The Ba2 corporate rating and stable outlook for Russian mobile firm Mobile TeleSystems (MTS) will not be affected by the recent confiscation of assets of its wholly-owned Uzbek subsidiary Uzdunrobita LLC, the international rating agency Moody’s said on Tuesday.
MTS, one of Russia's big three mobile firms, announced last week that the Uzbek court had passed a ruling to confiscate all of Uzdunrobita's assets, following a judgment against four Uzdunrobita employees.
“Uzdunrobita had virtually no debt and has contributed a modest portion of MTS's consolidated reported EBITDA. Therefore, its loss will translate into only a small increase (around 0.1x) in MTS's reported debt/EBITDA of around 1.8x,” Moody’s said in a statement.
“Given that Uzdunrobita has not paid any dividends to its parent MTS, being effectively a standalone entity as opposed to helping to service the group's debt, the impact of its exclusion from the group's cash-generating base is limited to one-off accounting effects,” the statement said.
Moody's noted that, given the strength with which MTS has refuted the accusations levelled against Uzdunrobita and its employees, MTS might take this dispute to an international court.
The Uzbek Communications and Information Technology Agency suspended Uzdunrobita's license on July 17, initially for 10 working days, for what it said were “repeated and systematic gross violations, and also for failure to comply with the regulator’s directions.”
A week later, the Tashkent Commercial Court extended the license suspension for a further three months, citing Uzdunrobita's failure to comply with the regulator’s directions.
In late June, the Uzbek Prosecutor General’s Office opened a criminal case against a group of Uzdunrobita's staff, accusing them of numerous gross violations of law and widespread use of illegal tax evasion schemes.
MTS told Prime news agency in August that the company believed the Uzbek prosecutors' actions were intended to strip the Russian mobile firm of its business in the Central Asian state.