Ukrainian prosecutors have launched a court action to cancel the sale of the country's leading mobile operator to Mobile TeleSystems (MTS), Russia's biggest mobile company by number of clients.

They say the purchase of the state's 51 percent stake in UMC by MTS from national telecoms monopoly Ukrtelekom violated Ukrainian law and damaged the country's economic interests.

Prosecutor General Hennady Vasylyev has said the Russian firm might be stripped of its shares in UMC.

MTS has said there was no need to review the deal, which was completed last year. MTS paid about $172 million for the stake.

"The court hearing is set for July 12," the official at Kiev's economic court told Reuters.

Analysts said Ukraine was trying to boost Ukrtelekom's value ahead of its privatisation later this year. Ukrtelekom specialises in the fixed-line telecom business, which is less profitable and dynamic than the mobile sector.

Ukraine's mobile market has been one of the star performers in the country's economy in the past three years, posting double-digit growth in customer numbers.

UMC, a market leader in Ukraine, has about 4.36 million clients, up from 3.35 million at the end of 2003. Its main rival Kyivstar, owned by Norwegian telecoms group Telenor (TEL.OL: Quote, Profile, Research) (TELN.O: Quote, Profile, Research) , had about 3.25 million clients in April.

MTS first took control of UMC in 2002 by buying 57.7 percent for $194.2 million from Dutch phone operator KPN (KPN.AS: Quote, Profile, Research) , Deutsche Telekom (DTEGn.DE: Quote, Profile, Research) and Ukrtelekom.

Last year, MTS completed the deal, purchasing the remaining 26 percent stake from Ukrtelekom and 16.3 percent from Denmark's TDC (TDC.CO: Quote, Profile, Research) .

© «Reuters»