MTS will pay US $850 million in Uzbek case

The Uzbek epic MTS is finally over: the mobile operator has entered into a settlement agreement with the US Department of Justice and the Securities and Exchange Commission (SEC). The company will pay $850 million in fines so that the US authorities waive claims in connection with a corrupt entry into the Uzbek market back in 2004.

More. MTS will pay out $850 million from the funds reserved for the "Uzbek case" in the third quarter of last year.

• Due to the future fine, MTS showed a record net loss in the III quarter - 37 billion rubles, but it will not affect dividends and current results, the company promised.
• “The signing of the settlement agreement is a logical step,” said Alexei Kornya, President of MTS: this will allow the operator to focus on development. MTS' debt burden remains low and it will continue to invest.
• MTS has never commented on the investigation of its activities in Uzbekistan, and it has not done so now.
• The company could sue the US authorities, but this would mean huge costs without a guaranteed result, writes RBC.
• MTS is the third and last of the mobile operators to pay a fine in the Uzbek case. In 2016 Vimpelcom paid $795 million to regulators, in 2017 Telia agreed to pay $965 million.

Question history. In 2014, the US Department of Justice and the SEC suspected MTS, Vimpelcom (now Veon, VimpelCom's holding) and the Swedish-Finnish Telia (last year it sold its 19% stake in Megafon to Gazprombank, yesterday it turned out that the bank had sold this stake under an offer to the operator itself , allegedly earning almost 17 billion rubles on this) in illegal payments to structures close to the daughter of the President of Uzbekistan, Gulnara Karimova.

According to the investigation, MTS paid $100 million for the entry into the Uzbek market in 2004 of the Gibraltar-based Swisdorn associated with Karimova. The company paid later: the amount of corrupt payments by MTS was estimated at $380 million.

Before Karimova's disgrace, the 100% subsidiary of MTS Uzdunrobita was the largest mobile operator in Uzbekistan with a share of up to 40%. With the beginning of disgrace in 2012, Uzdunrobita first lost its license, and then went bankrupt: the country's authorities filed claims for $600 million and confiscated its assets.

In 2014, MTS managed to return to the Uzbek market. The largest shareholder of MTS, AFK Sistema, agreed on the return of assets, but the company received only 50.01% in the new operator Universal Mobile Systems (UMS), to which the property was transferred.

The return turned out to be short-lived: in 2016, MTS sold its stake in UMS to the Uzbek authorities for a symbolic dollar, leaving the country for the second time. Most likely, this was due to the anti-corruption investigation. The company then estimated the write-off of Uzbek assets at 3 billion rubles.

Karimova is imprisoned in Uzbekistan on charges of embezzlement and corruption. The U.S. Treasury personal sanctions ruling against Karimova said that due to her corrupt activities in the telecommunications sector, "cellular communications in Uzbekistan were among the most expensive in the world."

Why is it important. The example of MTS and other operators confirms that the easiest way to enter the market of a corrupt country is through corruption. The problem is that the risks of this path usually do not pay off.

Sergei Smirnov