Megacom

concluded

Megacom was awarded a 10-year national license to operate a nationwide AMPS (800 MHz) network in 1994. The license did not grant exclusive rights over the provision of mobile phone services, but the company obtained the only two bands of 800 MHz for mobile phone services. The government did not require any license fee. Megacom was created as a subsidiary of Schoma International (100%). The company launched its network in Tbilisi in November 1995. The company invested around US$10 million in 1995 to have an installed capacity of 50,000 lines. Megacom had two competitors (Geocell with its GSM 900 network and Magticom with its GSM 900 network) by 1997. By the beginning of 2001 MegaCom's coverage area has included Tbilisi, Mtskheta, Gardabani, Rustavi, Kojori, Dusheti, Gori, Tskhinvali, Khashuri, Zestaponi, Kutaisi, Senaki, Samtredia, Batumi, Kobuketi, Ureki and the surrounding areas of these cities. In 2002, it had 18,000 subscribers, which represented about 5% of Georgia's market. However, in 2003 the company had come into financial difficulty over owed tax payments to the government. Megacom's license expired in 2003, and the company was supposed to pay several thousand lari in order to extend the license. It failed to do so despite repeated warnings by Georgia's National Communications Commission (GNCC) and the license was annulled. Subsequently, some of the 800 MHz frequencies to which Megacom previously held the license were sold to the country's biggest cellular operator, Magticom for US$14.4 million (27 million lari). In 2005, some of the remaining frequencies were given back to Megacom (who had to pay US$139.5 thousand), whose license was reinstated based on a ruling by the Tbilisi district court. Georgian Minister for Economic and Structural Reform said the court order was unlawful and said he would ask the Prosecutor General to bring charges against the members of the GNCC. In the meantime, Megacom is free to use its reinstituted spectrum and may choose a new technology instead of the dated TDMA/AMPS as, according to Georgian Law on Communications, a company is free to choose any technology to operate in its licensed spectrum. In 2005 Megacom had a change of owners. The agreement on the sale of 100% of Megacom to Russian-Georgian joint venture GMC Group was signed in December 2004 and the deal was finalized in January 2005. In May 2006, Telecominvest -largest Russian company and the owner of Megacom- bought a license for usage of third generation cellular Communication frequencies for approximately US$10.3 million (GEL 18.68).