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
Business Positive – Successful radio program from Radio Positive
Starting point of radio program Business Positive is to meet interesting people, communicate with them and deliver information that is interesting for the audience.
A factory of electric vehicles to be built in Kutaisi
Prime Minister Mamuka Bakhtadze stated that a factory of electric vehicles will be built in Kutaisi at the presentation of the Aigroup business group.
Qvevri-shaped hotel complex to be built in Telavi
A Qvevri-shaped hotel complex is scheduled to be built in the village of Shalauri in Telavi, Kakheti (east part of Georgia).
Georgian designers presented at Fashion World Tokyo 2019
The products of 11 Georgian designers are showcased at Fashion World Tokyo 2019,
Silknet raises $200 million in Eurobond issue
27 March 2019 - JSC Silknet (“Silknet”), one of Georgia’s leading telecommunications operators, has successfully priced a debut $200 million 5-year 11% senior unsecured bonds issue (the “Notes”).
Pistachio trees will be planted in Georgia
Dozens of hectares of Pistachio are planned to be planted in Georgia this year.
Toyota Safety Sense and Hybrid Technology
Toyota Caucasus, has presented two new models the 5th generation RAV4 and the 12th generation Corolla at Rustavi International Motorpark, several days ago.
Bidzina Ivanishvili “became number one oppressor of businesses in Georgia” - ICC Georgia chairman Fady Asly
Mr. Ivanishvili promised the business community to protect them from harassment and pressure, unfortunately his words died with the sunset of that day
The best brands of Belarus will be exhibited on a large-scale exposition in Tbilisi
"The Belarusians like to come to Georgia to relax near the sea in Batumi as well as to stay in sunny Kakhetia."
Don’t treat business like a hooker! - Georgian businessman Vasil Soprpmadze addresses politicians
Businessman Vasil Sopromadze, founder of the company "Fresco", addresses politicians
RAV4 No Compromise and Corolla Set to Impress – Two New Cars Presented by Toyota
Toyota Caucasus, the company constantly aspiring to greatness, has presented two new models the 5th generation RAV4 and the 12th generation Corolla.
Mamuka Khazaradze quits TBC bank, does not sell the TBC Bank share
I made a decision to leave TBC bank where I spent 27 years of my life
10 Reasons to buy an apartment in the suburbs
There is a tendency for Tbilisi dwellers to move from central parts of the capital to the suburbs.
Georgian citizens are granted the right to work in France
The French Embassy in Georgia made remarks on granting Georgian citizens the right to work in France
The New York Times: Bitcoin declines but Georgia still bet on it
The New York Times has recently published an article about reasons, challenges and causes of generating Bitcoin in the former Soviet country Georgia.
EU to allocate € 13 billion for Eastern Partnership countries, including Georgia
The European Union together with the World Bank plans to allocate investment worth € 13 billion for infrastructure projects in the Eastern Partnership countries.
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.
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
April 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