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Incumbent near-doubles wireless subscribers and revenues regardless of ongoing legal battle

24 Mar 2005

ArmenTel, Armenia’s dominant wireline and wireless operator, shook off uncertainty over market regulation and its own ownership troubles to post a 24% rise in turnover in 2004 on the back of a near-doubling of its mobile user base. Revenues for the year reached EUR85.2 million, up from EUR69.7 million in 2003. The telco finished 2004 with 203,309 wireless subscribers, up from 111,188 twelve months earlier, of which 151,034 (74%) were pre-paid users; mobile revenues rose from EUR18.8 million to EUR27.2 million accordingly. Whilst ArmenTel has yet to announce its full wireline statistics, it did report a massive 235.3% year-on-year increase in incoming traffic over its PSTN, although outgoing minutes fell 7.1% over the same period.

The telco endured a difficult 2004, blighted by its numerous run-ins with the state over the revoking of its monopoly status. In June 2004 Armenian Justice Minister David Harutiunian flew to London for talks with representatives of Greek telco OTE in a last-ditch attempt to reach an out-of-court settlement regarding the cessation of ArmenTel’s monopoly on the provision of internet and wireless services. OTE purchased a 90% stake in ArmenTel in 1998 for USD142 million and was promised a 15-year monopoly on the provision of all telephony services. In September 2003, however, the government revoked ArmenTel’s exclusivity on the provision of wireless and internet access services from 30 June 2004 (later delayed until 28 September 2004). The decision to rescind ArmenTel’s exclusivity in a number of markets was followed by a series of anti-trust cases brought against the incumbent by Armenian ISPs and the State Commission on the Protection of Economic Competition. ArmenTel lost virtually all of them, prompting its then chief executive, Georgios Vassilakis, to allege a high-level conspiracy against the unpopular operator. Relations between the state and OTE soon deteriorated, with the Greek telco launching a claim for compensatory damages of USD300 million through the international courts. The government countered with accusations that OTE had abused ArmenTel’s monopoly, pointing to poor network quality and the disproportionately high costs of services.

Key to the regulatory changes being sought by the Armenian government is the ability to licence a second wireless player to bring a much needed boost to the sector. With the legal claims ongoing, ArmenTel’s potential competitors remain frustrated. One local company, ISC Star, has begun work on the installation of a GSM-1800 network, and is still waiting for regulatory approval to launch wireless services across Armenia and Georgia under the brand name Caucasian Star.

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