all legal options in the international arena in order to claim damages incurred as a result of an unwarranted attack on its subsidiary in Uzbekistan.”

MTS said that as a result of the case it had written off $579 million as an “impairment charge” in the second quarter of 2012, and legal proceedings in Uzbekistan were expected to cost around $500 million more.

In a separate development, a Swedish court ruled on January 16 that Swedish courts have jurisdiction to hear bribery charges involving Nordic telecoms giant TeliaSonera and a small Gibraltar-registered company called Takilant Ltd, which is believed to be linked to Gulnara Karimova, the daughter of President Islam Karimov.

Sweden’s Court of Appeal overturned a December ruling that found that the courts did not have jurisdiction, paving the way for Swedish prosecutors to pursue allegations that TeliaSonera bribed its way into Uzbekistan’s telecoms market (which the company denies) and to seek freezes on over $200 million more of Takilant assets abroad ($30 million is already frozen in Sweden).

How are these two telecoms scandals related? 

As EurasiaNet.org reported last week, documents filed with the Swedish court suggest that in their negotiations TeliaSonera officials knew they were dealing indirectly with Karimova. The intermediary was Bekhzod Akhmedov, who was pursuing talks for TeliaSonera to enter Uzbekistan even while heading a rival company. That rival was MTS’s subsidiary O’zdunrobita – the very one that has filed for bankruptcy – and Akhmedov is now the subject of a Swiss money-laundering probe involving other Karimova associates.