05 July 2007

Mobile debate is tender matter

By Eric Jansson
Published by Financial Times, 5 July 2007

Less than a year into the Macedonian government's campaign to liberalise the country's telecom-munications sector, public debate about the issue is heating up.

"Everyone is for telecoms liberalisation, but there are differences of opinion about how to do it," says Mile Janakieski, the 28-year-old transport and communications minister.

His choice has been to let the market work in the fast-growing mobile sector. Keen to challenge the dominance of the country's two existing mobile operators - Deutsche Telekom-controlled T-Mobile Macedonia and Greek OTE's local operator, Cosmofon - the government in February sold a third mobile licence to Mobilkom Austria, the mobile subsidiary of Telekom Austria.

Boris Nemsic, chief executive of Telekom Austria, calls the €10m purchase of a 10-year renewable licence "an excellent extension of our footprint" in the Balkans. The company, aiming to launch local service in September, is likewise launching operations in Serbia, bolstering its Balkan portfolio.

But announcement of Mobilkom's purchase spurred additional market interest. "Many companies came forward saying they were interested in being the fourth," Mr Janakieski says.

The minister soon signalled that a fourth licence might be issued as well. Six companies have since expressed formal interest in a tender, among them Russian and Israeli operators.

Mobilkom Austria was given no warning about a fourth licence. "We did not promise not to publish a fourth tender, and they did not ask. They are strong enough to play on the market," the minister says.

But the move has vexed the new licence-holder. Mr Nemsic says he understands the government's "legitimate political wish to break up the duopoly" but adds: "We have to distinguish political wishes from [investment] logic."

Debate now rages about potential overcrowding in a telecoms market where mobile penetration has already reached 72 per cent, accounting for 60 per cent of the overall telecoms market. T-Mobile Macedonia and Cosmofon, which reject the "duopoly" name, say they have doubts. So do opposition politicians.

Rubin Zareski, chief executive of T-Mobile Macedonia, the leading operator, says he is "OK with a third mobile operator" but asserts that "the market is already full".

Mr Zareski also attacks the analysis on which the government justifies its drive to boost competition. This holds that insufficient competition has let the two existing operators keep prices artificially high.

"If you have a duopoly, that means you agree on prices and prices do not change. But look at two years ago, one year ago, six months ago, and you see there is competition. Prices are dropping - in our case by 30-35 per cent per year," he says. T-Mobile's high profitability, he says, results not from overpricing but from "extremely high efficiency".

Irony runs deeply through this tiff. The government aims to make straight the way for new foreign investors, yet already it risks offending companies that are relative newcomers.

T-Mobile Macedonia's history began just six years ago with the €342m privatisation of the country's state telecoms utility, MakTel. The buyer was Matav, a Hungarian company controlled by Deutsche Telekom and later renamed Magyar Telekom.

Mr Zareski says the government is not acting in a "highly professional" manner - hardly the signal that Skopje intends to send out.

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