Kcell JSC informs about internal investigation


Almaty, 29 September 2014 – Kcell Joint Stock Company (“Kcell” or the "Company") (LSE, KASE: KCEL), informs about internal investigations. The Board of Directors of the Company (the “Board”) has been made aware that a number of the Company's external supplier contracts were entered into in breach of the Company's own internal policies and procedures. The Board has, therefore, commissioned investigations by internal and external resources into these contracts and the way in which they were entered into.

The initial findings of these investigations have caused the Board to widen the scope of the external investigation and devote more resource to this. As part of the investigative process, the Board has asked its external English and Kazakh law advisors to review the information which has been compiled to date.

Currently there has been no indication that any of the matters under investigation will have any material effect on the Company's balance sheet or on its results of operations. The Board is addressing the deficiencies which have been identified in the Company's internal policies and procedures.

The Board will continue to investigate such matters and make any further changes identified as necessary in order to ensure best practice in relation to the Company's entry into future contracts. In particular, the Board will ensure that the Company continues to have in place appropriate corporate governance, compliance and risk management controls and that such internal policies are properly documented and communicated. Further announcements will be made in the future as and when necessary.




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Company Overview

Kcell is the leading provider of mobile telecommunications services in Kazakhstan by market share in terms of revenue and the number of subscribers. It has operated since 1998, and as at 31 December 2013 it had approximately 14.3 million subscribers, representing a market share of 46.2%, as estimated by the Company. Its estimated market share in terms of revenue was 54% for the year ended 31 December 2013.

Kcell provides mobile voice telecommunications services, messaging services, value-added services such as multimedia and mobile content services, as well as data transmission services including internet access. It has two brands: the Kcell brand, which is targeted primarily at corporate subscribers (including government subscribers), and the Activ brand, which is targeted primarily at mass market subscribers. The Company offers its services through its extensive, high quality network which covers substantially all of the populated territory of Kazakhstan.

In December 2012, Kcell successfully completed its offering of GDR’s on the London Stock Exchange and common shares on KASE. The price was set at USD 10.50 per GDR and KZT 1,578.68 per share with each GDR representing one share.  The offering consisted of a sale by TeliaSonera of 50 million shares, which represent 25 percent of Kcell’s share capital. TeliaSonera holds directly and indirectly 61.9% of the Company’s common shares.

Kcell plans to benefit from the significant growth potential for mobile data services in Kazakhstan. The Company intends to continue to invest in the deployment of its 3G network to expand coverage. Kcell aims to maintain its market leadership in terms of revenue and the number of subscribers by offering its products and services at competitive prices, expanding its offering of products and services, maintaining the high quality of its network and enhancing its brand value