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U.S. Lawmakers Pledges on Favour of MTS

Friday 31 August 2012

(Bloomberg) – U.S. lawmakers urged Uzbekistan’s president to resolve a conflict over New York-listed OAO Mobile TeleSystems (MBT), the Russian phone operator that had its local license withdrawn and employees detained, warning investment in the Central Asian state may suffer.

“If not resolved in a timely and transparent manner, this situation will negatively impact the perception of Uzbekistan’s business climate,” five U.S. congressmen, led by Representative Dan Burton of Indiana, wrote in the letter to President Islam Karimov, dated Aug. 27 and obtained by Bloomberg. “The detention of employees may be particularly damaging to investment in the technology sector.”

A U.S. delegation recently visited Uzbekistan as the country seeks investment in technology, according to the letter.

More than a third of MTS’ 47% free float is owned by American funds, pushing the United States to step up pressure on Uzbekistan. The U.S. Commission on Security and Cooperation in Europe warned of “deterioration in bilateral ties” and a “chilling effect on foreign investment” if the executives were not released from jail, and if an Uzbek investigation into Uzdunrobita, MTS’s wholly owned subsidiary in Uzbekistan, was not handled with more transparency, The Financial Times reported late last week.

Today MTS declared it faces seizure of its local subsidiary following a criminal investigation. MTS last week took a US $1.1 billion write-off in connection with the withdrawal of its Uzbek operating licence and the arrest of four local managers on criminal charges. Last Monday, the Tashkent Criminal Court has initiated a trial against four previously detained employees of Uzdunrobita: Temirmalik Alimov, First Deputy General Director for Finance; Azizillo Mirzamoidinov, Director for Corporate Development; Alisher Muhamedov, Director for Security; and Aziz Rahimov, Deputy General Director for IT. Only limited information on the substance of charges has been provided to the MTS employees and their attorneys. They also have not been provided with full materials of the case. Throughout the pre-trial period, the detained employees were denied minimum procedural guarantees and basic rights in violation of the Uzbek law and international human rights conventions. Some interrogations of the employees have been conducted without counsel. According to the information available to the Company, portions of the employees’ testimonies were obtained under pressure from the prosecution.

MTS claims the campaign is an unwarranted attack on its business of the type that had forced out other foreign investors such as Oxus Gold.

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