Posted: 3 years ago

Revaz Kopaladze, CEO of Caucasus Online informed AmCham in Georgia About Ongoing Dispute with Communication Commission

Caucasus Online as a member of AmCham in Georgia has called for the meeting with the Executive director of AmCham in Georgia, Mr. George Welton, who was informed on the ongoing dispute of Caucasus Online with Communication Commission related to the shareholder changes.

"During the zoom meeting, we got through the problematic issues in detail to brought up awareness to all AmCham members. Also, the official letter was delivered to the President and Executive Directors of AmCham in Georgia, "Kopaladze noted.

(See the letter below)

To Mr. R. Michael Cowgill President and Mr. George Welton Executive Director of American Chamber of Commerce in Georgia

I am addressing you on behalf of Caucasus Online LLC ("Caucasus Online" or "Company"), one of the largest wholesale telecommunications operators in Georgia. I would like to direct your attention to the risks that the Company is facing.

Please note that on 17 October 2019 Georgian National Communications Commission ("Commission") adopted a decision on the imposition of administrative sanction on Caucasus Online. The Commission warned Caucasus Online due to its failure to submit an advance notice and obtain preliminary consent from the Commission on the alienation of ownership interest in the Company. The Commission referred to the sale of 49% of the shares in the parent company of Caucasus Online ("Transaction"). The Commission ordered Caucasus Online to ensure the reversal of the sale of shares Transaction, i.e., to reinstate the status quo, which existed before the change of beneficial owner of the Company.

The Commission required Caucasus Online to ensure that its beneficial owners, who effected the sale of shares in a company registered in a foreign jurisdiction, change their decision and reverse the Transaction, which has already been completed. Caucasus Online simply lacks legal capacity to ensure that its beneficial owners undertake any action, as Caucasus Online is not a party to the Transaction and does not have any influence on the fulfillment of the reversal obligation. For this very reason, the Company is unable to enforce the decision and has been repeatedly sanctioned by the Commission. On 12 December 2019, 6 February 2020, and 12 March 2020, the Commission has imposed fines on Caucasus Online for GEL 30 000, GEL 90 000, and GEL 270 000, respectively.

On 28 May 2020, the Commission commenced another administrative proceeding for sanctioning CO for its continued failure to fulfill the reversal obligation. An oral hearing is scheduled for 25 June 2020. On this very hearing, the Commission is considering suspension of the authorization to the Company. If the Commission suspends authorization to Caucasus Online, it will automatically result in termination of business activities of the Company in Georgia, since the law does not permit Caucasus Online to provide telecommunications services without authorization. Consequently, the Company will no longer be able to provide wholesale telecommunications services to its clients, perform its employment obligations towards employees, pay state fees and taxes, etc. Not only will Caucasus Online suffer irreversible damage from the suspension of an authorization, but the consequences will negatively affect the Georgian telecommunications market at large since users of wholesale and retail internet services will suffer irreversible harm by losing access to quality and safe internet services.

Caucasus Online aims to find the most effective possible solution which, on the one hand, will allow for the fulfillment of its functions by the Commission and, on the other hand, will not damage the interests of the Company. It shall also be noted that the Commission based its decision and ordered a reversal of the Transaction based on the argument that alienation of beneficial ownership of Caucasus Online was a threat to the competition on relevant segments of the market. Though the Commission has not conducted any study or investigation to determine the potential impact of the Transaction on competition as the Commission is supposed to do pursuant to the law.  Even more so, the Commission has dismissed an application by which the Company was seeking ex-post approval of the Transaction. Based on the application from the Company, the Commission could have commenced a respective study of the actual impact of the Transaction to competition on the telecoms market in Georgia.

Stemming from the abovementioned, I look forward to the opportunity to meet with you and discuss in more depth and detail the issue of Caucasus Online presented at this moment.

Thank you for the cooperation and consideration of this request.


Revaz Kopaladze, CEO of Caucasus Online LLC