Cell tariff puzzle
02 December, 2010
Cell tariff puzzle

Georgian cell regulatory body questions consumer tariffs again. It thinks that Georgian cell market operators have not cut down consumer tariffs as expected when the interconnection tariffs between operator companies was halved. Cell operators, on the other hand, ask the regulatory body to increase the halved interconnection tariff again to offset the losses they suffer after the introduction of excise on cell calls.
Georgian National Communication Commission (GNCC), the communication market regulatory body, has to solve another cell tariff puzzle.

February Georgia was named as one of the most expensive countries globe over respective to cell tariffs by research of a non-governmental watch-dog, the Association of Young Financiers and Businessmen (AYFB). AYFB argued that the reason was the cartel agreements practiced by two monopolists Magti and Geocell for years and hailed GNCC to handle the problem.
GNCC disagreed with the accusation; however, it cut down the interconnection tariff [fixed on outgoing calls between cell operators] by 45% in May [from 14.8 tetri per minute to 8 tetri] to give an impetus to cell operators to reduce consumer tariffs ultimately.
Economic analysts and non-governmental watchdogs remained skeptical nevertheless. They argued that interconnection tariff has been twice reduced within the last 5 years shrinking from 24.8 tetri to 14.8 tetri per minute but no tariff slump on cell calls ensued. The AYFB analysts insisted that cartel agreement between Magti and Geocell [covering 49% and 43% of Georgian cell market respectively] is the real reason of high tariffs and GNCC in turning a blind eye to it. Beeline, the third cell market player having entered the market in 2007 with much lower tariffs, could not change the situation as its coverage area falls behind Magti and Geocell cover zone.
This time GNCC promised that if no tariff slump ensues as a result till the end of the year, GNCC would force cell operators to cut down prices. 
Cell operators responded briskly this time. They did not cut down retail [consumer] tariff standing at 28 tetri per minute on outgoing calls among cell operators networks but entered the market by new preferential tariff products starting June. Magti introduced a new product Bani, fixing 4 tetri per minute on internal calls from Bani to Bani; 12 tetri on calls to other Magt-based product Bali and Magti-Fix, and 16 tetri - on any outgoing calls. 5 tetri was fixed for Bali subscribers on internal Bali calls.
Geocell cut down tariff to 12 tetri for Lai-Lai subscribers on all calls. But consumer has to pay GEL 1 per month for this tariff system.  Beeline introduced new brand Fresh fixing 9 tetri on all outgoing calls [including the fixed line] starting the third minute of call. The first two minutes cost 18 tetri, but calculation does not start on each call anew.
But scenario developed in unexpected direction later in summer. Government mused and decided that cell companies enjoy pretty big profit [the total income of cell market accounted for more than GEL 811 million in 2009] and decided to tax incomes of cell calls by 10% of an excise starting September of 2010.
Economic analysts criticized the new tax as far as excise is used to tax either luxury goods or products that harm health. Cell product and service does not belong to either of them and has never been excised anywhere in the world. They predicted that the expected retail tariff slump will never occur thanks to this new tax and tariff can go even higher for business always compensates its losses on expense of consumers.  
Meantime GNCC thinks that introduction of certain preferential tariff-products does not mean the expected retail tariff-slump actually and decided to research whether or not the currently active retail tariffs are fair. It has to air findings of its research on December 5, 2010. However Magti and Geocell submitted an official request at GNCC to envisage the newly introduced 10% of excise and increase the interconnection tariff again. Beeline does not join Magti and Geocell’s request. The point is that Beeline with its 8% of market share [as registered in 2009] is acknowledged as a non-powerful market player and enjoys preferential interconnection tariff system as following: it pays the new tariff 8tetri per minute to Magti and Geocell on outgoing calls, but the latter two have to pay the old interconnection tariff 14.8 tetri on outgoing calls to Beeline.
“To be ranked as powerful players we need to have at least 15% of market share,” Teona Baghdavadze, PR Manager of Beeline, explained to Georgian Journal adding that their share increases quite rapidly lately.
The underway GNCC research aims to update the market share information as well and if it acknowledges that the Beeline share increased to 15%, it can no longer enjoy the preferential interconnection tariff system. According to Khatia Kurashvili, PR Manager of GNCC, it cannot be said at the moment whether or not the interconnection tariff will be increased and how much till the research is on. But Magti and Geocell expect to increase the interconnection tariff by at least 10%. On the other hand they do not think to abolish any of the already introduced preferential-tariff products, nor think to increase retail consumer tariffs if interconnection tariff is really increased.
“Tariff increase-reduction is regulated by the market demand and competition in fact,” Irakli Lobzhanidze, Marketing Director of Magti, explained to GJ. He disagrees that the new tariff-based products do not mean retail price-slump.
“Consumer tariff is reduced significantly and it reflects on Bani and Bali tariff systems. Our subscribers can use these new tariffs, they are brand tariffs and not temporary products,” he said.

Other Stories
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Winemakers to produce Kvanchkara in its place of origin - Racha
Khvanchakara is a semi-sweet Georgian red wine which originates from Racha, in the western part of Georgia. Kvanchkara is made of two types of grape Mujuretuli and Aleksandrouli.
The level of Georgian wine and Chacha exported has increased
The National Wine Agency of Georgia has recently published statistical information about the level of Georgian wine and Chacha exported between January and July, 2018.
New fire engines to be Manufactured in Georgia
The Acting Head of the Emergency Management Agency Shalva Khutsishvili said that the old Zili fire engines (which were made in the USSR) will be phased out and replaced with new ones, manufactured in Georgia.
Georgia witnesses a record number of tourists
The Georgian National Tourism Administration publishes statistical information about international visits to Georgia.
Canadian businessman plans to build a hotel in Bakhmaro
Canadian businessman Vadim Malishev plans to build a hotel in Bakhmaro resort, Guria, in the western part of Georgia.
Coffee Factory will open in Tbilisi in October
The first coffee factory (which will be located on the Kakheti highway) in Tbilisi will open in October.
Places in Georgia where real estate is the most expensive
The real estate market in Georgia is growing annually. In Tbilisi as well as other regions of Georgia new developments are increasingly taking place.
How much does a vacation cost in Tbilisi?
It is the middle of summer and those who have not yet taken a vacation are looking for an appropriate place for sure!
The price for extreme sports in Georgia
Georgia offers a variety of options to extreme sport lovers.
The number of Georgians who own property abroad increases
The number of foreign properties owned by Georgians is increasing.
How much does Taxi cost in Tbilisi?
Stories how Taxi drivers try to deceive passengers and charge them with more money than they should pay are known for everybody all over the world.
What are the highest paid areas in Georgia
According to the data collected by the National Statistics Office of Georgia in the first quarter of 2018 the highest paid jobs in Georgia are found in the financial and insurance fields.
Exchange Rates
GEL Exchange Rate
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange