GEO

Phone number portability and a government-appointed monopolist

11 December, 2012

The team behind MediaPro Georgia – three people – sits in a small two-room office in Saburtalo. The building has seen better times, one of the office’s two rooms is shared with several other people. No sign on the door hints that a company which generated about GEL 6.5 million in revenues in 2011 is located here. 

MediaPro Georgia is a special company. It holds a monopoly status that has been granted by the Georgian National Communications Commission (GNCC) for 10 years. When a customer of a Georgian phone company – landline or mobile – wants to switch from one operator to another while keeping his or her old number, MediaPro Georgia comes into play. The company maintains a database that keeps track of phone numbers and providers they are associated with. When switching providers, consumers do not pay a fee, as is the practice in some EU member states. Rather, the bill is footed by Georgia’s four mobile phone and 27 landline operators.

And some of these operators are not happy, lamenting that they have to pay significant fees to MediaPro Georgia for a service they see as a minor technicality. Nicholas Murghulia, the company’s director, says that two mobile phone operators currently have pending court cases with MediaPro Georgia, seeking to challenge the company’s position. 

Some smaller landline operators expressed worry that because the GNCC does not regulate wholesale prices for landline telephone services, they might eventually disappear as a result of market consolidation, as their clients can now switch to larger providers without having to change their numbers.

“We won this tender transparently”, says Nicholas Murghulia, the company’s director. “The requirements for the tender were elaborated by a working group that included experts and operators. And also the decision was made by a commission in which operators were involved.” Murghulia says that having a neutral company to manage the portability process from one operator to another has proven to be a good approach.

The introduction of number portability – and the creation of a monopolist

The possibility to carry a phone number from one provider to another in Georgia was introduced in February 2011. The GNCC introduced this option in order to increase competition between providers. By October 2012, a total of 110,453 mobile phone subscribers have moved their number from one cell phone provider to another. Officials at the GNCC see the number portability as a success story, and representatives of MediaPro Georgia say the move has increased competition and resulted in a decrease of tariffs.

Preparations for the introduction of number portability started in 2010, when the GNCC established rules for the process and announced a competition to select the company to manage the transfer of phone numbers. The GNCC set up a tender commission, comprised of employees of the regulator and representatives of mobile phone operators to select the winning company.

The company to be awarded the contract to manage the number portability was required to prove prior experience in this area. Local phone operators were not allowed to compete. Three companies submitted the required documents: Ltd Kat and Kat Media, Media Pro Georgia and Gantek Teknoloji Bilişim Çözümleri A.Ş., a Turkish company. The tender commission disqualified Kat and Kat Media, arguing that the company had failed to prove it had relevant business experience; Gantek Teknoloji Bilişim Çözümleri was disqualified because the proposed system of collecting fees was found to be not in line with the GNCC’s tender requirements.

By majority vote, the commission awarded the contract to MediaPro Georgia, making the company a government-appointed monopolist for a 10-year period to manage the portability of numbers.

The contract

Every landline and mobile phone operator is required by the regulator to pay the equivalent of 0.38 Euro per year for every number the operator has been allotted by the regulator. Phone providers control significantly more numbers than they have paying customers in order to maintain a reserve of numbers for potential future customers. After portability rules came into force, several operators reduced the amount of phone numbers they controlled and returned number-blocks to the GNCC.

The contract with the GNCC allows MediaPro Georgia to decrease the fees it collects from mobile phone operators but not to increase them. The company has to provide the GNCC with financial information and data on its activities. The contract, signed on 1 October 2010, also grants the GNCC broad powers to modify or cancel the agreement with MediaPro Georgia.

MediaPro Georgia

The company (ID: 204551742) was registered in 2008 in Tbilisi, originally with a different profile than it has today. On July 26 2010, MediaPro Georgia was bought by the Lithuanian company Contland, and on 17 August 2010, Mediafon, also a Lithuanian company, took over 80% of shares. MediaPro Georgia’s director, Nikoloz Murghulia, held 10% of shares until late 2010, another 10% of shares were held by Sistor Intereurop Systems AS, a Norwegian company that produces the software MediaPro Georgia uses to manage the number portability. In December 2011, Mediafon also acquired the remaining 20% of shares and since then is the company’s sole shareholder.

Through different daughter-companies, Mediafon offers number portability services in Lithuania and several other countries around the globe, including Azerbaijan and Argentina. Recently, the company was also awarded a similar contract by the Moldovan telecom regulator. In 2011, Mediafon reported revenues of EUR 24.35 million.

Murghulia says MediaPro Georgia had to make significant investments into server infrastructure and backup systems and also has to pay a license fee for the software it uses. In October, after the parliamentary elections, MediaPro Georgia sent a letter to telephone operators, informing that the company will reduce its fees from EUR 0.38 Euro to EUR 0.32.

The fact that consumers do not have to  paying a fee when switching provider seems to be a good idea, as it keeps the burden for changing providers low and contributes to competition. Nonetheless, an evaluation of the fees and an assessment of the contractual relationship with MediaPro Georgia by the GNCC might be a useful exercise. 

For example, the fee for a similar portability service in Lithuania, where the owner of Media Pro Georgia is registered and active, is significantly lower (0, 29 Euro) than in Georgia. The fee that the monopolist is allowed to collect should be cost-oriented (while allowing for a reasonable profit) and information of its calculation should be publicly available. Media Pro Georgia and the GNCC should disclose information about the amount of the infrastructure investments made by the company and the company’s cost structure. The GNCC should conduct a regular assessment of the activity of the portability operator and make the results of this evaluation public.

 

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Author: TI Georgia
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