VZCZCXRO1647
PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHTI #0632/01 2281146
ZNR UUUUU ZZH
P 151146Z AUG 08
FM AMEMBASSY TIRANA
TO RUEHC/SECSTATE WASHDC PRIORITY 7362
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCPDOC/USDOC WASHDC

UNCLAS SECTION 01 OF 02 TIRANA 000632 
 
SIPDIS 
 
DEPARTMENT FOR EUR/SCE 
 
E.O. 12958:N/A 
TAGS: ECPS ECON EINV AL
SUBJECT:  ALBANIA'S CELL PHONE RATES - HIGHEST IN THE REGION 
 
REF:  07 TIRANA 569 
 
Summary 
------- 
 
¶1.  Albania's nascent telecom regulator and increasing competition 
are finally beginning to soften mobile tariffs, currently the 
highest in the Balkans and among the highest in Europe.  Two 
operators, AMC and Vodafone, had virtually free reign to set prices 
as they chose from 2000 to 2007, raking in huge profits for their 
parent companies and drawing criticism from the EU.  Finally, in 
2007, the Telecommunications Regulatory Entity (TRE) and the 
Competition Authority began to reign in the mobile operators, fining 
them for monopolistic practices and forcing them to reduce tariffs. 
A third cell phone licensee, Eagle Mobile, came on line in early 
2008, and a fourth license is expected to be awarded within six 
months, applying further pressure on Albania's high mobile prices. 
End Summary. 
 
Mobile Telecommunication Market - a duopoly 
------------------------------------------- 
 
¶2.  As in many developing countries, Albania's fixed line capacity 
cannot keep up with demand, forcing citizens to turn to mobile 
operators to provide basic phone services.  While Albania still has 
the lowest penetration of fixed telephony in Europe, mobile phone 
service has been growing at a fast pace.  Albania, with a population 
of 3.2 million, went from 15,000 mobile service users in 2000 to 
2.32 million by the end of 2007.  Up to the entry in March 2008 of 
the third mobile operator, Eagle Mobile, AMC, a subsidiary of 
Cosmote Group, Greece, and Vodafone Albania, the subsidiary of 
Vodafone Group Plc, each had about half the service base.  AMC began 
service in 1999 and Vodafone came on line in 2001.  Vodafone's 
entrance did little to reduce tariffs, which remain the highest in 
the region and among the highest in Europe.  Although media 
frequently accuse the operators of monopolistic practices, the 
operators blame the explosive growth in demand since 2000, requiring 
constant capacity improvements in infrastructure. 
 
¶3.  This duopoly in the Albanian mobile market continued to flourish 
even though in March 2004, a third mobile license was granted to 
Alb-telecom, the then state-owned fixed line operator that was to be 
privatized in 2005.  Eagle Mobile, a Turkish consortium, won the 
tender for the license, but became operational only in March 2008 
because of a prolonged controversy over the purchase of Alb-telecom 
by the Turkish Consortium CETEL that was finalized only in July 2007 
(reftel).  While Eagle's tariffs average about ten percent less than 
those of AMC and Vodafone, it has suffered from delays in providing 
coverage throughout Albania and has not been aggressive in pursuing 
new customers. 
 
Lucrative Business 
------------------ 
 
¶4.  For almost seven years the two main operators, AMC and Vodafone, 
dominated and shared the lucrative market, with a total 2007 
turnover of 389 million euro (AMC - 201 million euro and Vodafone - 
188 million euro).  AMC's net profit margin of 34.6 percent is the 
highest among all companies of the Cosmote Group with the next 
highest at 19.5 percent.  AMC's EBIDTA for 2007 reached 62 percent 
with the next highest score in the group being 41.7 percent.  AMC's 
tariffs are the highest in the region and among the highest in 
Europe.  The weighted average price per minute in Albania is 0.23 
euro, compared to 0.11 euro in Macedonia and 0.16 euro in Greece. 
 
 
Getting Tariffs Under Control 
----------------------------- 
 
¶5.  In its 2007 Albania Progress Report, the EU notes that the 
Albanian Telecommunications Regulatory Entity (TRE) has been unable 
to tackle the high retail tariffs of the two mobile operators 
through market regulation.  The GOA and various Parliamentary 
commissions have also been unsuccessful.  However, in 2007, the 
Albanian Competition Authority conducted an investigation on the 
abuse of dominant position by AMC and Vodafone and decided to impose 
a fine of 3.76 million euro on them for violation of competition 
rules.  The TRE also stepped in to set interconnection tariffs after 
the fixed and mobile telephone operators failed to reach agreement. 
In the absence of any change of behavior by the market operators, 
TRE and the Competition Authority are finally beginning to enforce 
market regulations.  The new TRE leadership appointed in April 2008 
has recently approved a plan to regulate tariffs and to gradually 
reduce them toward the average EU tariffs.  As an immediate step TRE 
is proposing a 20 percent reduction of pre-paid mobile service 
tariffs, which constitute 80 percent of the mobile users in Albania, 
with a second 20 percent decrease a year later. 
 
Comment 
------- 
 
TIRANA 00000632  002 OF 002 
 
 
 
¶6.  Regulating mobile tariffs is a formidable job, even for 
experienced, powerful European regulators, as reported recently in 
the media.  The TRE seems to have found its direction, and with the 
help of its European big brothers, and perhaps more competition from 
a fourth licensee, might finally be able to bring some relief to the 
overcharged Albanian consumer. 
 
CRISTINA