Magti’s and Geocell’s appetite curbed
20 January, 2011
Magti’s and Geocell’s appetite curbed

Magti and Geocell, two leading Georgian cell market operators, can no longer enjoy the high profit as they used for years. Georgian communication regulatory body fixed limited retail tariffs for them. Companies question the methodology of the limited tariff calculation and feel discriminated.
Magti and Geocell charging outgoing calls by 32 and 28.8 tetri per minute respectively will have to cut rates to 24 tetri starting April of this year otherwise they will face serious penalties.
Presumptions that cell operators enjoy

unfairly high profit margin in Georgia came true at last.
In February of 2010 Georgia was named as one of the most expensive country 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 Georgian National Communication Commission (GNCC) to handle with the problem.
GNCC disagreed with the accusation however cut down the interconnection tariff [fixed on outgoing calls between cell operators] by 45% past May [from 14.8 tetri per minute to 8 tetri] to give an impetus to cell operators to reduce consumer tariffs. The regulatory body also warned that if retail tariffs did not change by the end of 2010 they would introduce cap tariffs. Cell operators bustled about initially and offered the market different preferential tariff products but the premium [retail] tariff did not reduce. On the contrary, cell operators increased tariffs on outgoing calls to offset the loss.
GNCC kept promise and after a four-month market research [started on September 17, 2010] came to conclusion that Georgian cell market operators enjoy unfairly high retail tariff rates.
To curb monopolists’ appetite GNCC introduced cap tariff of 24 tetri that enters into effect on April 1st, 2011. Beeline, a part of Russian-based Mobitel and the third cell operator of Georgian market, is exempted from the cap tariff till it reaches 15% of market share. According to Georgian law, cap tariff covers only companies with significant market power, and a company is authorized as a significant market player when it takes at least 15% of the market.
Beeline takes just 12% share by today and charges outgoing calls by 18 tetri - much lower than its monopolist peers of Magti and Geocell making 49% and 43% of the market respectively.
According to GNCC figures, Magti charging outgoing calls by 32 tetri per minute spends 17.1 [the figure includes all taxes and profit] in fact, and Geocell charging outgoing calls by 28.8 tetri per minute spends maximum 18.5 tetri itself. Simple calculation shows that Magti and Geocel have been enjoying 87% and 55% profit respectively.
AYFB analysts believe that this profit margin was even higher for the last 15 years as much as the recent calculations include 10% of excise tax imposed on cell calls starting September of 2010 when the GNCC research started.
“Obviously cell companies enjoyed much higher profit till September of 2010,” the AYFB official paper reads. It is a lamentable fact that GNCC needed 15 years to make a decision [to introduce the cap tariff]. During all this period companies enjoyed superb-profit in fact and subscribers had to pay unreasonable tariffs.”
GNCC argumentation is that it has been monitoring the market and cut down interconnection tariffs for several times [from 24.8 tetri to 18.8 and 14.8 gradually, that slipped to 8 tetri past year] to boost cell operators to reduce retail tariffs. GNCC expectation was that tariffs had to be reduced automatically as a result but to no avail.
“After 8 tetri interconnection tariff entered into effect starting August 8, 2010 cell operators even increased charges on outgoing calls,” GNCC informed Georgian Journal. “Commission decided to research the market and as a result introduces 24 tetri of cap tariff that will protect subscribers from unreasonable tariffs on the one hand, and boost operators to offer different tariff products on the other hand.”
But cell operators think to amend their preferential tariff products starting this April so as to balance a cut in premium tariff.  Both Magti and Geocell feel discriminated. They think that tariffs at Georgian market are quite liberal due to severe competition and no extra interference was needed. Moreover, they think that tariffs were reduced actually as they offered the market new very preferential tariff products last summer and subscribers have a big option. As Sandro Sadaghashvili, Head of Legal Department of Geocell, assures interconnection tariff reduction can’t cause retail tariff slump as it is based on sophisticated calculations and these two tariffs can’t be treated equally.
“In other countries interconnection tariff is zero by the way,” he complained to GJ. “It must be abolished if they really want to give an impetus to cell operators. Plus licenses are very expensive here.”
He never rules out to go to court as he believes that GNCC methodology was unfair and was based only on 11 month’s data instead of 12 months. Besides, GNCC did not discuss the issue with companies properly prior the official hearings and restricted them to present their argumentations during the hearing process on January 12, 2011.
Irakli Lobzhanidze, Deputy Director General of Magti, disagrees with the GNCC methodology too but obeys to the legal decision.
“Nonetheless Magti will be implementing regulations imposed by GNCC on the company,” he told GJ.

