A Matter of National Security? VimpelCom in the Georgian Market
Early January this year, VimpelCom, one of the largest Russian mobile and telecommunications companies, through its daughter company Beeline, announced its interest in the Georgian market. Precisely, the deal concerned Georgia’s internet communications market largely controlled by Caucasus Online, a Georgian internet service provider.
Reports were spread about negotiations over selling a fiber-optic cable through which Georgia receives internet from Europe (the Bulgaria-Poti undersea cable).
Following the news, which lead to wide public criticism for the potential cyber risks from Russia, Caucasus Online said in a statement that the sale of the Black Sea cable and land infrastructure is not a subject of negotiations but confirmed that talks were underway with several major telecommunications companies on the purchase of the Caucasus Online retail segment.
While meeting with VimpelCom leadership at the Davos Economic Forum late January, the Prime Minister of Georgia, Giorgi Kvirikashvili, stated that he does not see any misgivings in Beeline’s future acquisition of part of Caucasus Online, confirming that the deal does not refer to the selling of the backbone infrastructure.
Director of Beeline Georgia, Giorgi Tkeshelashvili, also said that the Russian company is not interested in purchasing the fiber-optic cable.
David Lee, head of Magticom, the largest telecommunications company in Georgia, spoke to GEORGIA TODAY on the matter. He claims that VimpelCom is a corrupt Russian company and says that if it is allowed to enter the Georgian market, there will be no way to stop Russian monitoring and control of the internet network within the country. He added that it will be the first time in history that a country has sold its internet network to a country occupying its territory.
Although Magticom was believed to be one of the main players in the deal, Lee clarified that since November 2015, his company has had no interest in the agreement, having pulled out of all negotiations due to the non-commercial price set.
“A company of this size, having already been convicted of corruption, can disrupt the normal operation of the market. For example, by offering an astronomical price for assets and then price dumping to remove competition,” Lee stated.
Following public concern over the potential deal, over 10 leading NGOs in Georgia, including the Strategic Communications Center, Georgia’s Reforms Association, Transparency International Georgia, and public movement Iveria, sent a petition to the President, Prime-Minister, Parliamentary Speaker and the Chairman of the Georgian National Communication Commission, warning them of the national security risks that the deal could incite.
The petition says that the government’s failure to guarantee cyber security and privacy of citizens might endanger the country’s national security interests as well as harm the confidentiality of private and classified data, which will enable the hostile country (Russia) to utilize the information for its own purposes.
The petition adds that, considering Russian’s most formidable cyber-assault capabilities, an integral part of its ‘hybrid warfare’ strategy, the threat is particularly heightened for Georgia when the sale of a communication company involves Russia-based operators.
“Bearing in mind Russia’s continuous attempts to penetrate the communication markets in a number of countries over the past years, purchasing mobile and internet providers in Georgia will strengthen Russian capability of gathering and monitoring the information flow in Georgia and make use of such for Russian intelligence purposes,” the NGOs claim.
Civil society is urging the addressees of the petition to put on hold the negotiations between Caucasus Online and VimpelCom until the issue has been investigated with due consideration.
Nika Rurua, a founder of Iveria, told GEORGIA TODAY that through opening doors for the Russian government-affiliated company, Russia will be enabled to control Georgian internet space. “Relatively, all internet communication, including that through Facebook, Google and mobile networks will be able to be effectively monitored by Russia’s special services.”
A leader of Free Democrats and ex-Defense Minister of Georgia, Irakli Alasania, early February also warned of the sale of the strategic fiber-optic cable which could result in a potential higher risk of cyber-attacks.
Russian VimpelCom was founded in 1992. It operates throughout the Commonwealth of Independent States space and has shares on the European market, including in Italy and Greece.
In November 2015, the company’s CEO, Jo Lunder, was arrested on corruption charges in Oslo, Norway. The case alleges that in exchange for an operating license, VimpelCom funneled some USD 57.5 million to Takilant, a company linked to Gulnara Karimova, the daughter of Uzbek President, Islam Karimov.
Last month, the Securities and Exchange Commission announced a global settlement along with the US Department of Justice and Dutch regulators that requires VimpelCom Ltd. to pay over USD 795 million to resolve its violations of the Foreign Corrupt Practices Act (FCPA) to win business in Uzbekistan.
VimpelCom’s Beeline, and Caucasus Online, filed a joint application to the Georgian National Communications Commission (GNCC) on November 15, 2015, according to which Beeline should become the provider of cable television, the internet and the telephone network by Caucasus Online.
The GNCC began administrative proceedings on the issue on January 5. The Commission is expected to reveal its final decision on March 10.
Zviad Adzinbaia