21 Dec 2010 14:50

MTS subsidiary in Turkmenistan halts operations as license suspension takes effect

ASHGABAT. Dec 21 (Interfax) - The subsidiary of Russian mobile provider Mobile TeleSystems (MTS) in Turkmenistan, Barash Communications Technologies (BCTI), halted operations today as a one-month license suspension took effect.

BCTI subscribers - over two million of them - received SMS notification on Monday they would lose service for one month.

MTS began operating in Turkmenistan in June 2005 with the purchase of a controlling stake in BCTI, which had been the monopoly mobile operator in Turkmenistan for more than 10 years. At that time BCTI had about 60,000 subscribers.

MTS is the leading mobile operator in Turkmenistan, well ahead of its only competitor, state-owned Altyn Asyr.

Altyn Asyr sales locations were swamped on Tuesday with cell phone users eager to obtain working SIM cards.

Turkmenistan has a population of 5.1 million.

It was reported earlier that BCTI's license would be suspended for one month beginning on December 21, 2010.

MTS operates in Turkmenistan under a three-party agreement between BCTI, MTS and the Turkmen Communications Ministry in November 2005. The agreement expires on December 21, 2010.

"The Company at all times had reasons to believe that the Agreement would be extended and had approached the Ministry of Communications within the required timeframe to formalize the extension. However, the Ministry of Communications failed to grant the extension in accordance with the terms of the Agreement," MTS said in a statement on December 16.

"MTS management is taking active steps to clarify the situation but no explanation, including in relation to the alleged breaches by MTS has been given by either the Government of Turkmenistan or its Ministry of Communications," it says.

"In any event, it is the Company's opinion that the expiration of the Agreement does not preclude MTS from continuing its operations in Turkmenistan nor can any alleged termination of the Agreement serve as the basis for suspension of BCTI's licenses," it says.

BCTI accounted for 1.9% of MTS revenue in the first nine months of 2010 and 2.7% of Operating income before depreciation and amortization (OIBDA).

BCTI boosted third quarter revenue 29.7% year-on-year to $56.8 million. OIBDA rose 32.7% to $34.1 million and the OIBDA margin increased to 61.1% from 59.5%. Third quarter net profit was up 34.6% to about $21 million.

BCTI recently received a license to provide 3G services and launched a network. The president of MTS parent company AFK Sistema , Leonid Melamed, said the company planned to expand its presence in Turkmenistan.

Sistema has invested about $280 million in Turkmenistan since it began operations there, Melamed said. "Future investment will run into the tens of millions of dollars," he said.

Commenting on the agreement on BCTI with the Communications Ministry, Melamed said: "At this stage the agreement remains in force."