By Karine Kalantarian
The Armenian government’s case against ArmenTel received a strong boost on Monday with the disclosure of results of the Greek-owned monopoly’s audit conducted by a California-based consulting firm. A representative of WFI Consulting, Ian Beebi, said ArmenTel’s management has failed to meet some of the key obligations stemming from its 1998 takeover by the Greek telecommunications giant OTE. He said that is the main conclusion of WFI auditors who have scrutinized the company’s books over the past year.
The revelation took the form of testimony at the ongoing public hearings on the long-running contractual dispute between the government and ArmenTel. The government will use it to justify its widely anticipated punitive action against the telecom operator accused of fraud, mismanagement inefficiency.
Beebi, who specially arrived from his London office to testify at the hearings, gave those allegations additional weight by saying that telephone service is now less accessible to ordinary Armenians than it was in 1998 and that capital investments claimed ArmenTel have been highly inefficient.
Under the terms of the 1998 takeover, the number of phone lines per 100 residents of Armenia was to increase from almost 16 to 20 by March 2004. ArmenTel also pledged to connect 800 villages to digital phone exchanges. However, the so-called “teledensity” rate has since fallen to 14 and, according to Beebi, is unlikely to reach the agreed target in the near future largely due to the deterioration of fixed-line phone services in rural areas.
“The access to telecommunication services has declined. We have seen a number of villages where exchange capacity did exist and now no longer exists,” the WFI executive told the de facto litigation chaired by the head of Armenian State Commission on Securities. The audit found that only 54 villages have been digitalized so far, he said.
ArmenTel claims to have already invested $182 million in Armenia’s telecom sector and to be on track to meet the 2004 investment target of $200 million. The government, however, insists that the figure is grossly inflated and that the company has failed to honor conditions laid down in its operating license that gave it 15-year exclusive rights to telecom services in Armenia.
“Our summary was that the results of the capital investment are substantially less than we would have expected given the amount of money that has been spent,” Beebi said.
He also attacked the ArmenTel management’s procurement policies, saying that the Greeks’ selection of equipment suppliers was far from being understandable. “We observed instances where the bid accepted by ArmenTel was not the lowest bid,” he said. “In some cases the bid that was finally accepted was priced in excess of 50 percent over the competitive bid.”
Also questioned was the OTE subsidiary’s handling of Armenia’s mobile phone network which has seen little development in recent years. Beebi emphasized the fact that the number of mobile phone users in Armenis is nearly three times higher than the network capacity because of a lack of investments.
His next revelation could become an even more potent weapon for the government in its apparent bid to find a new owner for the monopoly. It turned out that ArmenTel has for years tapped and recorded every telephone conversation in Armenia despite a constitutional provision protecting citizens against the practice. Under Armenian law phones can not be tapped without a court permission.
The top ArmenTel executives attending the hearings confirmed the information. They said they monitor the phone calls in order to detect illegal users of Internet phone services that violate its legal monopoly. They also said that they have only made the records available to law-enforcement agencies.
The international audit was launched in August 2002 and was suspended later in the year following strong objections from the ArmenTel management. The inspection resumed at the beginning of this year at the government’s insistence. Its complete results have not yet been submitted to the conflicting parties.
Transport and Communications Minister Andranik Manukian told RFE/RL that the government will use them in its drive to unilaterally alter and even revoke the ArmenTel license. That could happen as early as this month, he said.
But the ArmenTel chief executive, George Vassilakis, has already made it clear that his company will challenge such a decision at an international court.