Cisco wrote off the debt of MTS for more than ₽1 billion

The American IT company Cisco has written off more than ₽1 billion of MTS debt, presumably for the old supply of equipment. Cisco does not explain such a decision,

In mid-February, MTS signed an additional debt relief agreement with one of the structures of the American Cisco Systems Inc. — Cisco Systems Finance International UC. This is stated in the MTS report filed by the US Securities and Exchange Commission (SEC; until recently, the company was traded on the New York Stock Exchange, so it must disclose information to this commission). The document also states that the total debt of MTS to Cisco as of December 31, 2022 amounted to 1.234 billion rubles. All outstanding obligations of the parties under it or related to this debt are also terminated.

The representative of MTS only said that they settled the receivables with Cisco "by mutual settlements and the completion of deliveries", refusing to specify the details. RBC sent a request to Cisco.

Kira Vinokurova, special advisor on sanctions issues at the Pen & Paper Bar Association, says that the wording given in the MTS document means “write-off”, that is, in legal terminology, the debt was forgiven. “Forgiveness of a debt means the release by the creditor of his debtor from his obligations. The termination of the agreement between MTS and Cisco was made on the terms agreed by the parties, in view of the desire of Cisco to terminate business in Russia for reputational reasons,” Vinokurova noted.

RBC's source in the IT market says that Cisco Systems Finance International UC financed transactions for the supply of equipment. “For example, MTS could conclude an agreement with this company that payments for already delivered equipment would be made within three to five years. All major IT vendors have similar companies that finance projects related to the supply of equipment - they charge a small percentage for providing funds, and it is more convenient for customers to work through them, since this percentage is lower than in banks, ”said RBC’s interlocutor.

It follows from open information that the Cisco Systems Finance International UC mentioned in the MTS report is a "daughter" of Cisco Systems Inc., through which leasing and loan agreements are concluded with corporation customers from the EMEA region (Europe, the Middle East and Africa; includes Russia).

RBC's interlocutor did not begin to suggest why Cisco did not demand payment of the debt, stating that the reason could be some special wording of the agreement between the companies. Kira Vinokurova noted that sanctions definitely could not be the reason  - in this case, debt forgiveness would be a form of providing benefits to the sanctioned person and would require obtaining a license from the sanctions authorities. MTS was not sanctioned, but its subsidiaries MTS Bank and Vision Labs are mentioned in the sanctions lists. In addition, the authorities of the US, the EU and a number of other countries have banned high-tech exports to Russia. Such exports include the supply of Cisco equipment.

Read pioneerprodukt.by Why it is dangerous to expel "star tyrants" from the company - The Economist How to look for a job using ChatGPT Boil chicken in a kettle:how LinkedIn is changing the approach to content Is it possible to make money on the IPO of Alibaba businesses in Hong Kong

How Cisco left Russia

In March 2022, due to a special military operation in Ukraine, Cisco Systems Inc. decided to suspend activities in Russia, and in June last year - completely leave the local market. As stated in the explanation to the balance sheet and financial statements of the Russian legal entity Cisco - Cisco Systems LLC, in July-August last year, the company terminated most employment contracts with its employees by agreement of the parties, paying them 190.64 million rubles. (the amount includes mandatory contributions to off-budget funds). As of December 31, 2022, Cisco Systems had five employees - instead of 60 at the end of 2021.

Cisco indicated in its reports last year that it may need to make one-off payments related to the withdrawal from Russia and Belarus, including likely future claims and lawsuits in these countries related to trade restrictions and sanctions (based on information from the Card file arbitration cases, last year the company was the defendant in one claim, which was dismissed). The company did not give the possible size of the claims, but indicated that in the event of an unfavorable resolution of any of such claims, the company's assets in Russia and / or Belarus could be confiscated, but in aggregate they amounted to less than 0.1% of Cisco's total assets at the end of the second quarter of fiscal 2023 of the year.

Last August, the Russian legal entity also decided to destroy all stocks, IT equipment, demos and fixed assets due to the termination of sales and the suspension of the company's licenses, as well as the impossibility of re-exporting. The cost of fixed assets amounted to 1.063 billion rubles, reserves, whose value was 1.864 billion rubles, were physically destroyed in January of this year.

Cisco Systems itself sold in Russia only products that were produced in the country - VPN modules with hardware encryption for Cisco switches, as well as set-top boxes for IP-TV. Moreover, the company received the main revenue by providing maintenance services, replacement of spare parts, marketing support (research, distribution of promotional products, participation in exhibitions), etc. under an agreement with its parent company Cisco Systems International BV