The FINANCIAL — Caucasus Online (CO) and United Telecom Georgia (UTG) signed three new agreements on spreading resource access, on communication wells access and on increased interchange systems. The new agreements will be valid for the next 6 months. UTG announced that Caucasus has agreed to pay USD 1,178,918 before the 15 November.
The war between the providers started when a Kazakh backed company paid USD 90 million for a controlling share in United Telecom of Georgia, the country’s largest telephone company. Soon the company imposed a limitation on CO internet users using phone communication.
Both companies have strong lobbies in the Georgian Government. Caucasus Online is the biggest internet provider in Georgia that secures internet connection for the Presidential Office and almost all leading companies. And UTG controls the phone communication of more than 400,000 customers in Georgia. This allowed the company to cut off more than 37,000 internet users two weeks ago.
Eka Matchitidze of Caucasus Online explains that there were proper concessions from both sides. She claims that UTG’s clients won’t have speed limitations on accessing Caucasus Online’s server websites. According to the new agreement CO will have 24 hour access to its equipment located in UTG’s stations. For every extra hour USD 347 (GEL 500) will be paid.
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.
“Caucasus Online takes the responsibility for paying USD 1,317,614 and admits only USD 1,178,918 as its debt,” said Caucasus Online’s representative.
UTG announced that Caucasus has agreed to pay USD 1,178,918 before 15 November.
The level of competition is increasing as companies spend millions on new investments. Caucasus Online is on its way to completing a USD 75 million 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 .From Varna 1,400 kilometre fibre optic cables were installed. In addition to this Caucasus Online will build the first Data Centre in the Caucasus and Central Asia,” claimed Eka Machitidze.
United Telecom Georgia started a new project recently. “European internet for every family,” the company has announced. “From now on you can get the same global and local internet speed. For USD 10.4 (GEL 15) Telecom’s clients will be able to get 1 megabit (125 kb/s) per second internet. Telecom gets internet directly from Frankfurt via fibre optic cables.”
The number of UTG’s subscribers exceeds 24,000. According to the General Director of UTG the company expects to double the number.
“The revenues of the company increased by 40% this year and we’ve had income of over USD 10,000,000.”
By connecting to the data centre located in Frankfurt, UTG managed to receive large volume of internet resource. According to the Deputy Director of UTG, Iva Martiashvili the quality of internet service will increase dramatically.
“20-25% is added to the cost of internet when Armenia and Azerbaijan receive it from UTG. We think that the transit business is a very attractive direction for our company. We had negotiations with different foreign partners as a result of which we agreed with the Turkish side to provide us with transit routes to Europe,” said Iva Martiashvili.
“The demand for internet is increasing tremendously in Armenia and Azerbaijan. These countries are quite limited in terms of access and we think that the volume of exports will increase significantly,” said Adilkhan Temirbekov, the General Director of UTG.
United Telecom Georgia is supplying Armentel the major telecom operator in Armenia. According to International Telecommunication Union in 2008 there were 172,800 internet users in Armenia. ArmenTel was allowed to retain sole rights to internet telephony and the use of fibre optic cables. Previously, it had been granted exclusive rights to provide all telecom services in Armenia until 2013. UTG also supplies Azertel with internet. Azertel has a 64 percent share in Azercell Telekom. Azercell is known as the trend setter in the mobile telecommunications market in Azerbaijan, applying new technologies and offering segment-oriented rate-plans, products and services to its customers. Azercell Telecom J.V. currently holds 73% of the market share in mobile telecommunications in Azerbaijan.
“Last year we finished the construction of cables from Batumi to Turkey. There were capital expenditures, but overall we can’t consider that significant in comparison to the benefit of Georgia as a country. The benefit that our subscribers get from those cables is huge. We expect the number of our subscribers to double next year, so that we’ll have about 50,000-60,000 customers,” said Adilkhan Temirbekov, the General Director of UTG.
“The new tariff won’t be permanent. We’re going to increase the level of competition in the market. When the price was USD 35-42 (GEL 50-60) it was unrealistic for the quality of service that it offered. Now the price has become more realistic,” explained Temirbekov.
“The new project cost United Telecom Georgia (UTG) about USD 4,000,000. In October the number of our clients increased by 2,000-3,000 people. With our new offer subscribers will have the opportunity to quickly download movies, videos, music and other interesting resources from any foreign website. There’ll be no difference between the speed of download from foreign and Georgian websites,” explained Iva Martiashvili, Deputy Director of UTG.
“The Georgian regulator commission took out the cost of a 1 gigabyte internet connection worth USD 3,467 (GEL 5,000), which is 25 times cheaper than the ordered sum from internet provider Caucasus Online,” said Iva Martiashvili, Assistant of the Director, United Telecom Georgia.
The situation became more tense several weeks ago when representatives from the Municipality started cutting all lines of the GeLink service, costing USD 4,160,888 (GEL 6,000,000), with the excuse of carrying cables over roofs, needing construction permission from the Municipality.
“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,” said Eka Matchitidze, Director of the PR board of Caucasus Online.
Negotiations between the municipality and Caucasus Online haven’t come to an end yet.
Approximately 15,000 of Caucasus Online’s clients were left without internet during the cutting down process. As Eka Machitidze told The FINANCIAL some of the company’s clients are still cut off. The number of Caucasus’s clients is about 35,000.
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 75% of the shares and the rest of the shares are held by Growth Management Limited (GML) with 10% and TBC Bank which holds 15%.
Written By Levan Lomtadze