Tag Archives: telecoms

Uzbek bribes cost VimpelCom $795m

FEB. 19 2016 (The Conway Bulletin) – Russian telecoms operator VimpelCom said it would pay a $795m settlement to resolve US and Dutch lawsuits focused on bribes it paid to top Uzbek officials in the late 2000s, a deal that highlights corruption by foreign telecoms companies in Uzbekistan.

The court settlement against VimpelCom is one of the largest settlements linked to bribery in US corporate history.

VimpelCom is majority owned by Russian billionaire Mikhail Fridman but is headquatered in Amsterdam and is also listed on the New York Stock Exchange. Telenor, the Norwegian telecoms company, also owns a 33% stake in VimpelCom.

Officials in the US and the Netherlands opened investigations against VimpelCom in 2014 for bribing Uzbek public officials to obtain a licence. The description of the corrupt official in the US court’s proceedings fits the profile of Gulnara Karimova, the president’s daughter, although her name is not explicitly mentioned.

The court said that, between 2006 and 2012, Unitel, VimpelCom’s subsidiary in Uzbekistan, paid $114m in bribes to operate in the country and to obtain 3G and 4G licences.

Two days before the settlement, VimpelCom released a report where it effectively admitted its guilt.

VimpelCom said it “would, among other things, acknowledge certain violations of the US Foreign Corrupt Practices Act and relevant Dutch laws and pay fines.”

Following the settlement Jean Yves Charlier, the VipelCom CEO, said: “The wrongdoing, which we deeply regret, is unacceptable.”

VimpelCom uses the Beeline brand. In Central Asia, Beeline also operates in Kazakhstan and Kyrgyzstan.

But VimpelCom is not alone in bribing its way into Uzbekistan’s mobile network. Swedish-Finnish telecoms company TeliaSonera has also admitted bribe paying in 2008 for access to Uzbekistan’s market.

For Uzbekistan, the telecoms corruption cases have confirmed widely perceived views that bribe paying is rampant and that, previously, major companies wanting to do business there had to deal with Ms Karimova. She was once thought of as a future president but has been under house arrest in Tashkent for two years.

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(News report from Issue No. 268, published on Feb. 19 2016)

Uzbekistan sells state firms

FEB. 17 2016 (The Conway Bulletin) – Uzbekistan’s government published a list of 89 state-owned companies that it said will sell at least 15% of their shares to foreign investors this year. Last December, the government approved a law that aimed to attract foreign investors. The long list of companies open for investment includes cotton industry giant O’zbekyengilsanoat, telecoms operator Uzbektelekom and Uzbekistan’s postal service.

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(News report from Issue No. 268, published on Feb. 19 2016)

Tele2 merges with Kazakhstan’s Altel

FEB. 10 2016 (The Conway Bulletin) – Swedish telecoms company Tele2 said a deal to merge its operations in Kazakhstan with Altel, owned by KazakhTelecom, was close to completion. The deal was announced last November. The new company will be 51% owned by Altel and 49% by Tele2, although the voting rights will be reversed. It will have a market share of around 22%, behind Kcell and Beeline, the brand name of Russia’s Vimpelcom.

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(News report from Issue No. 267, published on Feb. 12 2016)

Kyrgyzstan looks to cash in on expropriation of MegaCom

BISHKEK, FEB. 2 2016 (The Conway Bulletin) — Kyrgyzstan’s government said that it wanted to sell Alfa Telecom, which owns the mobile brand MegaCom, for around 19b som ($253m), cashing on its most lucrative asset grab from a revolution in 2010.

The sale of Alfa Telecom will mark the end of a battle for control over one of Kyrgyzstan’s most valuable companies.

Alfa Telecom had been controlled, directly and indirectly, by the son of former Kyrgyz president Kurmanbek Bakiyev. He was forced to flee the country in 2010 and one of the first moves by the new government was to start nationalising Alfa Telecom by taking control of a 49% stake in the company. It completed this process in 2014 when a court in Bishkek handed it the final 51% stake in the company from Alexey Yeliseyev, regarded as a frontman for the Bakiyev family.

Presenting plans to sell off, Alfa Telecom, Kyrgyz PM Temir Sariyev said: “We are presenting the auction to the international market, where competition is very high. The company is appealing for foreign investors and it needs a technological upgrade.”

Local audit firm All Star and the Kazakh branch of Ernst & Young assessed the total price of Alfa Telecom shares at $306m.

But with markets, especially Emerging Markets, subdued it will be a tough time to sell a telecoms company.

Last December, the government said companies from Russia, China, Turkey and Azerbaijan have expressed interest in buying Alfa Telecom.

A successful sale would be a boon for the Kyrgyz government which is struggling to fight off the impact of a worsening economic downturn.

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(News report from Issue No. 266, published on Feb. 5 2016)

Kcell revenues fall 10% as economic downturn bites Kazakhstan

ALMATY, JAN. 29 2016 (The Conway Bulletin) — Revenues at Kazakh telecoms company Kcell fell for the first time in six years in 2015, evidence that worsening financial conditions are hitting all sectors of Kazakhstan’s economy.

Last year Kcell revenues dropped 10% to 168b tenge ($448m), the company said at its full year results. In US dollar terms, however, the comparison looks worse. In 2014, revenues stood at 187.6b tenge or $1.01b at the time. This means that revenues dropped 56% in US dollar terms. The Kazakh tenge lost half its value against the US dollar in 2015.

