Boston, MA -- (SBWIRE) -- 06/10/2014 -- Executive summary

Cancellation of MTS mobile licence in Uzbekistan causes major dislocation in local market

For many years Uzbekistan's telecom infrastructure remained outmoded and inadequate. The country has been struggling to bring its telecommunications system up to the standard found in developed markets. Over the last decade or so, the situation has been steadily improving. This has in part been due to the government's decision to give national priority to the telecom sector. The result has been a definite upward trend in the country's telecom market, with increased investment in infrastructure, expanding subscriber bases and rising revenues. The government's strategic policy was to privatise the incumbent operator Uzbektelecom and to open the market to competition.

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The telecom market in Uzbekistan ran into a period of considerable difficulty in 2012 and the aftermath was being felt in 2013. In a dramatic turn of events the government took strong action against mobile operator MTS Uzbekistan after alleging a range of violations, including tax evasion, failure to meet regulatory standards, and the use of unlicensed infrastructure. The conflict escalated dramatically in August 2012 with the cancellation of MTS Uzbekistan's operating licence. MTS held 40% of the mobile subscriber base at the time;

the government's action saw the 9.5 million subscribers to MTS suddenly without mobile service. These disconnected subscribers were forced to find service elsewhere. By mid-2013 MTS had been declared bankrupt and there had been no final resolution of the complicated dispute between the government and MTS. In the meantime, the mobile market had been severely damaged by the dispute and especially the way it had been managed. The disastrous process was certain to be viewed negatively by potential foreign investors.

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