OREANDA-NEWS. July 04, 2012. Mobile TeleSystems OJSC (“MTS” or the “Company”–NYSE: MBT), the leading telecommunications provider in Russia and the CIS, announces that Uzbekistan authorities are conducting audits of the financial and operating activities of its wholly-owned subsidiary Uzdunrobita FE LLC (MTS-Uzbekistan) and with no grounds have detained its managers. These actions are being carried out in violation of local regulations, which create risks for the continuity of MTS operations in Uzbekistan and could lead to a cessation of business activity.

The Company has received official documents from the Prosecutor General’s Office of the Republic of Uzbekistan relating to tax claims against Uzdunrobita FE LLC in the amount of 2.4 billion soums (USD 1.27 million).  Currently, in conjunction with audits taking place throughout the various subsidiaries of Uzdunrobita FE LLC, authorities are seizing internal documents, interrogating employees and illegal detaining management in violation of procedural norms. Among the illegally detained are Radik Dautov, Acting General Director of Uzdunrobita FE LLC and citizen of the Russian Federation, and Temirmalik Alimov, Chief Financial Officer of Uzdunrobita FE LLC. In the Company’s opinion, the detained managers are being pressured by law enforcement officials with no grounds and for the reasons unknown to the Company.

The detainment of the managers, each of whom possesses the signatory power to authorize financial transactions, and seizure of internal documents will hinder the operations of Uzdunrobita FE LLC. In particular, the Company will be prevented from placing orders for express payment cards, which impedes the ability of subscribers to pay for the communications services in some regions of Uzbekistan. Nevertheless the operator continues to provide communications services for more than nine million subscribers, one-third of the population of Uzbekistan.

MTS notes that these actions of the regulatory and law enforcement agencies breach a number of legislative acts of the Republic of Uzbekistan aimed at stimulating foreign investment and protecting rights of foreign investors. In the Company’s opinion, an audit of financial and operating activities and/or criminal prosecutions of any suspects should be conducted in compliance with local laws and should not create unnecessary obstacles for the operations of the telecommunications provider.  MTS considers the actions of the law enforcement agencies of the republic of Uzbekistan as an effort to apply deliberate pressure on a long-standing Russian investor in the market.

MTS appeals to the leadership of the Republic of Uzbekistan to ensure that activities of controlling and law enforcement agencies are conducted in a legal and fair manner and to prevent Prosecutor General's Office from applying unjustified pre-trial restrictions for employees of Uzdunrobita FE LLC.

MTC also notes that tax audits have been conducted in Uzdunrobita FE LLC and its subsidiaries on a regular basis since 2004, when MTS acquired a stake in Uzdunrobita FE LLC. These audits have not revealed any serious violations. In February 2012, upon completion of the last of the last tax audit covering the period of 2007 - 2010, tax authorities ruled on charging additional taxes  in the amount of  2.4 billion soums (approximately USD 1.27 million  dollars), which were voluntarily and fully paid by MTS-Uzbekistan.

MTS has always acted strictly in accordance with the local regulation in all markets of presence and is willing to assist the Uzbekistan authorities in resolving all issues pertaining to audits of the taxation and other aspects of financial and operating activities of the Company.

In 2011, MTS-Uzbekistan contributed 3.5% to the revenues and 4.5% to the OIBDA of MTS Group respectively.