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ArmenTel was the only telephone company operating in the first years after the independence of Armenia.

ArmenTel relinquishes all monopolistic rights

Armenian Telecom Sector Further Liberalized
RFE/RL, 24, August 2007
By Anna Saghabalian

The national telephone company, ArmenTel, will abandon its remaining exclusive rights to telecommunication services in Armenia under an agreement with state regulators that was unveiled on Friday.

The deal, which should lead to greater competition in the country’s underdeveloped telecom sector, came after weeks of negotiations between the Public Services Regulatory Commission (PSRC) and ArmenTel.

The latter will, in particular, cease to have a legal monopoly on fixed-line telephony. Still, officials admitted that this will change little in practice as there will hardly be local or foreign investors willing to spend huge sums on building a second fixed-line network in Armenia.

Far more important is the fact that ArmenTel agreed to give up its grip on external phone connection provided over the Internet. Many Armenians use the so-called IP telephony service to make phone calls abroad at prices that are much lower than those charged by ArmenTel for regular phone connection.

As recently as last January, the PSRC reaffirmed ArmenTel’s monopoly on the lucrative service and allowed it to force scores of small Internet phone providers out of the business. The move sparked street protests by hundreds of owners and employees of those firms.

ArmenTel was controversially granted 15-year exclusive rights to all forms of telecommunication when it was acquired by the Greek telecom giant OTE in 1998. The company was forced by the Armenian government to abandon its monopoly on mobile telephony in late 2004 after failing to develop its wireless network and meet growing demand for the service.

Another key monopoly, relating to Armenia’s Internet access to the outside world, was scrapped late last year shortly after ArmenTel’s $500 million takeover by the Russian mobile operator VimpelCom. The monopoly had long been blamed for the poor quality and high cost of Internet connection in the country. Many hope that its abolition will spur the development of information technology, one of the most promising sectors of the Armenian economy.

Officials also said on Friday that ArmenTel will not seek to significantly raise its fixed-line phone fees at least until next April. This means that they will remain unchanged before a presidential election due early next year.

ArmenTel formally asked the PSRC to allow such a price rise in May. The regulatory body rejected the request as unfounded.

ArmenTel’s Russian chief executive, Oleg Bliznyuk, indicated that the telecom operator will again seek higher phone charges later in 2008. “It’s important that the market be not only free but civilized,” he told journalists. “We will take one year to gauge the real work and investments of new companies entering the market as well as the quality of services provided by them.”

(Photolur photo)

Purchase by OTE

Armenia Hails Greek Ote's 90 Pct Buy of Armentel

By Hasmik Mkrtchyan

YEREVAN, Dec 9 (Reuters) - Armenia said on Tuesday an agreement by Greek telecoms company OTE to buy 90 percent of Armenian telephone operator ArmenTel would raise international investor interest in the country. "This privatisation will raise interest and trust in Armenia. This is the biggest one so far and it was done professionally," said Vahram Avanesyan, an adviser to Prime Minister Robert Kocharyan.

"This is our first international tender, and if ArmenTel hadn't been sold, then it would have been doubtful whether we could have sold others," Communications Minister Gregor Pokhpatyan told a news conference. Earlier the government announced that OTE had won the tender for a controlling stake in Armenia's telecoms utility.

The deal, in which OTE will get a 90 percent stake in the mostly state-owned company and leave the rest in Armenian state hands, was worth around $500 million, a government statement said.

Of that money, OTE would pay $142.7 million up front and agreed to invest $300 million in Armenia's communications network over 10 years, including $200 million in the first five years, the statement said.

Some money from the proceeds of the sale would go towards covering Armenian budget deficits.

The Armenian government now has a 51 percent stake in ArmenTel, which handles international communications for the former Soviet republic of 3.5 million people.

Forty-nine percent of ArmenTel is owned by Transworld Telecommunications Inc of the United States. Transworld stands to get a little over $62 million from the deal, Avanesyan said.

The ArmenTel sale was the first of several high-profile privatisations of large Armenian enterprises through international tenders. Others open or under negotiation with bidders are the Lyus lightbulb factory and the Yerevan cognac plant.

OTE heads a consortium which is expected to include the Cyprus-based Leventis group and the European Bank for Reconstruction and Development (EBRD).

Armenian government sources have said Metromedia of the United States also competed in the ArmenTel tender, which was announced earlier this year. Avanesyan said OTE would obtain an exclusive 15-year licence on internal telephone lines, international lines and paging systems in Armenia. Under the agreement, OTE would agree to hold regular residential phone fees to 600 drams ($1.20) per month until 1999, when they would be raised to 850 drams.

Rates for commercial enterprises would be held to about $5 monthly until 1999, said Avanesyan. Greek TELECOM Ote Snaps up 90pct of Armentel

By George Georgiopoulos

ATHENS, Dec 9 (Reuters) - Greece's partly privatised state telecoms company OTE said on Tuesday it was acquiring 90 percent of Armenia's Armentel for $142.5 million, part of its goal to expand abroad. The Armenian Republic will retain the remaining 10 percent. ``The acquisition of a controlling interest in Armentel represents part of OTE's strategy for the Black Sea region, board chairman Dimitris Papoulias said in a news release.

``We believe that this region offers outstanding opportunities for the application of OTE's operating expertise to generate attractive investment returns.

With the largest capitalisation on the Athens bourse, around $9.5 billion, OTE operates 5.5 million lines and has 23,800 employees.

Its new acquisition follows OTE's recent acquisition of a 20 percent stake in Serbia's Telecom Srbija. OTE has also been eyeing a 40 percent stake in Moldova Telecoms, bidding against a French-Danish consortium.

Completion of the Armentel purchase was expected by January. The European Bank for Reconstruction and Development (EBRD) has indicated readiness to take a stake in Armentel and make a loan to it next year.

``We are going to take it to our board, most likely in February, and then we would be looking to invest in equity and probably make a loan to the company, EBRD principal banker Andy Scott told Reuters.

He said the EBRD was still negotiating on the size of the stake in Armentel to be acquired from OTE and it could turn out to be around 10 percent. Armentel will be licensed exclusively to provide a wide variety of fixed and mobile telecommunications services for a period of 15 years.

It will also be licensed to provide value-added services on a non-exclusive basis, OTE said.

The sale was expected to lead to a significant overhaul of the Armenian telecoms sector since the licence calls for the installation of a certain number of digital lines, increased penetration and a formula to raise local tariffs and cut rates on international calls.

Armenia, a former Soviet republic with a population of 3.5 million, has 585,000 telephone lines currently in service -- 74 lines per Armentel employee.

The ratio is expected to reach around 150 by the year 2008, with digitalisation rising to 47 percent from 3.0 percent currently. Armentel started to offer GSM mobile telephone service in 1997.

``Armentel's revenues are projected at $60 million next year with an EBITDA margin of around 50 percent, OTE said.

Armentel does not charge for local calls now as it lacks the technology to metre them.

``From Armenia's perspective the deal makes sense in that the licence requires the installation of digital lines and expanded penetration, so they will get a better quality network and a lot of investment, Scott said.

Likewise, Greece's Leventis investment holding company has agreed in principle to participate in Armentel and acquire up to 10 percent of OTE's holding.

© Reuters

New Ownership

April 2008, Russian VimpelCom (under the Beeline brand) became the absolute shareholder of ArmenTel. The company currently has about 650,000 stationary telephone users and over 780,000 mobile subscribers.

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