By Emil Danielyan
The Hellenic Telecommunications Organization (OTE) is marking the fourth anniversary of its operations in Armenia amid fresh government allegations that it has failed to honor the key terms of its $142 million purchase of the national operator ArmenTel. OTE’s relations with the authorities in Yerevan have gone from bad to worse recently after the latter accused the Greeks of large-scale fraud.
Its Armenian subsidiary, ArmenTel, has become an object of public anger fanned by the local media. Particularly unpopular has been a substantial increase in telephone charges in Armenia, which are now higher than in most other former Soviet states.
Government claims that OTE has not invested in Armenia as much as it had pledged only reinforce the widely held belief that ArmenTel’s 1998 sell-off has not paid off. Vazgen Manukian, chairman of a special parliamentary commission investigating the telecom sector, summed up the dominant mood when he said last week: “One thing is obvious. The goals which we hoped will be achieved through the sell-off are not being achieved.”
ArmenTel’s Greek managers have painted a totally different picture. The company’s executive director, Nikos Georgoulas, says Armenia’s Soviet-era telephone network was in an “almost collapsing” state in 1998 and thanks to the OTE investments is now approaching international standards.
“It is very important to state that Armenia became independent in telecommunication and now has its first terrestrial telecommunication exit to the rest of the world by digital systems,” Georgoulas declared at a recent news conference in Yerevan.
OTE puts the amount of its investments, the key bone of contention, at $143 million dollars. But an ad hoc government commission concluded in a recent report that the Greeks have invested in Armenia less than half of what they claim. The inter-ministerial commission alleged that the cost of telecom equipment imported to Armenia has been grossly inflated.
The report is the most serious of long-running government accusations levelled against ArmenTel. The company’s management has always flatly denied them, saying that ArmenTel has been audited by the Armenian tax authorities and the British firm KPMG which found no evidence of fraud. The ArmenTel chairman, Vassilis Maglaros, argued that KPMG’s findings carry more weight than the government commission’s.
“We respect very much all the decisions of the parliament, the government and whoever, but for us -- for OTE, I mean -- this procedure is closed,” Maglaros said.
The government, meanwhile, is seeking a judicial inquiry into its allegations. Transport and Communications Minister Andranik Manukian told the parliament last week that the government will have a case for scrapping ArmenTel’s 15-year monopoly on telecom services if its claims are endorsed by the court. He said: “If we prove in court that those abuses did take place, then I think the government should raise the issue of stripping it of the monopoly.”
The government now agrees with critics that its decision to grant OTE the exclusive rights as part of the ArmenTel deal was a mistake. Many local analysts believe that the controversial monopoly is a serious obstacle to the development of the Internet and the broader information technology in Armenia. The Greek firm, for its part, has made it clear that it would not give up the monopoly without receiving a hefty financial compensation. It is therefore bound to challenge any unilateral government decision in an international court.
ArmenTel’s sale was the Armenian government’s first and least transparent multimillion-dollar deal with foreign investors. It is still not known what other, if any, privatization options the government had back in 1998. Opposition leaders have repeatedly claimed that the choice of ArmenTel’s new owner was the result of a shady deal, implying that senior Armenian officials received lavish kickbacks from the Greeks.
But according to Georgoulas, the decision to buy the Armenian telecom operator was taken by the Greek government which controlled OTE at the time. Georgoulas insists that his country thereby wanted to cement its close political ties with Armenia.
Still, the fact is that OTE has expanded rapidly across southeastern Europe for the past several years and now holds major stakes in telecom firms in Albania, Serbia, Romania and Bulgaria. The way it has gained them has attracted the Greek law-enforcement authorities’ interest. They have already investigated some top company executives for alleged improperties in OTE’s expansionist push.
The most recent of such scandals broke out last week when a Greek prosecutor launched a preliminary inquiry into reports that OTE has made a secret arrangement with a rival Italian company to win a mobile phone license in Bulgaria. The Athens daily “Kathimerini” alleged that OTE paid Telecom Italia Mobile $10 million to drop out of the bidding for the Bulgarian deal.
