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Mobile business suspension in Crimea aims to avoid western sanctions — experts

August 05, 2014, 17:18 UTC+3 MOSCOW

Experts said the Russian mobile firms could lose almost 5 billion rubles ($140 million), if they quit Crimea

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© ITAR-TASS / Artyom Geodakyan

MOSCOW, August 05./ITAR-TASS/. A decision by the Ukrainian subsidiary of Russian mobile firm MTS to halt operations in Crimea may be followed by VimpelCom as the companies are seeking to reduce their risks and avoid western sanctions, experts told ITAR-TASS on Tuesday.

MTS Ukraine announced on Tuesday it was halting its operations in Crimea while Kyivstar, the Ukrainian subsidiary of Russian mobile operator VimpelCom said it did not rule out closing down its business on the Black Sea peninsula, which could cost the company 1-2% of its revenues.

Experts said the Russian mobile firms could lose almost 5 billion rubles ($140 million), if they quit Crimea.

The decision by MTS Ukraine to switch off its mobile network in Crimea can be explained by the company’s desire to offset risks in the region, “which has become more complex for doing business lately,” Deutsche Bank analyst Igor Semyonov said.

The mobile firms’ Ukrainian operations are affected by “the weak macroeconomic situation, increased operational costs and lower profitability margins,” the analyst said.

It is not ruled out that failure to comply with the Ukrainian authorities’ orders to halt business in Crimea may entail sanctions that will further complicate MTS’s work in Ukraine, the analyst said.

Gazprombank analyst Sergei Vasin said that MTS’ complete withdrawal from Crimea might cost it up to 1% of its total revenues (398.4 billion rubles or $11 billion in 2013 while revenues for this year were expected to grow by 3-5%, according to media reports).

The analyst said, however, it was early to talk about any complete halt of MTS’ activities in Crimea. “Most likely, we can talk about technical problems accompanying the work for license re-formalization. Communication interruptions are possible but they are hardly critical,” the analyst said.

The Ukrainian mobile operators have started to talk about the risks of providing communication services in Crimea since the Black Sea peninsula was re-integrated into Russia in the spring of 2014.

Kyivstar was the first to announce problems with the quality of services in Crimea. The Ukrainian operator said electricity was being cut off at its basic stations due to the refusal by local partners to accept hryvnias. “For this reason, equipment and basic stations (including node stations) are getting out of order in Crimea, which has caused and will continue to cause a deterioration in communications,” the company earlier said in a statement.

“These circumstances cannot be eliminated by the company’s efforts. However, we are taking all efforts on our part to continue qualitative coverage and are bringing our apologies to subscribers for inconveniences,” the statement said.

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