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Telecom draft law criticised

After stumbling through bureaucracy and objections over the past year, the privatisation of Slovenské Telekomunikácie (Slovak Telecom - ST), which was to have been wrapped up last year, hit its latest snag on April 14.
Mobile phone service provider Globtel said in a statement that the new Telecom law - which must be passed by parliament before ST can be privatised - drafted by the Telecom Ministry would put existing operators in the market at a disadvantage and that it was not fully compliant with standards set down by the European Union (EU).
However, Telecom Ministry representatives struck back at the claims, saying that the draft was the best possible version given the constraints of EU and Slovak regulations, which had sometimes been in conflict.


Mobile operator Globtel GSM criticised the new draft of the Telecom law, saying that it ran contrary to European Union standards. The law must be passed before the privatisation of Slovak Telecom (pictured above) can take place.
photo: TASR

After stumbling through bureaucracy and objections over the past year, the privatisation of Slovenské Telekomunikácie (Slovak Telecom - ST), which was to have been wrapped up last year, hit its latest snag on April 14.

Mobile phone service provider Globtel said in a statement that the new Telecom law - which must be passed by parliament before ST can be privatised - drafted by the Telecom Ministry would put existing operators in the market at a disadvantage and that it was not fully compliant with standards set down by the European Union (EU).

However, Telecom Ministry representatives struck back at the claims, saying that the draft was the best possible version given the constraints of EU and Slovak regulations, which had sometimes been in conflict.

"I can say that we prepared our Telecom law according to EU regulations and directives. I think there is a misunderstanding of some definitions, or maybe the people at Globtel didn't read it correctly," said Viliam Podhorský, director of the Telecom Ministry's Telecom Department.

The document submitted to the Slovak government by Globtel outlined 19 points of concern and stated that these issues had already been raised during the drafting process. "Despite the fact that several Telecom service providers warned before its submission that the draft of the Telecom Law ran contradictory to EU principles, those responsible for the draft chose to ignore these concerns," the document said.

The Telecom Ministry said that while the document had raised some valid points, most of the issues were based on misunderstanding or were related to Globtel's attempts to keep its current advantage in the market place.

One of the major sticking points for Globtel was the fact that a regulatory body would have too much influence over market share and price regulation rather than letting the market itself control these. Furthermore, the specific text regarding the regulatory body's power, Globtel complained, was vague and unclear.

Benoit de Saint Aubin, commercial director for Globtel, said he was concerned with how much power the regulatory body would have if a provider acquired a certain market share, which although compliant with EU regulations, did not mean it was compliant with the public interest, he said.

Saint Aubin explained that in the language of the current draft, the assigned regulatory body could push the prices up or down "if necessary," and that no specific conditions had been defined regarding this power. "What does this mean, 'if necessary?' This is unclear," he said. "Right now, we have no tools to attack the definition of the regulatory body's power regarding interconnection prices."

Milan Luknár, General Director of the Telecom Ministry, disagreed. In order to be EU compliant, one stipulation is that of 'universal service' throughout the country, meaning that all operators must absorb some of the costs of service delivery to more remote and less profitable regions. This, he said, would dictate price decisions made by the regulatory body.

"If ST has an obligation in its licence to universal service throughout the country - including more isolated areas that are not very attractive from a business point of view - we want an operator to absorb these costs. The Telecom Office will have the right to define how much all operators will contribute to this cost. It will be based on total income or number of subscribers, but it will be decided by the regulatory body," Luknár said. "From this point, I see that Globtel has a fear that they will have to contribute, but this is at our discretion. We can decide or the regulatory body will decide."

Martin Kabát, an advisor for Slávia Capital - part of the Deutche Bank-led advisory consortium for the ST privatisation - felt that any new regulatory body would be an improvement over what was currently in place. "After the approval of this law, regulation will be much more enforceable, secondary legislation will decrease and the new regulator will drive the market," he said.

The current Telecom draft marks the creators' second attempt - an initial version of the law created last year in June was scratched after being criticised by the ministry's own advisors and the EU. In their defence, ministry representatives said that the drafting of any law was a complicated process, and that many complications had been rooted in the discrepancies between Slovak law and EU regulations.

"The basic principle of the draft was to fulfil all the requirements of the EU directives," Luknár said. He added that several of the issues raised in the Globtel statement were specific to Globtel's current market advantage.

Saint Aubin did not disagree with Luknár's comments but said that the law must first be made precise and comprehensive, and that only then could the issue of whether or not they were EU compliant be addressed. "Some of these issues are not a question of whether they are compliant to EU standards or not. They are questions for the participants in the market," he said.

Kabát said the draft was the result of a political consensus and that there would naturally be objections from both sides. "I'm not 100% comfortable with the draft, but keeping in mind all that influences the parties involved, I think there is about 20% that could still be worked on."

Luknár said that the latest concerns surrounding the draft would not affect Slovakia's bid to join the EU, and that he expected the law to be finally approved by May or June.

Kabát agreed. "I think the law will be introduced in May to parliament and by the middle of June it will be approved. Then we can follow the next steps in the privatisation procedure."

However, on April 26 the ministry told journalists that there could be no guarantee that the privatisation would be completed by the end of the second quarter of this year because of delays in approving the law.

Stanislav Vanek, director of the regulatory department at the Telecom Ministry, told the SITA news agency that the draft law would go to a parliament session on May 9 and that bidders for ST would only submit final prices after the draft had been approved.

The three bidders vying for ST are Telekom Austria, Deutsche Telekom and the Dutch company KPN.

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