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2.4 Million Mobile Customers Still Without Service in Turkmenistan

Turkmen customers of the Russian mobile company Mobile TeleSystems (MTS) were looking forward to January 21, when MTS was allegedly scheduled to resume operations after the Turkmen government shut it down in December, the independent Turkmen web site chrono-tm.org reported.

Yet to date, service is still unavailable, and now rumors are circulating that instead of MTS, another domestic provider will launch soon called Galkynysh, the Turkmen word for "revival," used for a number of things in Turkmenistan, ranging from the national state-controlled social organization to the president's yacht -- a gift from a more favored Russian company, Itera. Rumor has it that confiscated MTS infrastructure may be used as a base to launch the new company, says chrono-tm.org.

On the 21st, instead of reinstating MTS, the Turkmen government held a cabinet meeting to discuss the economy at which President Gurbanguly Berdymukhamedov praised German businesses as "reliable and responsible partners" producing a $339 million trade turnover last year, and also enthused about a recent cultural exchange with Saudi Arabia. He then said that his government was devoting "the most intent attention" on the telecommunications sector and was spending "considerable resources" on it. He assigned officials to exercise "strict oversight" over the sector's projects," with "an aim to improve their quality", the State News Agency of Turkmenistan reported.

Nothing was said about MTS or its 2.4 million customers, now left high and dry. As chrono-tm.org reports, no provision was made to transfer these customers, and while for a few days lines formed to buy sim cards from the sole domestic provider, Altyn Atyr, now they have run out.

The suspension of MTS in Turkmenistan has exposed the lack of laws and legal remedies for foreign businesses in Turkmenistan. Some Turkish companies have already left Turkmenistan because of these risks, says chrono-tm.org.

Yet there is also the deeper question of how the independent states that emerged from the former Soviet Union can boost their national economies in the shadow of hegemonic Russian business. Turkmenistan says it wants to open its doors to international business, yet to ensure jobs for its own citizens and diversify its hydrocarbons-dependent economy, it needs native business to develop as well. The problem is that laws for Turkmen entrepreneurs are no better than for foreign investors, and the private sector simply isn't protected from state confiscation at any time.

Foreign companies find the Turkmen insistence on significant profit-sharing to be onerous, and if Ashgabat now seizes infrastructure from MTS -- downright predatory. Yet if Turkmenistan turns over all its people as customers to a foreign company, what should it get out of it?

MTS reported in 2009 that it had a dominant market share of 85%. In 2008, the Russian company reported annual revenue in Turkmenistan grew by 63% compared to the previous year; in 2009, the subscriber base grew by 90 percent and has now reached 2.4 million. MTS reported $9.8 billion in revenue from all countries in 2009.

While the Turkmen government was said to get 20 percent of the profits in this deal, it is now ready to sue MTS "in any international court," the semi-official turkmenistan.ru reported. Minister of Communications Ovlyguly Dzhumagulyyev says the Russian mobile company's five-year contract expired in December, and the Turkmen government had given notice of this in due time. He discounted MTS's claims of damages, and said that in fact MTS had not suffered any losses, and had in fact steadily gained a high profit. Dzhumagulyyev said Ashgabat stood ready "to use its entire arsenal of legal means to defend its interests in any international arbitrage and judicial bodies," turkmenistan.ru quoted him as saying.

Originally, the Ministry of Communications halted the operations of MTS on December 21, 2010, saying it was for one month. MTS sent a letter to the Turkmen government in January asking for negotiations, and indicated they had suffered a significant loss, regnum.ru reported. The Russian company urged a rapid resolution of the impasse, and cited a procedure for resolving investment disagreements provided for under an agreement between the two countries about promoting mutual protection of investments. If that procedure fails to resolve the problem, then the next step may be filing a complaint with the World Bank's International Centre for Settlement of Investment Disputes.

MTS has also filed suit with the Turkmen Arbitration Court and the International Arbitration Court, claiming that the Turkmen Ministry of Communications has violated its agreements. Ashgabat also suspended leases for land where the base stations and antennas were located as well as digital portals and radio frequencies. The Turkmen government demanded that the equipment be dismantled by the end of 2010.

Altyn-Asyr, the state-owned cell company which had about 310,000 customers until now, has reportedly been unable to cope with a influx of new subscribers switching from MTS. Customers complain not only about poor quality but inability to get funds transferred to pay for sim cards, and lines for service with at least an hour wait in Ashgabat, chrono-tm.org reports.

There was one theory that the rumors of the second state-owned cell company were being disseminated to try to bring MTS to the negotiations table by January 21, but now that the date has passed, the assumption is that the Turkmen government will form its own company.

2.4 Million Mobile Customers Still Without Service in Turkmenistan

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