30 september 2020

Central Asia news

TeliaSonera and Uzbekistan: A mismatch?

10.09.2014 23:50 msk

Daniil Kislov

Analytics Business Politics Uzbekistan

Several sources of Fergana.Ru in Tashkent partially confirm information on the probable departure of the TeliaSonera Swedish-Finnish Telecommunications Concern from the mobile communications market of Uzbekistan. The reasons behind such a move are quite obvious.

On 8 Sep 2014, the popular Tashkent-based website Uzmetronom broke the news on the European company’s intentions. Uzmetronom reported the TeliaSonera administration decided to sell its filial in Uzbekistan, currently functioning under the Ucell brand name.

According to said publication’s “reliable sources,” the decision was adopted during the visit of TeliaSonera Vice President Erik Hallberg to Uzbekistan. Vice President Hallberg has reportedly raised the issue of conversion of Ucell’s assets in local currency and allegedly stated that a lack thereof would force the company to leave the Uzbek market.

According to Uzmetronom, the Uzbek authorities refused to allow exchanging said assets into a foreign currency. “The rejection means that new Ucell Director-General Tonu Grunberg, who is to start working on September 15, could start looking for potentinal customers. According to experts, the Chinese could perhaps be the only interested party in buying it.”

It is noteworthy that the TeliaSonera Company is yet to make any official statements in this regard. Fergana.Ru’s journalist colleagues in Sweden say they received no news on the company’s such plans.

Meanwhile, a hasty departure of the former CEO Osman Turan and the appointment of a seasoned manager are alarming occurrences. At the moment, Mr. Grunberg is currently holding the position of vice president for technology in the region of Eurasia. Has the new CEO been appointed to pull off of a major deal?

Some of Fergana.Ru’s own sources in Tashkent confirm the rumors about TeliaSonera’s plans to exit the Uzbek market. But the probable sale of TeliaSonera’s Uzbek subsidiary will not take place any time before the second quarter of 2015; however, conversations on the topic have already taken place in the headquarters of Ucell in Tashkent.

“Employees here are shocked. Some are already looking for another job, while experienced and seasoned experts are receiving lucrative offers,” our own source in Ucell said. He did, however, emphasize that the end is not near as negotiations between the Swedes and the Uzbek government are still underway.

Currency conversion in Uzbekistan is not fully based on the market rules of demand and supply. It is a compound system of several independent mechanisms, which bring about fertile grounds for corruption among state officials and create conditions for fraud and semi-legal earnings at Uzbek banks, which obviously leads to the complications in the activities of foreign businesses.
However, the currency conversion is probably not the only issue forcing TeliaSonera to leave the Uzbek mobile market. The troubles the Uzbek president’s elder daughter Gulnara Karimova finding herself involved in is perhaps yet another reason. After all, Ms. Karimova’s name is mentioned in several criminal investigations launched in Europe. In March 2014, the Swedish prosecutor’s office charged TeliaSonera with bribing some of the representatives of political elite of Uzbekistan, including Gulnara Karimova. “In the period between 2007 and 2010, the company provided bribes to gain access to [radio] frequencies. The investigation now has irrefutable evidence, including information on assets control, which provide grounds to suspect Gulnara Karimova organized and hosted negotiations; at the same time, she was a direct beneficiary of this scheme,” a statement issued by the Swedish prosecutors reads. The Swedish investigators report Gulnara Karimova received about 240 million euros in the deal in question.

A court hearing in Sweden could take place soon. Although no Uzbek official or representatives for Gulnara Karimova are expected at the trial, more scandalous details of ties between the prosperous European telecommunications company and the formerly omnipotent “Uzbek princess” will probably surface.

On the other hand, the Swiss authorities have also been investigating into Ms. Karimova’s activities there. The Swiss authorities charge the permanent Uzbek president’s daughter with money laundering and froze some 1 billion dollars held in her own and her close allies’ accounts.

Obviously both trials will receive significant coverage in the European mass media. Many journalists will most probably spend many hours covering this European business’s unseemly activities and corruption mechanisms in this Central Asian country. Could that be the very reason why Gulnara Karimova is not in Stockholm but under house arrest in Tashkent (which, by the way, could be easily be staged arrest), while the Uzbek court imprisoned several of her trusted allies (which effectively is a rubber stamp for decisions coming down from the higher echelons of power).

With this backdrop, any information leaked from Tashkent would only damage the Uzbek state’s image. That is why the Uzbek authorities are sparing no effort to close the mouths of as many people as possible if they had anything to do with deals inked with TeliaSonera or transferring money to the aforementioned accounts in European banks.

By creating an appearance that no criminal shall be spared (just glance at a press release the Uzbek Prosecutor General’s office circulated), Tashkent is aiming at two birds with one stone. First, instilling some hope in the population’s mind that justice would be served. After all, Gulnara Karimova has long become the face of tyranny on the part of authorities and officials. “Karimov reined in his presumptuous daughter,” one could hear talks among the public. They naively think corruption and despotism will soon come to an end.

Second, by “convicting those guilty in unseemly international deals,” Uzbekistan is sending the message that it is ready to fight against corruption, thus instilling hope in potential foreign investors that civilized relations with the Uzbek authorities are possible in the future. After all, the story around TeliaSonera dealt a very damaging blow to Uzbekistan’s reputation as a partner and hurt the financial interests of those on the political Olympus’ peak.

At the same time, giving bribes is no lesser gravely criminal than receiving. Let us assume Gulnara Karimova did receive money when she was a pseudo diplomat and a show diva, and certainly not an Uzbek state official. Therefore, the official Tashkent could stave off corruption allegations. All the while, Gulnara received money (one could perhaps even say “got corrupted” by) from several notable European partners with whom “honest” and “independent” Uzbekistan now has nothing in common.

This is the reason why Tashkent is seeking ways to rid itself of a partner that “discredited” it. And this very partner is in hot waters too – what can be done?!

Just read the main point in a press release Ucell circulated following the TeliaSonera shareholders’ visit to Tashkent: “The delegation paid a special attention to the issues of sustainable development of private business. In particular, they highly praised the Ucell initiatives aimed at ensuring sustainable and transparent business affairs for the benefit of the group and the country. The mobile communications operator is employing every effort to implement and realize internal anticorruption programs and the code of ethics and behavior for a complete compliance with the local legislation and international norms adopted by the Republic of Uzbekistan.”

I am afraid that despite the fact the company is “employing every effort,” it would probably be impossible to achieve transparency in business dealings in Uzbekistan. Neither harsh convictions handed down in Tashkent nor the Uzbek authorities’ assurances can help. The Swedes understand that new intermediaries would demand more bribes and the company cannot afford such an outcome is certainly undesirable given the situation around Gulnara.

The only way out is exiting this “rather risky market.” In case TeliaSonera is found guilty of bribing Gulnara Karimova at the trial in Stockholm, the company’s assets in Uzbekistan could be declared illegitimate and consequently become inaccessible. It is perhaps better to sell them off at a lower price while there is still time.

What is your opinion in this regard, Mr. Gunberg?..

Daniil Kislov

Fergana international information agency.