The FINANCIAL -- Caucasus Online , the leading internet provider in Georgia that secures internet connection for the Presidential Office said Saturday its 37,000 users were cut off by Kazakh owned United Telecom Georgia . UTG which controls the phone communication of more than 400,000 customers in Georgia denied the CO report but claimed it did issue them a deadline of Monday, saying that its rival must pay a debt of USD 3 million. Otherwise UTG will disconnect CO users from the network. The biggest Georgian companies told The FINANCIAL that they have not experienced any internet problems yet. Among them, TBC Bank which owns 10% of Caucasus Online .
Caucasus Online was planning to raise USD 100 million through an
initial public offering on the London Stock Exchange by the end of
2008. The company had the chance of becoming Georgia’s second to be
listed on the LSE after Bank of Georgia .
BTA Bank (former Bank TuranAlem) paid USD 90 million for a controlling
share in United Telecom of Georgia, the country’s largest telephone
company. Kazakhstan was named the number one investor for Georgia in
2007. But in 2008, after the five day war between Russia and Georgia
Kazakh companies dramatically reduced their investment plans. UTG has
not reported the changes of their strategic plans concerning activities
in Georgia.
A few days ago the board of European Bank for Reconstruction and
Development approved financing of a USD 76 million Caucasus Online project which includes construction, laying, commissioning and
operation of a high capacity sub-sea cable to connect Georgia with
Bulgaria, together with on-shore network extensions connecting the city
of Poti to Tbilisi and the Azerbaijan-Georgia border.
“This will enable Caucasus Online to route its own and transit traffic
from other countries in the Caucasus and, in the future, Central Asia,
cost effectively to Europe and to sell spare capacity to operators in
Europe to route their traffic from Europe to Georgia, the rest of the
Caucasus, Central Asia and beyond,” EBRD said.
Caucasus Online has been operating since 1997 as one of the pioneers in
the Georgian Internet Service market. In 2000 Mr. Mamia Sanadiradze
acquired the Company and became its CEO. He holds 80.1% of the shares
and the rest of the shares are held by GML International Limited - 10%,
and TBC Bank - 9.9%.
The USD 35 million financing package composed of a senior secured debt
and an equity investment in 5% share capital of Caucasus Online .
In May 2008 Reuters reported that EBRD is set to buy a 5 percent stake in Georgia’s biggest internet provider Caucasus Online .
“The Georgian regulator commission took out the cost of a 1 gigabyte
internet connection worth GEL 5 thousand, which is 25 times cheaper
than the ordered sum from internet provider Caucasus Online ,” said Iva
Martiashvili, Assistant of the Director, United Telecom Georgia .
Martiashvili says the Regulator Commission’s decision was taken
foreseeing the other 8 Georgian providers’ demands: United Telecom,
T-net, Egrysy, Lu net, Web com, New com, Adjara telecom and Wanex.
“Telecom has to decide who will be the monopolist on the Georgian
online market, but until then the loss of Caucasus Online has already
reached USD 400,000,” Eka Machitidze, CO said.
The difference between Caucasus Online ’s demanded sum of GEL 300,000,
reported by united telecom and GEL 120,000, which Caucasus Online stated, was explained to The FINANCIAL by Eka Machitidze, Director of
the PR board of Caucasus Online : “When the regulator commission
announced GEL 5,000 for one gigabyte, it left the court building in
protest. These figures were taken after counting all our expenses by
international audit company Deloitte Touch. At first they counted GEL
300,000 but at the second meeting, when we already had the real number
of our potential clients, the sum was reduced to GEL 120,000.”
The fight between Caucasus Online and United telecom started in 2007
when United Telecom raised the tariffs of each DSL subscriber from GEL
3.50 to 11.50. The situation became more tense several weeks ago when
representatives from the Municipality started cutting all lines of the
GeLink service, costing GEL 6 million, of Caucasus Online , with the
excuse of carrying cables over roofs, needing construction permission
from the Municipality.
According to Matchitidze, “The Municipality cut all the cables of
GeLink, which, according to them, was in major demand at the time. They
claim it was an accident, but Caucasus Online , which is dealing with
such large projects as fibrous internet, would not make such an
elementary mistake. We held negotiations with the chairmen of
districts, and when some people were against our project we understood
why. I just wonder how they managed to pick out the GeLink cables out
of hundreds.”
Caucasus Online is not objecting to paying Telecom. The disagreement is about the sum.
“We didn’t have any contract with United Telecom from 2007 onwards and
then one day they sent us an invoice of USD 3 million, but we couldn’t
understand where they’d got this figure from. We don’t object to paying
them for all the equipment of theirs that we use, but there was a big
misunderstanding about the sum,” Machitidze declared.
United Telecom prosecuted Caucasus Online , which covers about 80% of
the Georgian online market and demands the execution of requests,
otherwise threatens to leave Caucasus subscribers without internet.
“We didn’t have a contract with Caucasus Online from 2007 as we had
laid out a verbal agreement. We had a contract with Caucasus Online before it ran out. United Telecom didn’t mean to fulfil our threat and
leave people without internet, as most of them are our clients,” Iva
Martiashvili reported.
United Telecom, which has its own internet portal, made a problem for
Caucasus Online’s clients and in three months the loss of Caucasus
Online had reached USD 2 million.
“During three month, from March to May, we couldn’t serve numerous
clients, because of Telecom and we sequestrated to their count in TBC
Bank. We counted the number of requests and according to this number
our loss reached USD 2 million,” Machitidze added.
Telecom already switched off a huge number of Caucasus Online ’s clients
and is threatening to increase this number if Caucasus won’t satisfy
their demands.
“I can’t understand yet how Telecom is going to carry out this threat,
because when they took this action to court they were given a document
according to which they have no right to put in place any steps, until
the court’s verdict. The fact is that Telecom controls the main levers
of DSL internet,” Machitidze stated.
On their side, Telecom is refusing everything and saying that Caucasus Online had problems because of their old technologies.
As Martiashvili says, “We can prove the truth at court. Caucasus Online blames Telecom for everything, but the cause is internal. Every night
the internet switches off because Caucasus has old technologies. Even
now if displeased a customer can call their hotline, and they will
simply declare that the reason for the disconnection is because Telecom
don’t let them make repairs.”
According to CO their agents installed bugs in Telecom’s office.
“Footage shows how employees of United Telecom are disconnecting a
Caucasus server,” the Company said in an official statement distributed
via the internet. Video clips aired by TVs are still placed on the CO
website.
“A lot of coincidences took place at the same time. Every night the
main parts of Tbilisi stayed without internet. People started talking
to our clients informing them that the Gelink project was counting the
days of its existence and were thus offering their services. It sounds
funny, but we got all this information from the media, they announced
that all Telecom’s clients were under this pressure and after that we
started a check of all our offices, so as to rate Telecom. With members
of the Municipality we reflected on the facts, and on how the employees
of Telecom had fulfilled their orders,” Machitidze stated.
As a sign of their independence and displeasure with Telecom, Caucasus
Online started a large magisterial project of fibrous internet, costing
USD 70 million.
“We interrupted the magisterial project, which we compare with
Telecommunication, during the period of war because most of the works
are being made under the Black Sea. Works are already finished in
Bulgaria and only Poti is left,” Machitidze stated.
At the moment, the main Georgian companies: Bank of Georgia , TBC Bank ,
Cartu Bank, Bank Republic, Teliani Valley, Magticom and Geocell,
internet clients of Caucasus Online , haven’t yet faced any online
problems. But as Iva Martiashvili mentioned, Caucasus Online ’s deadline
arrives on Monday.
See news update on finchannel.com
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