Russian Mobile Operator MTC Interested in Acquiring VivaCell

Yerkir-Media reports that the Russian Mobile Services Operator MTC is interested in Armenia and the probability of buying “K-telecom”(i.e. Vivacell) is very high, according to the statement made by the President of MTC Leonid Melamed after the board meeting of the company held on September 4th.
Russian experts have estimated “K-telecom’s” price at 500-600 million US dollar. Even with my utter disappointment with the US Dollar exchange rate as of lately, I have to admit this is a huge figure, and VivaCell is well worth it.
Following the purchase of Armentel by Russian Vimpelcom this heightened interest towards the Armenian telecom market may result in leaving the whole of Armenia’s telecommunication industry in the hands of Russians. Is it good or bad for us? Well, I guess it is good, as Russians have cash, a lot of it, and looks like their interested (or maybe President Putin is artificially stimulating that interest?) in the Armenian market. And while Russian companies are far from being world leaders in providing high-quality telecom services or pioneers in technological innovation, the initial steps undertaken by VimpelCom make it look much better then the Greek OTE, the previous owner of Armentel. Still I have this gut feeling, that giving only one country – and especially a country like Russia renowned for its use of economic levers to reach political results, full control of a strategic resource like the telecommunications sphere, is dangerous… very, very dangerous indeed!

14 thoughts on “Russian Mobile Operator MTC Interested in Acquiring VivaCell

  1. Reply
    Onnik Krikorian - 06.09.2007

    So far I can’t say that the acquisition of ArmenTel gives me much hope. They’ve been blocked internationally for spam for a long time now and they’ve done nothing to rectify the situation. Also, it’s been impossible for relatives abroad to contact me here at times.
    What does interest me about VivaCell are rumors that the company really belongs to Kocharian and that he is currently selling off his assets ahead of leaving office. Yes, I know. Rumors, but can someone tell me how credible they are?

  2. Reply
    Onnik Krikorian - 06.09.2007

    BTW: Yes, my main concern with the ArmenTel privatization in 1997/8 was giving something strategic like telecommunications to a foreign company. I would say that I agree with you that there should be concerns about Russia controlling both companies. In normal counties, perhaps, this would result in heavy parliamentary activity with deputies trying to block the sale, I think. Of course, this is not a normal country.

  3. Reply
    Katy - 07.09.2007

    IMHO, it is good because now one will be able to ROAM with a mobile phone from abroad. In Kazakhstan, for example, the BeeLine-owned local brand uses all of BeeLine’s international roaming partners.
    Also, BeeLine is one of the biggest WiFi providers in Russia. EVERYWHERE I went in Moscow, I could find BeeLine wireless networks.

  4. Reply
    Onnik Krikorian - 07.09.2007

    Well, one would hope that it results in something positve, but I think the underlying concerns of Observer’s blogs have not been considered. That is, almost everything of strategic note will soon be in the hands of one country — Russia. Perhaps that’s a reality of Armenia’s geopolitical situation, blockaded by Azerbaijan and Turkey and not being considered so favorably for foreign investors from other countries, but anyway, I don’t think many countries put all their eggs in one basket and effectively become an economic outpost for just one country.
    Sure, if there is oversight, accountability and also an improvement in services, I suppose we can conclude so what? However, I can’t say that there has been such an improvement and it’s potentially dangerous anyway. Indeed, I can’t remember when anyone here had a good thing to say about the quality of Russian-managed or owned enterprises and given the way VivaCell came onto the market in a questionable way, we urgently need transparency in the way foreign companies, especially from Russia or those allegedly linked to senior officials, enter the market.

    The Armenian authorities did not hold any tenders at all for the second mobile license that was granted to VivaCell for just $7 million. A competitive tender for that license could have clearly fetched tens of millions of dollars, a huge sum by Armenian standards. The cash-strapped government has similarly failed to officially explain why it has foregone the potential extra revenue to the state budget.

    As I said, give me improved services and I’d agree, but ArmenTel have so far not really done so. In fact, I’d say that with it’s dialup service blacklisted internationally by several major anti-spam services with no action taken to rectify the situation, some serious questions need to be asked as to whether there has been an improvement or not? Personally, I think it would be safer if another country were to take an interest. After all, if there are economic reasons why a Russian foreign investor is interested, there should be others lining up to buy.
    Critics, however, argue that this deal is not entirely economic and might also be based on internal and external political factors. Still, it will happen, the telecommunication industry will be entirely in Russian hands along with many other areas of the economy, and there’s probably nothing any of us can do about it.

  5. Reply
    tesaket - 07.09.2007

    I might be missing smth, but there were press reports some weeks ago, that this was actually a done deal
    (?)

  6. Reply
    Observer - 07.09.2007

    Yeah – Haykakan Zhamanak had reported it, but then Vivacell Raffi had rejected those rumors. However, the issue keeps popping up repeatedly, so there might actually be something.

  7. Reply
    Nanul - 07.09.2007

    Well… I am not sure how accurate it is, but an insider told me that they were basically instructed from the higher echelons to sell it. They are supposed to sell it to the Russians and not to anybody else because, as I was told, currently there is a UAE company who is willing to pay about 50% higher than what MTC is paying (or has already paid). Given the history of how Vivacell won the tender (the whole process of which ridiculously took only a day) the corrupt practices of buying and selling of Armenia’s telecommunication assets continue.

  8. Reply
    Onnik Krikorian - 08.09.2007

    Nanul, any inside word on who really controls/owns the lion’s share of VivaCell?

  9. Reply
    Onnik Krikorian - 08.09.2007

    Incidentally, with the election coming up perhaps civil society and political parties should make this alleged deal part of their campaigns. If there are issues on which to fight for election I’d suggest this might be one of them, along with other potentially dangerous done or pending deals that the electorate should be informed about. If they’re interested or can be bothered to actually think about voting for their and their children’s future, of course, but I can only hope.

  10. Reply
    Nanul - 09.09.2007

    Onnik, nothing for sure, but the buzz is that Kocharian has share in it. As to your observation that the political parties can make this an issue during the election campaign, I hardly doubt it. As you know very well, most of the political parties in Armenia are built around one or two leaders, and many of those leaders themselves are involved in shady deals, whether it is simply owning an “obyekt” or something bigger. Hence, nobody would want to dig deeper to find out the truth.

  11. Reply
    Onnik Krikorian - 09.09.2007

    🙁

  12. Reply
    Observer - 09.09.2007

    The poit about Civil Society bringing up the issue is quite valid though. In fact I just decided to make it the central topic of one of the TV programs which will be produced by my organization: MDI and be broadcast in pre-election period.

  13. Reply
    Observer - 09.09.2007

    BTW – I heard, that Be line Armenia, an IT company known to me mostly as a computer retailer, is going to take Armentel and Vimpelcom to court for using the brand name Be line Armenia.
    I guess its the right time to go and register MTC Armenia brand, in case rumors are true 😉

  14. Reply

    […] the Armenian Constitution, Kocharian can not stay in office for a third term. At the very least, some bloggers such as Observer are already beginning to wonder if having Armenia’s telecommunications network under total […]

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