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Communications Market to See Major Deal

Mobitel, the owner of Beeline company, plans to buy the Caucasus Online’s retail network. On February 9 the Georgian National Communications Commission (GNCC) held a meeting on the expected deal between Mobitel (Beeline) and Caucasus Online.

At the meeting the information was unveiled that Caucasus Online may sell its retail segment because of its debts of 86 million USD (210 million GEL).

According to the GNCC, Mobitel failed to submit valuable and perfect documentation. Consequently, the GNCC suspended taking a decision that would permit Mobitel to buy Caucasus Online’s retail network. The company must submit due documents to the GNCC in three weeks.

Under the agreement, if the application for sales of the retail segment of Caucasus Online is satisfied, Russian Mobitel must cover the 210 million GEL liabilities till 2032.

Statements about Mobitel plans for purchasing Caucasus Online started several months ago. Currently, the issue is of only the retail segment and negotiations do not refer to the optical-fiber cable. This issue was actualized by politicians recently. Several opposition parties pointed to threats to the state security if this deal is really implemented.

“Maybe the cable deal is not negotiated at this stage, but this issue was agreed in practice. I can definitely tell you the specified information that Mobitel showed interest in the retail segment after it was offered to purcgase the main cable infrastructure,”the Free Democrats party member Aleksi Petriashvili said

Beeline launched operation in Georgia long ago, but now, besides cellular services, the company will also launch operation in the internet communications segment and users security will get vulnerable.

It is interesting that in autumn 2015 Magticom planned to buy Caucasus Online and the ongoing negotiations failed at the final stage. “Magti has already received consent from the GNCC on purchase of Caucasus Online assets”, Magticom defense lawyer David Dzidziguri said. The negotiations failed because of astronomic sums that Caucasus Online demanded for the transaction.

It should be noted Magticom President David Lee was the first how started talking about Russian threats in relation to the expected deal between Mobitel and Caucasus Online. Georgian citizens should be aware of the owner of the information source. Today the internet is a part of the national security, David Lee said.

„The internet is not only an instrument for economic and democratic progress, but it is also weapon. Therefore, the owner of the Internet connection in Geoirgia must be clear”.

Zurab Kukuladze, an analyst for the Association of Young Financiers and Businessmen (AYFB), has analyzed the Magticom statement. Magticom is trying to politicize the issue and in this way to stage pressure on the Communications Commission, which is to permit Beeline to purchase the Caucasus Online’s retail network. Through these manipulations, Magticom is trying to maintain its dominating positions in the market, Zurab Kukuladze said.

“Cellular communications gets maximally integrated into the internet communications and it is expedient to say that the modern technological development actualized the issue of sales of these services in a joint package.  These challenges have regrouped the market players. We see that Magticom has become a provider of internet and digital television services, besides cellular communication services. Sales of these services in a joint package is a successful business decision for the company. Silknet and Geocell also plan to follow the similar policy. These companies have already introduced joint projects on the market. In this situation, when the market moves to new regulations, naturally, the third largest player on the cellular communications market is trying to protect its positions and diversify its services.  Consequently, I believe that

Beeline’s interest in Caucasus Online’s retail network is an ordinary and healthy ambition that derives from the company’s business interests”, Zurab Kukuladze said.

It should be noted that it is upon the Communications Commission to discuss and examine all applications for merger of companies on the communications market. If the deal does not restrict the competitive environment and meets the legislation requirements, the GNCC is authorized to let companies conclude a suitable deal. Consequently, it is less expected that the GNCC veto the relevant deal because of only Russian origins of Mobitel.

“Our responsibility is to detect monopolistic threats and ensure the competitive environment on the market. The commission cannot take a decision on the issue that is beyond its competences. The State Security issues are not our competence. This is not a place where the Russian intervention is discussed”, the GNCC member Giorgi Pruidze said.

It is interesting fact that the Caucasus Online supervisory board head is Khvicha Makatsaria, who is also a member of the Mobitel supervisory board.

Mamia Sanadiradze, the former owner of Caucasus Online, has applied to the court for return of the company. He asserts that high-ranking officials of the previous Authorities have forcibly appropriated his company.

It is not ruled out that the fact Caucasus Online is a disputable asset leads the current owners to seek out a new buyer as soon as possible.

By Merab Janiashvili
Economic Analyst
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