Home / Economy / Mobile Internet Prices Triple in Georgia

Mobile Internet Prices Triple in Georgia

The three telecommunication companies Magticom, Geocell and Beeline have won the 2018-2019 state telecommunication consolidated tender.

As a result, public offices will be able to make individual decisions and choose a specific operator for signing service agreements. The decision was taken by the tender commission on March 1. In previous years, the consolidated tenders were won by Magticom and Geocell. The winning companies serve about 260,000 subscribers.

It is interesting that the first tender was announced on January 31, and that only Beeline took part in it. On February 23, the tender commission held a meeting and made a decision to terminate the tender under the pretext that only one applicant, Beeline, was taking part in the tender. Geocell and Magticom named the tender conditions and a letter  from Georgian National Communications Commission (GNCC) as a reason of their non-participation. The letter exposed violations of competition principles.

A new state tender for telecommunication services will be announced soon, but with revised conditions. For example, the company will provide services for state offices through January 31, 2019, while in previous tender the deadline was June 30, 2018. The part of tariffs has also changed. For example, in old tender documentation the price of 15 gigabytes was 4.99 GEL, but, according to the new conditions, subscribers will  buy only a five-gigabyte package for the same price. Moreover, subscribers will buy a three-gigabyte package for 3.99 GEL, instead of a five gigabyte package.

At the same time, the previous tender conditions  used to determine Internet speed (3mb/sc- 21mb/sc) and this component has been excluded from the new conditions. Moreover, in previous years, after the package deadline expiration, the remaining balance was activated after buying a new package, while, according to the new conditions, an Internet package is usable for only 30 days. As a result, it is impossible to renew the remaining megabytes and use them. Moreover, all these companies offered the same tender conditions. As a result, if mobile service tariff triples and it is replenished with the previous months’ amount, service prices will grow further.

The state commission named all three companies as winners in the consolidated tender. The public cannot understand why the government has accepted the  worsened conditions. Shortly after this, the GNCC released a special statement, in which the GNCC chairman noted that Magticom and Geocell had violated the law and served organizations and offices with dumping prices. According to GNCC information, as part of the consolidated tender services, in 2017 Magticom losses made up 32,204,577 GEL, while Geocell losses constituted 7,781,581 GEL. The companies balanced the losses from other sources.

The regulator commission asserts that the companies have violated the law on electronic communication and the commission’s decision. However, by request of the companies, discussion of the issue was postponed until March 15. If the violations are confirmed, Magticom and Geocell will be warned. “Preliminary examination proves and confirms that these two operators applied dumping prices as part of consolidated tender and this is punished by Georgian legislation. The law prohibits  some consumer groups be served with dumping tariffs,” GNCC chairman Kakha Bekauri said.

After tender games of several days, the GNCC decision emerged as a justification of why state corporate clients have to pay a higher price for mobile services as compared to the previous four years.

Beeline was ready to supply services with the previous years’ tariffs to 260,000 subscribers and it is interesting that the state commission has rejected this offer. A lack of competition was named as a reason for failed tender and this signifies in more competitive environment, when three companies take part, radically different results emerge – much higher tariffs and all three companies put forward the same conditions, while competition has absolutely different mission. As a result of competition, tariffs decline, while the GNCC asserts that companies subsidize corporate services from other sources and this signifies subscribers pay a very expensive price for other services from communication companies. As a result, this factor enables companies to subsidize various directions.

As a result, Internet service tariffs have also risen extremely. This signifies cell communication companies receive double profits. On the one hand, they have maintained expensive services and, on the other hand, they receive more benefits in the state tender. The commission decision has harmed clients, while the mentioned companies will receive only warning notifications for the violations. And subscribes will have to pay 40 million GEL (in 2017, Magticom losses constituted 32,204,577 GEL + Geocell – 7,781,581 GEL), which mobile operators subsidized from other sources in 2017.

By Merab Janiashvili
Economic Analyst
More by By Merab Janiashvili