Who will Manage Georgia's Airwaves? The Problematic Privatization of Alfa-Com - საერთაშორისო გამჭვირვალობა - საქართველო

Who will Manage Georgia's Airwaves? The Problematic Privatization of Alfa-Com

29 July, 2011

This post was updated on August 1, 2011 The Ministry of Economy and Sustainable Development is auctioning off the management rights of LLC Alfa-Com for the next four years. Alfa-Com is a fully state owned entity with about 330 employees that operates 36 telecommunication transmitter stations throughout Georgia. Most importantly, it manages the famous Tbilisi television tower on top of the Mtatsminda. The online-auction was launched on July 18, without any prior announcement, and will end on August 1 at 5 pm. The timeframe for this bidding process is inappropriately short, taking into account that Alfa-Com is holds a natural monopoly for the transmission of radio, television and telecommunications signals. The short bidding period practically excludes foreign bidders as well domestic bidders that do not have (access to) inside-knowledge. The terms of the auction require the successful bidder to invest at least USD 12 million in Alfa-Com within the next four years. However, the terms do not specify the kind of investment needed and the auction-website provides no description of the technical infrastructure Alfa-Com operates and the condition of its assets. Within the 11 business days of the auctioning period, it seems very difficult if not impossible for any serious bidder to draft a four-year business plan that allows for a sustainable operation of Alfa-Com while securing multi-million Dollar funding for the required investments. Although the auctioning process itself is conducted online and seems transparent, the conditions of this privatization do not provide for a fair and competitive environment, given the lack of supporting documentation and the short time-frame for the submission of bids. Under the terms of the privatization, the only management-related condition for the successful bidder is to “maintain the profile of the enterprise.” However, this vague condition is likely to deter potential bidders, it seems hardly possible for non-insiders to gather sufficient information about the profile of Alfa-Com within a few days in the middle of the summer, as most of Tbilisi is on vacation. The Ministry’s asking price for Alfa-Com is 100,000 GEL. As this blog post went online, one interested party had submitted a bid (made only four days after the launch of the auction), putting the price at 110,000 GEL. The winner will have to transfer the final price to the government in four installments over the next four years. The first installment is only due on August 1, 2012, the final payment has to be made by August 1, 2015. Thus, the winning bidder will be able to run Alfa-Com for almost one full year, before making the first payment to the government. Alfa-Com transmits the signal of more than 30 radio stations, 16 TV stations and a number of telecommunication providers throughout the country. According to the Georgian Law on Broadcasting, the company has to ensure that the Georgian Public Broadcaster as well as the private broadcasters are granted non-discriminatory and equal access to the technical means and services of Alfa-Com. This rushed and surprising privatization process of Alfa-Com’s management rights has created a climate of uncertainty, with independent broadcasters being concerned about the terms and rates the new operator of Alfa-Com will set for the transmission of their signals. A significant extension of the bidding period and a more detailed documentation of Alfa-Com’s assets and technical infrastructure as well as the contractual obligation it has with third parties would be a key condition to creating a level playing-field. The privatization of Alfa-Com’s management seems also relevant to Georgia’s transition to digital terrestrial broadcasting. By 2015, the year the management contract of Alfa-Com will end, Georgia has to turn off analogue terrestrial television signals due to international licensing governance agreements. The Ministry of Economy and Social Development, put in charge of the process, has yet to produce a strategy for the switch-over. It has not been decided how and by whom the new digital broadcasting transmission stations, so-called multiplexes, will be managed. The winner of this auction might be a well-placed candidate for this role. Update: August 1, 2011: The management rights of Alfa-Com have been sold for GEL 110,000 to the only participating bidder, who placed his bid four days into the auction. The identity of the bidder has not been disclosed yet, as soon as it is, we will seek to get more background information on this person or entity.

Author: Mathias Huter, Mamuka Andguladze