Armenia To Have Another Cellphone Operator
A company reputedly controlled by a powerful and controversial government official was formally authorized to become Armenia’s fourth mobile phone operator on Monday.
The Ucom operator, which runs the country’s largest fiber-optic cable network providing broadband Internet and fixed-line telephone connections, will pay 6.2 billion drams ($15.4 million) for a relevant license granted by the Public Services Regulatory Commission (PSRC). The five-year license will be valid from January 2015.
The Armenian authorities’ decision to further liberalize the domestic mobile phone market came despite its near saturation achieved in recent years. The once underdeveloped sector has seen rapid growth since the national telephone company, ArmenTel, lost in 2005-2007 a legal monopoly on all telecommunication services.
The sector currently consists of ArmenTel’s wireless division Beeline, the VivaCell network belonging to another Russian telecom giant, MTS, as well as Orange Armenia, a subsidiary of France Telecom. The three operators have been fiercely competing in the local mobile phone and Internet markets.
The emergence of a fourth cellphone operator came as a surprise for Orange. “It’s hard to understand how it will benefit the market,” Lilit Martirosian, a spokeswoman for the company, told RFE/RL’s Armenian service (Azatutyun.am). “The Armenian telecom market is already quite developed and competitive.”
Beeline’s official reaction was less negative. “Our sector is quite stable and this development will add an interesting escalation to our day-to-day work,” said Anush Beghloyan, its spokeswoman.
Ucom was founded in 2007 and has since become one of Armenia’s leading Internet service providers. Its rapid expansion is widely attributed to Gagik Khachatrian, the controversial head of the State Revenue Committee (SRC), the Armenian tax collection agency. Armenian media outlets, opposition politicians and some analysts consider Ucom one of more than a dozen lucrative companies effectively owned by Khachatrian. They have for years portrayed the SRC chief as one of the country’s richest men.
Khachatrian has repeatedly denied the business interests attributed to him. In a statement filed with a presidential anti-corruption body last spring, he said, among other things, that one of his cousins holds a 41 percent stake in Ucom.
“[Khachatrian] has nothing to do with us,” Hayk Yesayan, the Ucom chief executive, insisted on Monday.
Yesayan said his company has been a success thanks to the high quality of its services, which also includes cable television, resulting from the use of advanced telecom technology and equipment. “Armenia is now one of the few countries of the world with a rising number of fixed-line users,” he told RFE/RL’s Armenian service (Azatutyun.am).
These assurances will not quash speculation that Khachatrian was instrumental in the Armenian government’s decision to allow the emergence of a fourth wireless operator. Some government critics are already worried about possible foul play in what is currently one of the most competitive sectors of the Armenian economy.
“There won’t be equal conditions there,” claimed Vahagn Khachatrian, an economist and senior member of the opposition Armenian National Congress. “The emergence of a company sponsored by the head of the SRC is dangerous.”
In an annual report released in March, Armenia’s state human rights defender, Karen Andreasian, said that owning businesses is the norm among tax and customs officials. The report said some of the companies belonging to them or their cronies enjoy privileged treatment by the tax authorities, undermining their competitors. The SRC denied that, saying that the ombudsman failed to come up with any concrete examples.
Controversial Tax Chief Promoted
President Serzh Sarkisian has incorporated Armenia’s tax and customs services into the Ministry of Finance and appointed their controversial chief, Gagik Khachatrian, as new finance minister, making him one of the most powerful government officials.
A presidential decree signed late on Wednesday gave no reasons for merging the State Revenue Committee (SRC) with the ministry. Khachatrian was dismissed as head of the SRC and named finance minister on Saturday as part of an ongoing formation of Sarkisian’s new government.
Khachatrian, 58, took over the SRC in 2008 after serving as deputy head of its customs department for seven years. Armenian media reports have for years linked him with a host of lucrative businesses, including a major Internet and cable TV service provider, two food-importing companies, one supermarket, a car dealership and a luxury watch store in Yerevan.
“Haykakan Zhamanak,” Armenia’s best-selling daily critical of the government, claimed in late 2012 that Khachatrian also controls a company that has a legal monopoly on supplying paper for cash registers used by thousands of businesses. Citing that report, the Armenian branch of Transparency International asked a state anti-graft body to determine whether the SRC chief has abused his position to enrich himself. The Commission on the Ethics of High-Ranking Officials cleared Khachatrian of any wrongdoing in April 2013, saying he does not formally own any of those firms.
Khachatrian too has repeatedly denied any involvement in entrepreneurial activity. He claimed shortly after the launch of the corruption inquiry that it is the result of a long-running smear campaign targeting him.
In an annual report released earlier this month, Armenia’s state human rights ombudsman, Karen Andreasian, again charged that tax and customs officials as well as their relatively routinely engage in business and enjoy “illegal advantages over other entrepreneurs.”
“It’s not a secret to anyone that through his relatives [Khachatrian] is actively involved in business,” said Hayk Gevorgian, the chief economics correspondent for “Haykakan Zhamanak.” “Around two dozen big companies belong to him and his relatives. Gagik Khachatrian is one of Armenia’s richest men, if not the richest one.”
“I don’t think that anyone doubts that putting the country’s entire financial resource under his control will have very sad consequences,” Gevorgian told RFE/RL’s Armenian service (Azatutyun.am) on Thursday.
Gevorgian also questioned the wisdom of merging the SRC with the Ministry of Finance, saying that the ministry will no longer be able to serve as a “counterweight” to reputedly corrupt tax authorities. The latter will now themselves set their revenue targets and meet them in an even more arbitrary manner, he claimed.
“I am confident that Mr. Khachatrian’s skills and experience will help us continue the ongoing reforms,” Prime Minister Hovik Abrahamian said as he introduced the new finance minister to his staff on Monday.
Improved tax administration was a key declared priority of Armenia’s former Prime Minister Tigran Sarkisian and his inner circle of liberal reformers, including former Finance Minister Davit Sargsian. One of the reforms initiated by them was the introduction in January 2011 of electronic filing by businesses of financial reports to tax bodies. That was meant to make tax collection less arbitrary.
Many entrepreneurs still privately accuse tax officials of harassing them to extort bribes. But very few of them dare to go public with such allegations.
Gagik Hakobian, one of the owners of the Royal Armenia coffee packaging company, claimed in 2004 to have been offered to engage in a fraud scam with senior customs officials, including Khachatrian. Hakobian was subsequently arrested and sentenced to six years in prison on controversial fraud charges.