EurasiaNet Business & Economics - Georgia: The Fight between Tbilisi and Moscow Over South Ossetia Goes Cellular

BUSINESS & ECONOMICS

GEORGIA: THE FIGHT BETWEEN TBILISI AND MOSCOW OVER SOUTH OSSETIA GOES CELLULAR
Nino Patsuria 10/23/08

Not just territorial claims divide Georgia and Russia on the question of South Ossetia. Now, competing cell phone networks do as well.

Georgian officials state that on August 7 the Russian-owned cellular phone company MegaFon extended its coverage from separatist South Ossetia into the neighboring Georgian region of Shida Kartli, targeting in particular the areas around Gori, the region’s government seat, and the nearby Kareli district. MegaFon has operated within South Ossetia since 2004, according to the Georgian National Communications Commission (GNCC).

The move is seen as part of the Kremlin’s overall campaign to bring South Ossetia under its full control. Tbilisi alleges the cell-phone expansion began on August 7, coinciding with the arrival of Russian war materiel and troops in the disputed territory. The Russian and Georgian armies later clashed on August 8. [For background see the Eurasia Insight archive].

By late August, GNCC Chairman Giorgi Arveladze claims, MegaFon had allegedly cut into Georgian-owned radio bandwidth to override access to Georgia-based cellular networks operated by Magti and Geocell. Magti and Geocell subscribers traveling near Russian-controlled zones were switched over to MegaFon roaming, the GNCC chairman alleges.

A EurasiaNet reporter traveling within South Ossetia on August 24, however, still received sporadic Magti access.

The business news portal MediaGuide.ru reported that the Russian government asked MegaFon on August 14 to send a number of "base stations" to South Ossetia to connect with systems in neighboring North Ossetia, part of the Russian Federation. The government stated that the signal for one of two existing South Ossetian communication networks, routed through Tbilisi, was "very weak" and had no "guaranteed stability." Once the stations were in place, MegaFon’s signal could be picked up as well in the neighboring Georgian town of Gori, according to the website.

Both Magti and Geocell had been operating within South Ossetia since 1997, when they received their Georgian licenses. The Georgian Ministry of Foreign Affairs claims that the American-owned cell provider Magti "is widely preferred in the territory [South Ossetia], especially by people who need to roam rural areas, such as officials, militia, border guards, truck and taxi drivers etc."

South Ossetian border guards’ use of Magti allowed Georgian intelligence to intercept communications about the alleged arrival of Russian materiel into South Ossetia on August 7, The New York Times recently reported.

Terming MegaFon’s coverage extension into Shida Kartli "economic annexation," the Georgian National Communications Commission fined the company 500,000 lari (roughly $354,108) on September 19. The penalty follows an earlier, 5,000 lari (roughly $3,541) fine, imposed in June for MegaFon’s operation within South Ossetia. Neither fine has been paid, according to the GNCC.

The case has been turned over to Georgia’s General Prosecutor’s Office and to the financial police.

MegaFon’s representative in Georgia, Nona Kavelashvili, declined to comment on the penalties or the related allegations. Discussions with the GNCC are ongoing, she said. On October 2, the Tbilisi City Court rejected a MegaFon appeal against the fines.

The GNCC charges that MegaFon was acting as a political player for the Russian government, a charge the company denies.

MegaFon, set up in 2002, has strong ties to St. Petersburg, the hometown of Russia’s political supremo Vladimir Putin. The company’s executive management team has St. Petersburg connections, and nearly one-third of MegaFon shares are held by Telecominvest, a holding company formed by the city and regional/international phone companies.

MegaFon also has strong ties to Russia’s federal government. The company’s deputy general director in charge of "cooperation with state organs," Eduard Ostrovsky, is a former deputy minister for telecommunications.

The GNCC has yet to challenge MegaFon in international court. Arveladze states that the Commission, which technically operates as a non-government entity, can only monitor MegaFon’s activities, impose penalties and appeal to communications organizations like the International Telecommunications Union for assistance -- a tactic that, so far, has led to no results.

Currently, the Commission and officials within Georgia’s National Security Council intend to press for new legislation that would enable further legal action. A draft law now under consideration would allow "Georgia to stop arbitrary behavior by Russian companies by raising the issue of responsibility of their foreign founders or partners," said Murtaz Zodelava, an MP from the governing United National Movement, and one of the bill’s co-authors.

Zodelava declined to elaborate on how the law would differ from existing legislation, saying that the bill was still under discussion. Parliament is expected to adopt the law before the end of October.

Editor's Note: Nino Patsuria is a freelance business reporter based in Tbilisi.

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