MTS is a Russian telecom giantA leading Russian telecom giant, Mobile TeleSystems (MTS), stopped servicing the entire Turkmen market on 30 September, leaving hundreds of thousands of surprised customers.

The Russian media had reported earlier this year that Russian telecom giant MTS was experiencing licensing problems in Turkmenistan, apparently caused by Turkmen Telecom’s reluctance to renew its operating licence in 2018. Uncertainty over the renewal of licences is a common problem for regulated service providers not only in Turkmenistan but also in neighbouring Uzbekistan and Tajikistan. Local authorities exert pressure on foreign players with a view to obtaining tariff concessions or securing lucrative jobs for their relatives. Telecoms operators are particularly vulnerable to corruption and nepotism and often have to establish joint ventures with a president’s relatives to ‘compensate’ the first family for the privilege to carry on business.

Deputy Prime Minister Bayram Annameredov announced in June the incorporation of a new telecom services provider to be known as Ay Nazar. It is expected to assume the assets and liabilities of existing state-owned provider Altyn Asyr and will be owned by a closely-held entity, Ashgabat Urban Telephone Station (AGTS). The latter’s name refers to an organisation, established in the Soviet era, that was responsible for the provision of landline phones in Ashgabat.

Despite keeping the old name, the entity has since been privatised but is shielded from public scrutiny because of its legal structure. Turkmenistan is not particularly advanced in the disclosure of corporate information: it is usually impossible to identify the shareholders of a company because the government has yet to put in place a publicly available corporate register.

According to local rumours AGTS, and therefore Ay Nazar, are owned by President Gurbanguly Berdymukhamedov’s son-in-law, Nazar Rejepov. This speculation is largely based on the appearance of the word ‘Nazar’ in the company’s name; no other evidence exists to corroborate the claim.

Unlike in Kazakhstan or Azerbaijan where the first families officially own extensive swathes of the domestic economies — with Kazakh President Nursultan Nazarbaev’s son-in-law Timur Kulibaev and his wife Dinara Nazarbaeva recognised by Forbes as billionaires — Turkmenistan maintains a tight veil over individual wealth. It is believed that the presidential clan has significant influence over such lucrative sectors as oil and gas production, importation and distribution of high-end foreign goods, and foreign currency exchange – in as much as it is allowed by the central bank. Ay Nazar will effectively become the monopoly telecom provider in a country of over 5.6 million with the revocation of MTS’s licence.

MTS had experienced delays in the past in having its Turkmen licence reapproved. Turkmen Telecom suspended the licence in 2010 because of reported fears of increased competition from the Russian telecom giant amid the chronic underinvestment in its own infrastructure.

Discussions continued until 2012 when the Russian telecom giant MTS managed to resolve the licensing predicament to its advantage. However, it had to pledge to transfer about 30% of all profits earned in Turkmenistan to Turkmen Telecom as part of a deal aimed at modernising the poorly managed state monopoly.

It is also highly likely that the Russian telecom giant has been paying bribes since 2010 to maintain a presence in the local market at a time when no foreign operator was able to secure a foothold.

This article was taken from this months issue of Caspian Focus. If you would like to find out more about the publication, or have a question in regards to the content of this article then please contact us.