Is The “United Telecom” Monopolist?

Nino ArvelaDZe

Telecommunication market of Georgia faces huge competitiveness and just strong will survive. The “United Telecom” started effective works providing after assignation to real property.

Instead of today`s owner, potential investor of the “United telecom” (former “Electro Union”) is believed to be one of the famous American company, which properly studied the “United telecom” business three month before the tender providing. He believed the priority of the company is its technical re-equipment and maintain of complete modern management providing, but at final turning – point the winner of the tender turned out to be team of Kazakhain-Georgian investors. While the company condition considering process, it appeared that the “United Telecom” scheduled rising prices for internet providers, but what are the real causes of prices increasing? The “United telecom” has its own internet and schedules starting aggressive policy providing up form September, what mentions competitiveness reaching higher level. Small internet providers will not face oppose against internet tariffs climbing up to 10 lari from 3, 5 lari, but founders of “Caucasus-Online” in 1997, considered required tariff by ”United Telecom” backgroundless, and 15 lari tariff was imposed to the clients. “Caucasus-Online” has 90 % internet users. The “United Telecom’ officials say, that their expanses and profits should come into harmony, but despite of such view, the Minister of Economy Development of Georgia Giorgi Arveladze told the population detaining from “misunderstandable payment” and ordered Regulatory Commission to learn the issue… Low quality internets supplement may be the “sins” of internet providers and the “United Telecom”, because law quality cable was added to law quality internet supplied form abroad.
The “United Telecom” frequently suffers problems that the population is badly informed about tariffs changing issue. As the “United Telecom” Commercial Director, Iva Martiashvili tells, the company is profitable for today and the investors suffer no problems. But several problems were obviously faced, while interviewing the Director.
– Can you explain users why new tariffs establishment became necessary? It provided too much turmoil.
– After privatization, the company became “real property”, it mentions that the winner is team of shareholders, paid USD 90 million. The company suffered bad condition – In Tbilisi and the regions infrastructure is entirely devastated, communication channels, buildings and infrastructure of cables are importantly damaged. Creaking down on the problems process has launched. Of course, changing of everything is not an easy issue, it requires huge cadres resource and skilled specialists. We had 4 700 staffers in while Georgia. Our society, collaborators and shareholders required many changes and it might be said, that we suffer big influence. Rights and demands of the “United Telecom” have been always rejected, when it was state property recently. I can tell the same about mobile phones tariffs, and the fixed cost per one minute included 18.8 tetri. That is subsidy of mobile network. The same goes with the other companies and tariffs established by internet providers. We investing in whole Georgia, scheduling tariffs balancing and regulating for infrastructure restore. It should come into harmony with our real expanses, at least covering them. We started negotiations providing with Regulatory Commission concerning DSL couple tariff increasing issue. We are paid 3. 5 Lari for DSL couple by internet providers for today, and our claim is increasing the tariff for bringing it into accordance with real expanses of the company.
– Can you tell us more in details, why it created necessary tariffs increasing for internet providers?
– We lessee supply line- cable couple to internet providers, used for high-frequency resource, they put mounting in our station, user connects special modem to home phone and receives internet service. We are paid by internet providers. Tariffs increasing do not mean that internet provider should raise prices, because it has very low expanses on each user. For instance if user pays 50 Lari profit of internet provider includes 30 Lari, we are paid 3.5 Lari, and our claim is to be paid 15 Lari. It does not mean we are monopolists and with to increase tariffs. We schedule caring about each couple with the money, because we provide care not just couples located in Tbilisi, but entire infrastructure of the region. I believe everything is depended on Regulatory Commission and while any resolution making it should determine every expanses, presented by our officials and maintain new tariffs establishment.
– A little recent announcement of “Caucasus Online” appeared, directly telling about that the “United Telecom” is monopolist. Obvious fact is the report made by the Minister of Economy Development Giorgi Arveladze, talking about you negatively. What relationship do you have now with the Regulatory Commission and on what level are the negotiations?
–The Minister has said nothing negative about us.
–He used the phrase – “misunderstandable tariff”.
