The Armenian government is seeking to break a monopoly held by a Greek-owned telecom operator, complaining that the company has not improved the country's communications infrastructure. The dispute could possibly damage Armenia's important strategic relationship with NATO-member Greece.
The Armenian government in late August made clear its desire to change the terms of the 1998 sale of ArmenTel to the Hellenic Telecommunications Organization (OTE). In seeking to rework the deal, Yerevan accused one of Greece's largest companies of failing to honor its contractual obligations. Armenian observers now believe it is a matter of time before OTE loses its 15-year monopoly on all telecom services in Armenia, obtained under the $200 million takeover.
"The government of the Republic of Armenia must have the right to grant ArmenTel a new operating license," Armenia's Transport and Communications Minister Andranik Manukian said at the close of a week-long public hearing on September 4. The hearings were widely viewed as a prelude to punitive action, with some analysts likening the proceedings to a trial on ArmenTel's business practices.
During the hearings, the telecom operator faced allegations that it had abused its monopoly and had inflated the amount of capital investment made to upgrade Armenia's network. Some critics also claimed the telecom operator tapped phone lines. The company flatly rejected the wire-tapping claim.
The company, still partly owned by the Greek state, says that a unilateral revocation of the exclusive rights would be illegal. ArmenTel's Greek chief executive, Giorgos Vassilakis, vehemently denied charges of financial malpractice, accusing the authorities of trying to squeeze OTE out of Armenia. "Armenia's largest foreign investor has been deceived," Vassilakis said at the public hearings.
The hearing moderator, State Securities Commission chairman Eduard Muradian, is widely expected to rule in the government's favor later this month. Although his judgment will not be legally binding, the government is expected to use it as the basis for reworking the deal. ArmenTel executives vow to challenge any move to revoke its monopoly in the London Court of International Arbitration. Armenian officials insist that Armenian courts (which rarely rule against the state) would have jurisdiction over any legal challenge.
Thus far, the telecom dispute has not had a negative impact on Armenian-Greek strategic ties, which are bolstered by both nations' shared historical feud with neighboring Turkey. The ArmenTel hearings coincided with a visit to Armenia by the chief of staff of the Greek armed forces, Gen. Giorgos Antonacopoulos. He announced after talks with Kocharian that Athens remains committed to its "brotherly" attitude toward Yerevan, and promised more assistance to the Armenian military. The two sides also finalized plans for the upcoming dispatch of some 30 Armenian peace-keepers to the former Yugoslav province of Kosovo, where they will serve under Greek command.
The ArmenTel sale remains Armenia's largest privatization deal yet with a foreign entity. Before the dispute became public, President Robert Kocharian had touted it as a unique chance to modernize its aging Soviet-era telephone network. But his political opponents denounced a lack of transparency in the choice of ArmenTel's new owner. Critics now say the Greek company has mismanaged its exclusive rights to operate wireless phone services and the Internet communication with the outside world.
Developments in the wireless and internet sectors over the past five years appear to support the critics' contention. Armenia's mobile phone network is considered the least developed in the region, covering less than half of the small country's territory. The network's number of subscribers -- 70,000 -- is nearly three times higher than its current capacity. According to some expert estimates, as many as 200,000 more Armenians would subscribe if the network could accommodate the influx of new users. ArmenTel is also accused of stifling development of the Internet by charging disproportionately high tariffs for service providers.
ArmenTel executives argue that their handling of the mobile and Internet services is offset by large-scale investments in Armenia's fixed-line phone network. "Armenia has the best fixed-line connection in the region," Vassilakis claimed. He said the network has absorbed the bulk of OTE's stated $182 million investments in Armenia.
The Armenian government says ArmenTel's investment figures are grossly exaggerated. An audit by a California-based telecom consultancy Wireless Facilities Inc. (WFI) -- seemed to substantiate the government's position. "Our summary was that the results of the capital investments are substantially less than we would have expected given the amount of money that has been spent," WFI representative Ian Beeby said during the public hearings.
The two sides have made no signs of wanting to reach a negotiated settlement. OTE's chief executive, Lefteris Antonacopoulos, said late last year that the Greek telecom giant should sell its Armenian subsidiary. It remains to be seen whether the festering dispute with Yerevan would cause OTE step up efforts to find a buyer.
Emil Danielyan is a Yerevan-based journalist and political analyst.