MTS wins tax battle but faces interconnect action

20 Feb 2007

A Moscow court has reduced a tax claim against the country’s largest cellular operator MTS by around RUB1.2 billion (USD45.7 million). The government had claimed a total of RUB1.28 billion, including RUB308 million in penalties, for the 2003 and 2004 financial years, but the arbitration court says MTS is liable for only a fraction of the amount claimed. Authorities originally said the cellco had made incorrect tax calculations relating to payments from content providers, foreign exchange rates and payments for traffic routing, Prime Tass reports. In 2005 MTS was ordered to pay RUB373 million in back taxes from 2002, but this was later reduced in court to just RUB30 million.

Meanwhile, Prime Tass suggests that MTS is facing possible legal action for increasing interconnect fees for smaller operators. A report in local business daily Vedemosti claims that MTS is hiking its interconnect tariff for minor players from RUB0.95 per minute to RUB1.02, contrary to a regulatory ruling which has ordered all fees to be kept at a level of RUB0.95. The country’s big three operators – MTS, Vimpelcom and MegaFon – were threatened with legal action in 2006 for charging smaller rivals an interconnect fee of RUB1.10 per minute while lowering the fee for calls between their respective networks to RUB0.95. The regulator ordered all calls to be charged at the flat rate of RUB0.95 and MTS and Vimpelcom agreed; MegaFon opted to challenge the ruling in the courts and is still awaiting its hearing.

Russia, Mobile TeleSystems (MTS)