–The Minister understands well importance of the tariff. He agreed with everyone before establishing the tariff, he agreed with Regulatory Commission concerning 15 Lari, to say nothing of others. The last word should be told by the Commission. I properly understand position of the Minister, because his mission is people`s and county`s interests protection, but when all internet providers, except “Caucasus Online’ pays 13.5 Lari including VIP and satisfied with the tariff, why we should not receive the same tariff from “Caucasus -Online”?! We could interrupt agreement with ‘Caucasus- Online” leaving users without internet supplement because we understand well importance of the internet. So if “Caucasus Online” does not pay we claimed users doing additional payment. We held consultations with regulatory Commission, which continued with the share of Ministry of Economy Development. The resolution was made finally: Regulatory Commission should establish tariff to be paid by “Caucasus Online” and we also gained complete support of the Ministry of Economy Development.
– What can you tell us that you are considered as monopolists, that is breaching of law on competitiveness?!
– May be we are monopolists, because we have infrastructure and huge amount of telephone couples, but it might be “Akhali Kselebi” (“New Network”) monopolist in Kutaisi and not us. I see no problem concerning monopolize. For instance, “Caucasus Online’ weekly connects 500 users to our network, what is hugely profitable for “Caucasus Online”. We also have our users and profits, so I am a supporter of development, but they should pay the amount covering the expanses of the company and will bring profit for us.
– Whom on is internet quality depended in Georgia, what is your responsibilities and what are internet providers responsibilities? You will agree, that it`s very low quality internet in Georgia.
– Quality of internet is several factors depended, including out infrastructure.
– Is any technical re- equipment took place after new investor entering, will that positively reflect on internet quality?
– Of course, we provided big technical re- equipment. The quality is not just depended on us. Internet resource has its own price to be supplied from abroad. “Caucasus Online” purchases low quality internet the frequency is very low. But we do have couples which should work properly. Internet providers has hot line service, but not responses why internet is not connected or is slow, and it`s fault of internet providers, we also have our internet, and in the case of the same happening, that will be our fault.
– Why did you increase tariff with “Akhali Kselebi” and what are the indexes?
– “Akhali Kselebi” has 20% of Tbilisi subscribers, and 80% are our subscribers. We paid 4 tetri for phoning on Akhali Kselebi indexes and took just 2 tetri form subscribers. What means phones providing with the company` s expanses and gained no profit.
– What is the price of number taking at the “United Telecom”?
– It`s price includes 140 Lari, but the prices will reduced after re-equipment works providing.
– Is there any amendments concerning international calls, what is the price of one minute and can you say that the company is profitable?
– The “United Telecom” is not providing aggressive politics on international market yet, but will start up form September. International calls are not the main business of the company, the main is the service, and proper working of the telephone is the priority. We entered internet base on June 1, we suggest clients international high quality service with code 8-6, but we are nor running active marketing company for yet, what is scheduled to be provided up form September, tariffs are not low relatively to other existed operators but the quality is high. The company is profitable and faces 20% profits generation. The condition importantly improved after re-equipment of the stations. The expanses are high, so the company is not scheduling to be profits increasing oriented during up-coming two years period. The company is first of all oriented on the issues of infrastructure changing and development, because it will bring huge profits in future. Internet base is among the top issue. Believe me, we have capacity of infrastructure changing in whole Georgia and the problems resolving in the regions related to the telephone lines not existence.
– Do you expect any problems concerning the issue? There are no masts in the regions, it requires area what is not an easy task.
– Development of the company is also the interest of the government, so we will always have its support. Telecommunication is one of the basic strategies for the country. I believe complete support of the authority and governors, consultations are already under the way and we have no problems.
– They say, that the “United Telecom has an misterious investor.
– The “United Telecom” has team of investors which is consortium of Georgian investors, which provided consultation with Kazakhian bank “Turan Alen”, and received the credit.
– Do you schedule IPO providing?
– No, at least during two years period. Our attention is completely directed to re-structure and infrastructure renewing issue. Thinking about IPO will become possible after approaching the goals.
– What is the main problem?
– A lot should be done. Our company has a support of government concerning many issues, including internet providers and operators, but I believe the problems will be resolved in up-coming future.
– In the building you office is located at, “Akhali Kselebi” is one floor down, does it create any problems? When “Akhali Kselebi” was founded?
– Our company has several offices all over Georgia; we have enough space for staffers and equipment. “Akhali Kselebi’ is our competitor, suggesting its subscribers telephone service in Tbilisi and several regions.