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By Karine Kalantarian
Armenia’s government and Greek-owned telecommunications monopoly, ArmenTel, thrust their long-running dispute back into the limelight on Friday, accusing each other of not honoring their contractual obligations.

Senior government officials and ArmenTel executives publicly made their conflicting cases before the State Commission on Securities, a purportedly independent body which will arbitrate between the parties. However, ArmenTel’s acting chief executive, George Vassilakis, made it clear that its decisions, which will likely favor the government, are not binding for the subsidiary of the Hellenic Telecommunication Organization (OTE).

The procedure, which the two sides call an “open meeting,” resembles a court trial, involving opening and concluding speeches, cross-examination of witnesses and presentation of evidence. Its “indictment” is a long list of government allegations that OTE has not complied with the terms of its controversial 1998 takeover of a 90 percent share in ArmenTel. The government side, led by Justice Minister David Harutiunian and Transport and Communications Minister Andranik Manukian, charged that OTE has not met its investment commitments and thwarts development of the Internet by exploiting ArmenTel’s legal monopoly on telecom services in Armenia. It said it therefore has a case for changing and even revoking the company’s operating license.

Vassilakis vehemently denied the charges, saying that ArmenTel has already invested $182 million in the Armenian telecom sector. He claimed that the government is hampering further investments by preventing ArmenTel from further increasing its fixed-line telephone fees in accordance with the license.

The actual amount of those investments is a key point of disagreement, with the government accusing the Greeks of inflating their figures. The ArmenTel management has always denied the charges. Government officials, however, respond to that by citing the poor state of mobile phone connection in Armenia which now lags far behind its neighbors.

Grigor Saghian of the Transport and Communications Ministry told the meeting that wireless phone communication covers only 30 percent of Armenia’s territory and only 34,000 people in the country of three million are connected to the network. He said demand for mobile phones may be ten times higher.

The resulting deficit is a rare anomaly in the market-based Armenian economy. It has spawned a speculative trade in pre-paid mobile phone cards which may cost as much as $300 apiece. With the network stretched to its limits, ArmenTel has long stopped to attract new wireless subscribers en masse, despite its repeated pledges to expand the network capacity and coverage. Worse still, the quality of mobile phone service has deteriorated sharply since 2001.

Vassilakis claimed that ArmenTel has purchased necessary equipment but is unable to install it on high-rise buildings because of strong opposition from their residents who believe that there are serious health risks involved. He complained that the relevant ministry does not help the company overcome the obstruction.

Vassilakis went on to stress that from OTE’s perspective only an international court of arbitration can adjudicate on the dispute, warning Yerevan against taking unilateral punitive action.

The Greek telecom giant appears to have decided last year to sell its Armenian subsidiary to another foreign firm. “We should not be in Armenia. We will try and sell it,” its chief executive, Lefteris Antonacopoulos, told “The Wall Street Journal” last December.

Any such deal requires the consent of the Armenian government. It would almost certainly welcome regime change at ArmenTel, but says the Greeks have not yet officially informed it of such plans. All the signs are that OTE has not yet attracted a buyer for ArmenTel which has run up more than $100 million in debts. The continuing row hardly makes its more attractive to potential investors.

(Photolur photo: Vassilakis, left, during the "open meeting.")
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