Government May Seek OTE Monopoly Abolition

YEREVAN (RFE/RL–Noyan Tapan)–The Armenian government may push for the abolition of the ArmenTel operator’s 15-year monopoly on telecommunication services during the upcoming negotiations with its Greek owner–Justice Minister David Harutiunian said on Tuesday.

The government and the management of the state-controlled Hellenic Telecommunication Organization (OTE) agreed a week ago to settle disputes that have surrounded ArmenTel’s activities since its takeover by the Greek firm in February 1998. The two parties pledged to sort out the problems out of court. The issue of monopoly–which some experts believe stifles the sector’s development in Armenia–will be high on the agenda of the talks.

Harutiunian said Yerevan will either seek a complete abolition of ArmenTel’s exclusive rights or try to make them conditional on "the quality and price of services."If there are any diversions from that we would have the right to revoke the exclusive rights," he told a news conference. The monopoly allows the Greeks to "set high prices and ensure low quality," he said. According to Harutiunian–the negotiations may lead to the signing of a new license agreement between OTE and the Armenian government–which maintains a 10 percent stake in ArmenTel.

Among other issues that need agreement is the amount of investmen’s in Armenia’s telecom sector. Last March the government threatened to take OTE to court over the latter’s failure to respect its investment commitmen’s but later backed down.

The parties will also try to reach agreement on phone tariffs–another sticking point. They expect to finish negotiations by the end of October–in time for President Robert Kocharian’s official visit to Greece. In Harutiunian’s words–a deal will require "mutual concessions."

The Government of Armenia and the Greek OTE company signed a memorandum of mutual understanding recently for the purpose of regulating the activities of the ArmenTel company and specifying relations–Armenia’s Minister of Justice David Haroutiunian announced at a press conference Tuesday.

He went on to say that there are many issues and differences–including those connected with the interpretation of the current license and share purchase agreement–which has caused numerous judicial disputes. According to the minister–the Armenian side has proved that it can defend its rights in court but prefers to settle matters through negotiations.

According to Haroutiunian–among the issues to be discussed is the agreement between the shareholders to settle relations of the latter with the company’s managers on issues of administration–policies and settlement of disputes out of court.

OTE of Greece holds 90 percent of ArmenTel’s shares–the remaining 10 percent is owned by the Armenian Government. OTE purchased these shares as a result of the company’s privatization in 1998.

The minister reported that the license issued to ArmenTel will be reconsidered too. Three groups of issues will be discussed. These are commercial issues concerning tariffs on various services–technical issues concerning specification of OTE’s obligations and issues connected with the monopoly right. According to the minister–the exclusive rights given to ArmenTel allow the company to render services at a low level and at high rates. There are two options of solving this problem. One is to abolish the exclusive right and the other–to regulate the monopoly right with the pricing policy–amount of services and the quality are fixed. According to Haroutiunian–both variants are acceptable to Armenia and the negotiations will reveal which of the two will be preferred by the Greek company.

According to Haroutiunian–the vague terms of the license issued to ArmenTel–in particular–caused a problem connected with the IP telephone connection–which is more preferable and cheaper for consumers than ordinary connections. ArmenTel holds that this type of connection lies within the limits of its monopoly right–but the research of IP telephone connection in Armenia was launched as far back as 1994–consequently the monopoly does not extend to this sphere.

In 1999–the Constitutional Court of Armenia made a decision under which the law providing ArmenTel with the monopoly right to telecommunication services goes contrary to the Constitution. David Haroutiunian stated that this decision unequivocally implies that the monopoly must be abolished.

Haroutiunian reported that during negotiations with OTE the investment program will be reconsidered too. The volume of investmen’s provided for by the agreement which is $100 million may be reconsidered for market analysis shows that the demand for it has dropped. He noted that the technical advancement observed in recent years made it possible to solve more fundamental problems with the use of lower investmen’s. The agreement signed with OTE earlier did not specify the notion investment–which later occasioned misunderstanding.

The issue of EBRD’s making investmen’s in Armenia worth $200 million will be specified–which is in the interest of both OTE and Armenia. The minister reported that EBRD is holding negotiations with OTE for restricting the monopoly right of ArmenTel in some spheres.

The minister expressed hope that the negotiations will be completed by October 31–and before that ArmenTel will be operating without serious changes–in particular–without introducing a per minute billing system.

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