Page 74 - bne_Magazine_February_2019

74 I Eurasia bne February 2019
Russian telecom major MTS packing up its kit, exiting Turkmenistan
Ben Aris in Berlin
Leading Russian telecoms company Mobile TeleSystems (MTS) is dismantling its equipment and pulling out of Turkmenistan after the government cut off its services yet again in a dispute over profit sharing.
One of Russia’s big three mobile phone operators, MTS has been working in Turkmenistan since 2005. However,
the Turkmen government has on three occasions closed MTS’ operations down, each time to demand a larger share of the profits.
After the government cut off its access to the internet and long distance lines in September 2017, the company says
it has had enough and is pulling out completely. MTS began dismantling its base stations and sending its equipment back to Russia in December.
It has also filed a request for arbitration against the sovereign state of Turkmeni- stan with the World Bank’s Paris-based International Centre for Settlement of Investments Disputes (ICSID). Accord- ing to the ICSID website, the tribunal
www.bne.eu
consisting of three arbitrators has now been constituted and our sources say that the process is likely to take several years to conclude.
“In September 2017, MTS’s wholly- owned subsidiary MTS-Turkmenistan was compelled to suspend its operations in Turkmenistan due to the actions
of the government of Turkmenistan, including the actions of the Ministry
of Communications and other entities owned, controlled and directed by the Turkmen State. The company considers that the Turkmen state has violated
its rights as a foreign investor under
the Agreement on Promotion and Reciprocal Protection of Investments signed between the government
of the Russian Federation and the government of Turkmenistan on March 29, 2009, ultimately resulting in the total expropriation of the company’s investment in Turkmenistan,” MTS said in a press release in July.
MTS intends to sue the government for its lost investment and while it has not said how much the claim with the
ICSID will be, the company previously estimated its losses at $750mn.
MTS has had a long and difficult experi- ence in Turkmenistan that went wrong almost from the start. In 2005 it entered the market by acquiring a privately owned telecoms operator BCTI that had 47 base stations and some 59,000 sub- scribers. The government almost imme- diately supended its licence , demanding that BCTI share 70% of its profits with the state, but after a long negotiation MTS eventually agreed to pay 20% of its profits after tax, fees and fixed costs. Over the next five years MTS invested $250mn into its local subsidiary and expanded its network to 1,130 base sta- tions that were servicing 2.5mn clients.
However, at the end of 2010 the govern- ment shut the company down again by suspending its licence and demanded
a larger share of the profits. After two years of negotiation MTS eventually agreed to increase the profit share with the state to 30% and in return received a five-year licence with the option to renew for another five years after that.