The Hellenic Telecommunications Organization (OTE) is marking the fourth anniversary of its operations in Armenia amid fresh government allegations that it has failed to honor the key terms of its $142 million purchase of the national operator ArmenTel. OTE’s relations with the authorities in Yerevan have gone from bad to worse recently after the latter accused the Greeks of large-scale fraud.
Its Armenian subsidiary, ArmenTel, has become an object of public anger fanned by the local media. Particularly unpopular has been a substantial increase in telephone charges in Armenia, which are now higher than in most other former Soviet states.
Government claims that OTE has not invested in Armenia as much as it had pledged only reinforce the widely held belief that ArmenTel’s 1998 sell-off has not paid off. Vazgen Manukian, chairman of a special parliamentary commission investigating the telecom sector, summed up the dominant mood when he said last week: “One thing is obvious. The goals which we hoped will be achieved through the sell-off are not being achieved.”
ArmenTel’s Greek managers have painted a totally different picture. The company’s executive director, Nikos Georgoulas, says Armenia’s Soviet-era telephone network was in an “almost collapsing” state in 1998 and thanks to the OTE investments is now approaching international standards.
“It is very important to state that Armenia became independent in telecommunication and now has its first terrestrial telecommunication exit to the rest of the world by digital systems,” Georgoulas declared at a recent news conference in Yerevan.
OTE puts the amount of its investments, the key bone of contention, at $143 million dollars. But an ad hoc government commission concluded in a recent report that the Greeks have invested in Armenia less than half of what they claim. The inter-ministerial commission alleged that the cost of telecom equipment imported to Armenia has been grossly inflated.
The report is the most serious of long-running government accusations levelled against ArmenTel. The company’s management has always flatly denied them, saying that ArmenTel has been audited by the Armenian tax authorities and the British firm KPMG which found no evidence of fraud. The ArmenTel chairman, Vassilis Maglaros, argued that KPMG’s findings carry more weight than the government commission’s.
“We respect very much all the decisions of the parliament, the government and whoever, but for us -- for OTE, I mean -- this procedure is closed,” Maglaros said.
The government, meanwhile, is seeking a judicial inquiry into its allegations. Transport and Communications Minister Andranik Manukian told the parliament last week that the government will have a case for scrapping ArmenTel’s 15-year monopoly on telecom services if its claims are endorsed by the court. He said: “If we prove in court that those abuses did take place, then I think the government should raise the issue of stripping it of the monopoly.”
The government now agrees with critics that its decision to grant OTE the exclusive rights as part of the ArmenTel deal was a mistake. Many local analysts believe that the controversial monopoly is a serious obstacle to the development of the Internet and the broader information technology in Armenia. The Greek firm, for its part, has made it clear that it would not give up the monopoly without receiving a hefty financial compensation. It is therefore bound to challenge any unilateral government decision in an international court.
ArmenTel’s sale was the Armenian government’s first and least transparent multimillion-dollar deal with foreign investors. It is still not known what other, if any, privatization options the government had back in 1998. Opposition leaders have repeatedly claimed that the choice of ArmenTel’s new owner was the result of a shady deal, implying that senior Armenian officials received lavish kickbacks from the Greeks.
But according to Georgoulas, the decision to buy the Armenian telecom operator was taken by the Greek government which controlled OTE at the time. Georgoulas insists that his country thereby wanted to cement its close political ties with Armenia.
Still, the fact is that OTE has expanded rapidly across southeastern Europe for the past several years and now holds major stakes in telecom firms in Albania, Serbia, Romania and Bulgaria. The way it has gained them has attracted the Greek law-enforcement authorities’ interest. They have already investigated some top company executives for alleged improperties in OTE’s expansionist push.
The most recent of such scandals broke out last week when a Greek prosecutor launched a preliminary inquiry into reports that OTE has made a secret arrangement with a rival Italian company to win a mobile phone license in Bulgaria. The Athens daily “Kathimerini” alleged that OTE paid Telecom Italia Mobile $10 million to drop out of the bidding for the Bulgarian deal.