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Russia’s largest mobile operator in trouble after billionaire owner arrested

Russia’s largest mobile phone operator has been engulfed in turmoil due after its majority owner was put under house arrest under accusations of money laundering with many comparing it to the similar tactics used to dismantle Yukos Oil 10 years ago.

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Mobile TeleSystems [MTS], which is majority owned by billionaire Vladimir Evtushenkov, saw its shares fall to their lowest level since 8 August on the New York Stock Exchange [NYSE] and his other investments suffered a similar fate.

“This is the new Yukos,” Vadim Bit-Avragim, from Kapital Asset Management LLC in Moscow, told Bloomberg (opens in new tab). “The economy is doing poorly, sanctions have been imposed, and all there’s left to do is to seize tidbits that are left in the country.”

Evtushenkov is worth around $7 billion [£4.28 billion] and is Russia’s 19th richest person as a result with the arrest seeing a subsequent drop of 2.2 per cent in Russia’s Micex Index as investors looked upon the development as a sign of political instability.

“This directly hits the investment climate,” Vladimir Tsuprov, the St. Petersburg-based chief investment officer of TKB BNP Paribas, said by e-mail. “Many investors saw geopolitical risks and Ukraine as the main problem, underestimating the internal situation.”

MTS is one of those to be adversely affected by the development and its shares fell 4.5 per cent to $17.75 [£10.85] on the NYSE and saw daily average trading triple compared to the previous three months.

It “puts a lot of pressure on Mobile TeleSystems and all the companies connected to Evtushenkov’s AFK Sistema,” Sergey Libin, an analyst at ZAO Raiffeisenbank in Moscow, told Bloomberg. This selloff “may last a while because there is too much uncertainty on what will happen with Evtushenkov and how his arrest affects the company’s operational activity.”

Evtushenkov owns 53.46 per cent of MTS and the company commented that the investigation has no bearing on the operational activities of the mobile phone operator.

MTS is among the top 100 most valuable global brands according to Brandz and in the telecommunications sector it ranks ninth and launched LTE networks in 25 regions across Russia earlier on this year.

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The company has over 100 million subscribers in Russia and also serves subscribers across other CIS countries including Uzbekistan, Turkmenistan and Armenia.Porthole Ad

Jamie is a freelance writer with over eight years experience writing for online audiences about technology and other topics. In his time writing for ITProPortal he wrote daily news stories covering the IT industry and the worldwide technology market, as well as features that covered every part of the IT market, from the latest start ups to multinational companies and everything encompassed by the IT sector. He has also written tech content for our sister publication, TechRadar Pro. Jamie has since moved into sports betting content and is Content Manager at Betbull.