Other Stories
Anaklia Port and its importance for Georgia
In 2016, Anaklia Development Consortium was authorized to launch the construction of Anaklia Port.
Cryptocurrency mining threatens electrical network in Abkhazia
In the breakaway region of Akbhazia rampant cryptocurrency mining is threatening the shaky electrical network, reports an article of the news portal EuroNet.
Caucasus Wine University to be opened in Gurjaani
In the Kakheti region a new viticulture campus of the Caucasus University is in the process of planning.
Photos describing life of the poorest in Georgia
Fight with poverty should be among top priorities of every government in every country.
Training farmers to rescue the organic hazelnut production in Georgia
Even drizzling rain and unpleasant gusts of wind can’t prevent the farmers from coming and participating in the agricultural training.
Bleak times for organic farmers in Georgia – but there is hope
Organic hazelnut production is a delicate plant in Georgia that has emerged just a couple of years ago. Various pests, among them the Asian stink bug Parosana, trouble hazelnut farmers and menace their livelihood – even before their businesses could really take off.
Hybrid car imports are going through the roof in Georgia
Thanks to their fuel economy, the popularity of hybrid cars is increasing in Georgia, where fuel affordability is low and prices for fuel are unstable.
The New Year offer from MAQRO Construction - Apartments with unbelievable discounts and the parking spaces for FREE!
Location, green yard, spaces for various needs, experience of the construction company and parking space are the main important criteria for potential buyers of apartments.
Interview with the co-founder of Kiwi Vegan Café – the first vegan place in Tbilisi
Behind the Kiwi Vegan Café stands a group of activists who wants to raise Georgian’s awareness for animal rights and welfare.
Biblusi opens first shop for tourists - Georgian
The largest book shop in Georgia Biblusi opens the first shop specially designated to the needs and interests of tourists and named it Georgian.
Georgia improves by five ranks in the Prosperity Index
In the overall Prosperity Index rankings, Georgia has climbed by 5 positions from 85 to 80 when compared to last year. As such, Georgia is the best performing country in the CIS zone.
The future is bright for electric cars in Georgia
The numerous hybrid cars in the streets of Tbilisi cannot be overlooked. Entrepreneur Sulkhan Gvalia calls them “pagers”, referring to the predecessor of mobile phones.
Georgia’s fight against the big tiny enemy – Asian Parosana
It’s a tiny creature, but the harm it did to the Georgian agriculture sector was and still is immense.
New cable route: from Kobi to Gudauri in 15 minutes
On the 15th of December, cable transport is scheduled to be opened connecting Kobi and Gudauri.
Tourist boom in Gudauri – majority of hotels are booked by foreigners
Gudauri is among the most popular winter resorts in Georgia.
Medical tourism increases in Georgia
In the last 9 months, Georgia was visited by 19 500 foreigners for medical and recovery purposes.
Doing business in Georgia has become easier than in America
According to the Doing Business 2019 report published by the World Bank, Georgia ranked 6th among 190 countries in terms of simplicity of doing business. This was an improvement over two ranks compared to last year.
Problems that foreigners frequently face in Georgia
The importance of Georgia as a tourism hub is growing year after year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
Georgia second among the fastest growing tourist destinations in Europe
Georgia is among the fastest growing tourist destinations in Europe. The data is published by the UN World Tourism Organization.
Bitmain launches world digital mining summit in Tbilisi, Georgia
Bitmain CEO Jihan Wu and Roger Ver, CEO of Head Speaker List featuring Circle, and Genesis Mining when Digital Mining Leaders Convene In Tbilisi on September 21-23
TBC Bank and Gazelle Finance have teamed-up to support Medical City, a leading healthcare provider in the western region of Georgia to launch the Western Regional Center Of Modern Medical Technologies.

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
January 2019
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31