March 4, 2011 / 5:45 PM / 9 years ago

Turkmenistan rebukes MTS for investor letter

* Ministry says MTS did not adequately distribute profits

* Response to letter by MTS to potential investors

ASHGABAT, March 4 (Reuters) - Turkmenistan issued a strongly worded riposte to MTS (MBT.N) on Friday after the Russian mobile phone operator warned foreign investors of the “perils” of doing business in the Central Asian state.

Turkmenistan’s Foreign Ministry said the country had not received its fair share of the “enormous profits” generated by MTS in the country, and that it was entitled not to renew a business agreement that it said had lapsed at the end of 2010.

The ministry’s statement was a response to a letter sent by MTS to participants in a Singapore roadshow to promote the oil and gas industry in Turkmenistan, as the former Soviet republic seeks to attract investors to its lucrative oil and gas fields.

MTS said in the letter that its experience in Turkmenistan, where its licence was suspended in December and has not been renewed, was “a cautionary tale” for those doing business in the reclusive country of 5.4 million people. [ID:nLDE72208F]

MTS, part of oil-to-telecoms conglomerate Sistema (SSAq.L), had an 85 percent share of Turkmenistan’s mobile market until its licence was suspended for a month for reasons that the company said “were never fully justified”. [ID:nLDE6BL1FK]

The ministry said a five-year contract allowing MTS to operate in Turkmenistan had expired in December, and that the company had charged excessively high tariffs for its services.

“At the same time, the Turkmen side has proposed holding negotiations about the acquisition of the company’s property in Turkmenistan,” the ministry said in the statement.

MTS spokeswoman Yelena Kokhanovskaya, responding to the statement, said MTS had regularly paid 20 percent of its locally generated profit to the government and had never had any complaints from the regulator about high tariffs.

MTS said in the letter it had invested over $188 million in Turkmenistan since 2005 and serviced more than 2.4 million customers. It had previously said it could incur total losses of about $600 million following the licence suspension.

Turkmenistan’s Foreign Ministry said it was open to foreign investment. It said 1,677 companies operated with foreign capital in Turkmenistan today and that 2,362 investment projects worth a total of $45.7 billion were currently registered.

“The attempts by MTS to cast a shadow on Turkmenistan’s business reputation as a reliable partner appear absurd and bear no resemblance to the acceptable and civilised norms of global business relations,” the ministry said. (Reporting by Marat Gurt in Ashgabat and Maria Kiselyova in Moscow; Writing by Robin Paxton in Almaty; Editing by Jon Loades-Carter)

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