The management at Kcell blamed the downturn on low oil prices, the sharp depreciation of the tenge and a tough market.

“We experienced a tough operating environment in 2015, with the devaluation of the tenge, oil price weakness and a Kazakh telecoms market characterised by intensive competition,” Arti Ots, Kcell’s CEO said in a statement.

Tellingly, though, Kcell’s subscriber numbers fell by 7.5% and the average spend per consumer dropped by 8.7% in 2015 highlighting competition and creeping conservatism by consumers. Overall operating profit was down by 30%.

There is fierce competition in Kazakhstan’s saturated mobile market, an issue that Askar Akhmedov, a telecoms analyst at Halyk Finance, raised.

“The price war between Kazakhstan’s mobile operators appears to be intensifying,” he said in a note clients. Overall, he said that these results were worse than expected.

Swedish telecoms company TeliaSonera owns 61.9% in Kcell and in its sister company Activ.

Last year, TeliaSonera said it would sell stakes in companies across the South Caucasus and Central Asia after its Uzbek subsidiary became embroiled in a corruption scandal centred on payments made in 2008 to win a mobile phone licence.

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(News report from Issue No. 266, published on Feb. 5 2016)

Kazakhstan’s Kcell revenues fall

JAN. 29 2016 (The Conway Bulletin) – Kcell, Kazakhstan’s biggest mobile operator, posted revenues down 10% because of a slowdown in consumer spending linked to the economic downturn.

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(News report from Issue No. 266, published on Feb. 5 2016)

VimpelCom to pay $600m fine for Uzbek bribes

JAN. 17 2016 (The Conway Bulletin) — Russian telecoms company Vimpel- Com said it would plead guilty to bribing Uzbek government officials for mobile phone licences and agree to pay a $600m settlement in the United States, bringing a row over corruption in Uzbekistan that has also involved Sweden’s TeliaSonera and Norway’s Telenor closer to an end.

Sources close to the company told the Russian business newspaper Vedomosti that the amount that VimpelCom is ready to pay is lower than the $900m it set aside in the last months of 2015 for possible penalties.

A prosecution team at the New York District Court has been target- ing VimpelCom and MTS, another Russian company, who allegedly paid around $500m in exchange for mobile licences, but other companies have been dragged into a row that centres on corruption in Uzbekistan

In November, Norwegian police arrested Jo Lunder, VimpelCom’s ex-CEO for alleged bribe paying. Earlier, Norwegian authorities had sacked the chairman of Telenor, a company that owns — and wants to sell — a 33% stake in VimpelCom.

A parallel investigation is looking into a similar corruption issues at TeliaSonera, a Swedish competitor to VimpelCom in Uzbekistan. TeliaSonera now wants to sell its Eurasian unit.

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(News report from Issue No. 264, published on Jan. 22 2016)

VimpelCom bribe fine in Uzbekistan

JAN. 17 2016 (The Conway Bulletin) – Russia’s VimpelCom said that it was prepared to pay a $600m for bribes it paid in Uzbekistan to gain access to mobile phone licences. The row is part of a wider corruption investigation centred around bribes paid by international telecoms companies to gain access to Uzbekistan.

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(News report from Issue No. 264, published on Jan. 22 2016)

Azerbaijan’s Azercell sacks staff

JAN. 21 2016 (The Conway Bulletin) — Azercell, one of the largest telecoms companies in Azerbaijan, said it will lay off 60 workers, around 8% of its employees in the country. Azercell is TeliaSonera’s subsidiary company in Azerbaijan. It said in a statement that the worsening economic conditions in the country are directly affecting the company’s financial health.

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(News report from Issue No. 264, published on Jan. 22 2016)

Teliasonera writes off $622m of value from its Uzbek operations

JAN. 14 2016 (The Conway Bulletin) — Swedish telecoms company TeliaSonera effectively slashed the value of its assets in Uzbekistan by 5.3b Swedish kronor ($622m) to speed up a fire sale of its unit which it considers toxic after it was heavily implicated in a major corruption scandal.

Since last September, TeliaSonera has sought to sell off its businesses in Central Asia and the South Caucasus so that it can concentrate on its core mobile and data services in Europe.

TeliaSonera is under investigation in the Netherlands, Sweden and the US over its acquisition of mobile licenses in Uzbekistan in 2007. Prosecutors say the deal involved paying large bribes to the Uzbek president’s eldest daughter, Gulnara Karimova. Rival Norwegian telecoms company Telenor has also been accused of bribing Uzbek officials.

The cut in value of Teliasonera’s Uzbek assets, which will be booked on its Q4 2015 operations, is part of a 7.2b Swedish kronor ($845m) cut in the company’s global assets.

“We are well on track shaping the new TeliaSonera and the process to reduce our presence in Eurasia continues,” Teliasonera CEO, Johan Dennelind, said in a statement.

“As a consequence of this progress and current status in the overall divestment process, Region Eurasia will be reported as discontinued operations. When doing this we are obliged to change valuation method for these operations. This has resulted in an impairment charge relating to our operations in Uzbekistan.”

In its forthcoming 2015 annual report, due later this month, TeliaSonera will block out results from the Eurasia region and tag it “held for sale”.

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(News report from Issue No. 263, published on Jan. 15 2016)