MTS has warned about the risks of sanctions of Ukraine against Yevtushenkov

Salon of cellular communication of MTS in Kiev. March 2014

Photo: Artyom Geodakyan / TASS

MTS announced about additional risks for the company due to the fact that under sanctions in Ukraine was the main beneficiary of the operator — Vladimir Yevtushenkov

MTS does not rule out the possibility “of adverse consequences for business, financial condition and results of operations of MTS group” on Ukraine, said in a published report of the operator for the fourth quarter of 2016.

Cause of concern was the inclusion of the primary beneficiary of AFK Sistema, Vladimir Yevtushenkov (AFK taking into account indirect ownership belongs 50,31% MTS) in the list of persons against which Ukraine imposed personal sanctions. The corresponding decree against 335 individuals the President of Ukraine Petro Poroshenko has signed in mid-October 2016.

As noted in the explanation to the order, Yevtushenkov denied entry to Ukraine; temporarily restricted right to use and dispose of its property, limited to commercial operations; suspended the execution of economic and financial obligations; prohibited the transfer of technologies, rights to objects of intellectual property; wholly or partially prohibited transactions on securities whose issuers are entities to which the sanctions are applied.

The fact of the introduction of personal sanctions according to the legislation of Ukraine does not mean their distribution is indirectly controlled by that person of the company, including “MTS Ukraine”, the report says MTS. Against Ukrainian “daughter” of the operator, no restrictions are introduced.

Among other risks to the company associated with the deterioration of relations between Russia and Ukraine, MTS specifies which entered into force in the summer of 2015 amendments to the Ukrainian law “On licensing certain types of economic activity”. He expanded the facilities to enable local authorities to cancel the license. One of the possible reasons for stopping work was the “act of the documentary evidence establishing the fact of control (decisive influence) over the activities of the licensee entities of other States which carry out armed aggression against Ukraine and (or) actions which create the conditions for the occurrence of the military conflict, the use of military force against Ukraine,” the document says MTS.

Also in March 2016 in the Verkhovna Rada was registered a bill that envisaging the possibility of a ban for mergers and acquisitions for the applicant from the sanctions list. In October 2016, an initiative requiring companies to label is information about his connection with the “aggressor”. As noted by MTS in its report, in the case of “growth of anti-Russian sentiment in Ukrainian society can be difficult” for her business. However, these bills have not yet been considered.

Representatives of MTS declined to comment. The official representative of AFK “Sistema” has expressed bewilderment about the reasons for the inclusion of Yevtushenkov in the sanctions list. However, he noted that “these sanctions apply to the individual, personal nature and do not affect activities and operations of Sistema JSFC and its subsidiaries in Russia and abroad”.

MTS has not yet published its financial and operating results for the fourth quarter of 2016, prepared according to international accounting standards. In the third quarter, “MTS Ukraine” served 20.8 million subscribers of 108,8 million base the whole group (for comparison, Russia’s MTS, there were 79 million subscribers). Ukrainian “daughter” accounted for 6% of total revenue in MTS (was 112 billion roubles, Russia accounted for 91%). At the end of 2015, the company has agreed with Vodafone on the use of its brand in Ukraine. As explained a source close to MTS, among other things, the transition to the new brand was to reduce the possible negative attitude of the local subscribers to the Russian company.

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