Uzbek MTS subsidiary files for bankruptcy

ICT Materials 16 January 2013 16:51 (UTC +04:00)

Uzbekistan, Tashkent, Jan.16 / Trend D.Azizov /

Uzdunrobita Ltd., a full subsidiary of the Russian company Mobile TeleSystems in Uzbekistan is filing for bankruptcy in the commercial court of Tashkent, a report released by MTS's press service said on Wednesday.

MTS officials said the decision was brought about by the inability of its Uzdunrobita Company to pay a $600 million fine for tax evasion in accordance with a verdict of the Tashkent City Criminal Court dated September 17, 2012 and a decision of Appeals Board of the Tashkent Court dated November 8, 2012.

At this stage, the remaining $150 million has been recovered by law enforcement agencies from Uzdunrobita bank accounts following the criminal court's ruling.

The company continues to protect its interests in accordance with Uzbek laws, the report says.

In its report for the second quarter of 2012, MTS indicated the impairment of long-term assets in Uzbekistan to the amount of $579 million and a reserve of $ 500 million for tax and antitrust liability that may arise as a result of legal proceedings taking place in Uzbekistan. Thus, the total amount debited from the net profit amounted to 1.08 billion dollars.

As reported by Trend, the current situation around Uzdunrobita remains unclear. On Monday, many employees of Uzdunrobita received notices of dismissal. The company has retained some technical staff to keep equipment running.

The issue concerning the company's license also remains unclear. On November 20, 2012, the Supreme Economic Court of Uzbekistan suspended consideration of Uzdunrobita's appeal from a decision from the Tashkent City Economic Court on the revocation of its telecommunications licenses. The date of the next meeting of the Economic Court has not yet been determined.

As reported, in June 2012, regulatory authorities in Uzbekistan started an examination of Uzdunrobita's activity. It is the largest mobile operator in the country.

The Prosecutor General's Office authorized the seizure of original documents and an inventory of the company. It also conducted arrests and mass questionings of its employees. Subject to the request of the State Communications Inspectorate, Uzdunrobita shut down its Uzbek mobile network in July which resulted in more than nine million customers being left without mobile phone service.

In August, the Tashkent Commercial Court upheld the lawsuit filed by the Uzbekistan Communications and Information Technology Agency annulling Uzdunrobita's license to operate. The agency claimed that Uzdunrobita's branch offices were operating illegally.
In September, Tashkent City Criminal Court sentenced four managers of Uzdunrobita accused of stealing funds from the company through the purchase of equipment at inflated prices, and "organization of a criminal group to extract uncontrolled profits" to hard labor terms of various lengths and imposed other sanctions. Also, the court decided to transfer all assets of Uzdunrobita to the state. In November, the Tashgorsud Board of Appeals partially upheld Uzdunrobita' complaint and reversed the lower court's decision on the transfer of its assets to the state.

The court later set the total amount of fines and penalties to be paid by Uzdunrobita at $600 million that must be paid within eight months.

In addition, the panel recognized Uzdunrobita as the civil defendant in a criminal case against four of its employees and withdrew the freeze on the company's assets that was imposed by a court of first instance. The sentence of first instance of company managers was upheld.

The total amount of claims against the company by the Prosecutor General's Office, regulatory authorities, The Agency for Communication and Information and tax authorities amounts to over one billion dollars, which is the amount of investment made by MTS in the development of business in Uzbekistan.