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Magti and Geocelll against Beeline under Cartel Collusion Scheme

State Procurement Agency had announced a consolidated tender for January 26-30. The tender winner company was to provide cellular communication services for state structures in 2017-2018. 

This tender could pass without discussions, if not one  important detail. Only Beeline company had submitted an application for the mentioned tender, while Magti and Geocell had not even expressed interest in the tender.

It should be noted that these two companies were providing the mentioned services for state structures in previous years. Therefore, their decision seems very strange, because only Beeline has taken part in the tender.

Georgian National Communication Commission  (GNCC) forwarded a letter to all three mobile operators on conditions of the consolidated tender announced by State Pronouncement Agency.

GNCC, as an independent regulatory commission, ensures supervision over electronic communications and broadcasting fields, provides competitive and just environment for authorized bodies and licensees, the commission members noted.

“Based on the above-mentioned, the Commission has forwarded letters to LLC Magticom, LLC Geocell and LLC Mobitel, influential players on mobile communications market,  and explained that the applicant companies would be examined on compliance with  special obligations with the aim for ensuring competitive environment.

On February 1, 2017 based on State Procurement Agency application, the Commission examined LLC Mobitel’s coverage in  3G/UMTS technology through drive test. The test comprises a zone of 260 kilometers (Tbilisi, Gori, Rustavi and related highways). The examination showed that LLC Mobitel network did not function in the mentioned zones with 3G/UMTS  technology. Therefore, State Procurement agency was forwarded an answer, that, under GNCC conclusion, LLC Mobitel could not satisfy the tender conditions in the part of 3G/UMTS  technology services”, the Commission members explained.

Beeline managers do not agree with GNCC arguments. The company satisfied all conditions of the consolidated tender, including in the part of 3G services, they noted.

«Under tender conditions, it was not necessary to cover territory of Georgia by 3G technology. Magti and Geocell cannot provide 90% coverage either», Beeline representatives noted and said that they cover 90% of territory of Georgia  by 2G, 3G and 4G technologies  and in this way they satisfy the tender conditions.

Despite these arguments,  a      state tender as announced repeatedly. The government commission will take a decision under specific requirements, Levan Razmadze, head of Procurement Agency noted.

«They could not cover the parameters, 3G Internet, requested by documentation», Levan Razmadze noted and explained that the company had requested a license in December 2016, but it was not able   to cover the mentioned zones.

Naturally, developments around communications services raise certain doubts. Namely, this tender was to be quite interesting for Magti and Geocell and statistics of tenders of previous years prove this consideration.  These two companies had taken part in all tenders, while this year Beeline also joined the tender and Magti and Geocell abstained from participation.

Therefore, there are real doubts that Magti and Geocell may have come to cartel collusion. Magti and Geocell knew about Beeline’s participation in direct purchase system. They also knew that Beeline could not provide the mentioned technical services, based on the existing market research.

Consequently, if Magti and Geocell did not take part in the tender,  the tender would fail and consequently, Beeline would be disqualified. As a result, Magti and Geocell could count that they would get rid of the competitor in this way.

Besides the above-mentioned, there are other real doubts that under this dishonest game, Magti and Geocell will fail tender before the Government revises the price policy. This signifies that Magti and Geocell, following cartel collusion, plan to make the Government raise tariffs artificially.

Naturally, the above-mentioned circumstances evidently violate legislation on competition and consequently, attempts for establishing competitive environment fail. Therefore, it is necessary that the state revise approaches and that GNCC carry out adequate regulatory policy, on the one hand, and State Procurement Agency eradicate the gaps that exist in regulations of consolidated tenders.