Hijacked: $1bn company once owned by daughter of the president


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The Independent Online

It took all of 14 minutes for a court in Uzbekistan to revoke the licence of Russia's MTS, the biggest mobile provider in the country. The case, heard last month, resulted in around 40 per cent of the country's citizens waking up to find their mobile phones had been cut off.

Guilty verdicts in a separate, criminal, case against MTS employees that concluded last week look set to prompt the full government expropriation of the Uzbek arm of MTS, into which the Russian parent company says it has invested around $1bn (£617m) over the past eight years.

The case again puts the spotlight on the controversial country, which has one of the world's worst human rights records but has been courted by the West due to its strategic importance.

As a Russian company used to working in the thorny markets of the post-Soviet world, MTS hoped it would be immune from the shakedowns that have hit other companies working in Uzbekistan, but the Russian telecoms giant has been forced to write off hundreds of millions of pounds of cash and assets from its balance sheet after the ruthless pursuit of its Uzbek arm.

"This is the biggest telecoms provider in Central Asia, and we've been subjected to a classic shakedown," says MTS vice president Michael Hecker. "It was systematically expropriated, with fundamental violations of human and procedural rights. It's just unbelievable."

Since MTS bought Uzdunrobita, a small local mobile company, in 2004, the business has gone from strength to strength. But earlier this summer problems began as the company's local CEO disappeared, apparently reacting to a tip-off that problems were afoot. Shortly after, five of the top management were arrested. One of them, a Russian citizen, was released after pressure from the Russian Foreign Ministry, but the four Uzbek citizens remained in jail, as hundreds of other company employees were taken in for questioning.

Uzbekistan has long been controversial for its human rights record, including the use of enforced child labour to pick cotton, allegations of systematic torture in the prison system, and a massacre of hundreds of unarmed protesters in 2005. It has been ruled since the Soviet collapse by President Islam Karimov, and his socialite daughter Gulnara Karimova has been cited by several foreign investors and Western diplomats as a powerful business magnate who controls much of the country's economy.

Ms Karimova has always denied owning a wide range of business interests in the country. However, in one of the few interviews she has given to Western media, Ms Karimova told i's sister paper The Independent in 2004 that she owned the majority stake in Uzdunrobita, just before it was sold to MTS.

MTS declined to comment whether they paid Ms Karimova when they bought the company in 2004, or whether they ever negotiated directly with her.

The Uzbek embassies in Russia and the US did not respond to requests for comment; neither did an official in the Uzbek Prosecutor's Office. Carolyn Lamm, a US lawyer who has acted for the Uzbek government in legal cases before and led a delegation of US business representatives to Tashkent in August, insists that the case is simply about following legal regulations. She told i from Washington: "What I heard ... was that they failed to pay their taxes and were not operating legitimately".

In the conclusion of the legal case against the MTS employees, the four men were convicted of a litany of offences last week including tax evasion, abuse of power and forgery. The men were released from prison, but were fined more than $700m, which the court ordered to be gathered by seizing assets from MTS. Lawyers say the four are too afraid to launch an appeal.