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Ukraine is seeking to prevent Russian companies including OAO Mobile TeleSystems (MBT) from getting licenses to run 3G networks in a planned auction.

The move comes after President Petro Poroshenko yesterday signed legislation allowing restrictions on Russian businesses in Ukraine. The former Soviet republic passed the law as part of measures intended to punish Russia for allegedly supporting a rebellion in eastern Ukraine. Kremlin officials deny involvement in the conflict.

Waging Financial War

The governments position is to prevent Russian companies, including MTS, from getting 3G licenses in Ukraine, Cabinet Minister Ostap Semerak said by phone from Kiev yesterday.

MTS and VimpelCom Ltd. (VIP) together control 80 percent of Ukraines wireless market, according to Moscow-based researcher Advanced Communications & Media.

American depositary receipts of MTS fell 1.3 percent to $18.66 in New York. VimpelCom slid 2.3 percent to $8.56.

Joshua Tulgan, the Moscow-based director for corporate finance and investor relations at MTS, said Ukraines plan to exclude Russian companies from 3G auctions discriminates against their U.S. and European shareholders.

MTS is nearly half-owned by institutional investors around the world, with over 65 percent of our free float owned by investors in the U.S. and U.K., Tulgan said by e-mail yesterday. Any discrimination exercised toward MTS can also be seen as also being directed toward these shareholders.

Bobby Leach, communications director at VimpelCom Ltd. in Amsterdam, said by e-mail that the company wont comment until the 3G auction plans are published.

MTS is the biggest mobile phone company in Russia and second-largest in Ukraine. The company, controlled by Russian billionaire Vladimir Evtushenkov, has invested $4 billion in Ukraine since 2003, Tulgan said. Billionaire Mikhail Fridmans VimpelCom operates Ukraines biggest mobile-phone company.

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Ukraine Moves to Exclude Russia Companies From 3G Auction