Orange Cedes Armenian Telecoms Shares

Arshaluis Mghdesyan

Freelance journalist based in Yerevan

Monday, 24 August, 2015

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The mobile phone firm Orange is pulling out of Armenia as its local subsidiary is taken over by a company in which a government minister’s relative is a two-fifths shareholder.

The 100 per cent buyout deal was submitted for approval by Armenia’s Public Service Regulatory Commission, which announced on August 20 that it could go ahead.

In a document published on the commission’s website, Aram Khachatryan is named as a 41 per cent shareholder in the buyer, Ucom.  He  is a relative of Finance Minister Gagik Khachatryan, and is described as a nephew or cousin in different media reports.

Armenian media have alleged that family members have interests in a number of business sectors. When Gagik Khachatryan was appointed finance minister in May 2014, he said he had no personal business interests to relinquish. A journalist asked him about claims that he owned Ucom and two other companies, and he said “evidence is available that proves I am not the owner”, the Tert.am news agency reported. 

Asked by RFE/RL’s Armenian service whether his relatives owned businesses, he replied, “Of course my relatives might. Go and ask them.” He added that a previous investigation by the ethics commission that governs top officials had found nothing against him.

In a 2014 statement to the ethics commission, Khachatryan’s wife declared assets of some 5.6 million US dollars under her and her husband’s names, according to Eurasianet.

Khachatryan formerly headed Armenia’s tax and customs services.

Orange – previously known as France Telecom – has been in Armenia since 2009, during which time it has invested about 500 million euro. But its subsidiary Orange Armenia is still running at a loss. It reported losses of four billion drams for 2014, four per cent worse than in the previous year.

In 2009, two Russian-owned companies dominated the Armenian mobile and internet market, MTS and Beeline. They still do, and Orange Armenia remains number three in terms of mobile and internet service users.

“Orange is leaving the market, which means it was unable to compete with other players even by dropping its prices,” economist Vilen Khachatryan told IWPR.

Orange Armenia will continue to trade under that name for at least a year, and staff have been promised that they will keep their jobs.

Orange Armenia’s chief executive officer Francis Gelibter stressed continuity for its operations in the country.

“The negotiations between Orange and Ucom do not mean that the Orange Armenia company is exiting the Armenian telecoms market. All that’s involved is a change of owner and a transfer of shareholdings,” he told journalists at a July 22 press conference. “The share sale is a purely commercial decision. There’s no question of any political pressure.”

Since its creation in 2007, Ucom has built up a portfolio of watch-on-demand TV, broadband internet and digital landline phone services. A number of state institutions including the State Revenue Committee, the taxation agency which Gagik Khachatryan headed at the time.

Orange Armenia signalled its ambition to move into mobile phone services last year when it acquired a 4G license, although its plans were not clear at the time.

The share deal will remove a foreign investor from the market and elevate Ucom from a minor to a major player. The range of other services it offers will give it a competitive edge that the old Orange Armenia did not have.Its contracts with government institutions will also help.

“The [economies of] scale will come into effect, given that virtually all ministries now use the company’s services,” Emmanuil Mkrtchyan, who is head of the ArmInfo news agency and an economist by background. “If the deal is goes through, Ucom will offer corporate packages to all state institutions. It will find itself in a position of advantage thanks to its administrative leverage,”

Arshaluis Mghdesyan is a freelance journalist in Armenia.