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Russian MTS Returning to Turkmenistan

Thursday 3 May 2012

MOSCOW (The Associated Press) – Cellular operator Mobile TeleSystems says it is returning to the isolated Central Asian nation of Turkmenistan almost 1½ years after its operations in the country were suspended.

A deal agreed Wednesday between Yevtushenkov and Turkmenistan’s President Gurbanguli Berdymuhamedov ends an acrimonious dispute that had tarnished the former Soviet nation’s image among international investors. Vladimir Yevtushenkov, billionaire chairman of the holding company that owns MTS, said in a statement broadcast on Turkmen state television Thursday that services would be resumed within three to six months. MTS (MICEX-RTS:MTSS / NYSE: MBT) is the largest mobile operator in Russia and CIS with over 102.4 million subscribers as of 31 December 2009.

The mobile-phone sector in Turkmenistan was dealt a devastating blow in late 2010, when authorities pulled MTS’ license, leaving about 2.4 million subscribers without service. That left government-owned Altyn Asyr as the only provider available to the population of 5 million.

In 2005, Barash Communications Technologies, Inc. (BCTI), a U.S.-owned company which was founded in Turkmenistan in 1994, and MTS signed an agreement with the Turkmen Ministry of Communications, under which the government received 20% of the profits. That agreement expired 21 December 2010. MTS had grown rapidly and had more than 2.4 million customers in Turkmenistan, a largely desert-covered country with a population of over 5 million, controlling 85% of the market. At the same time, Altyn Asyr had only 310,000 customers.

MTS had initially fought back against the suspension of its operating license and launched a public relations offensive urging the international business community not to invest in Turkmenistan. The campaign proved deeply embarrassing to the government. Authorities promised to improve the quality of service offered by Altyn Asyr, but progress has been negligible.

Last April, Turkmenistan signed deals with China’s Huawei Technologies and Finish-German venture Nokia Siemens Networks to help increase capacity at Altyn Asyr. However, the President Berdymuhammedov had earlier criticized Altyn Asyr, which currently serves about 1 million users, saying “bungling” at the company was harming its efficiency.

Because of the poor quality of landlines, most people in Turkmenistan rely on mobile connections to surf the Internet, but speeds are dismally slow. MTS had proven popular for its marginally better service.

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