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Why Beeline Can’t Fly in Georgia

12/10/2008 22:23 (2019 Day 02:14 minutes ago)

The FINANCIAL -- Georgian veteran mobile operators U.S Metromedia International Group Inc (MIG) - MagtiCom and Swedish-Finnish TeliaSonera affiliated-Geocell regard Russian VimpelCom brand Beeline a feather weight competitor. “Today Magti is equivalent to Mercedes, Geocell BMW and where is Beeline?” Axis Financial Director Shota Modebadze is asking.



Russia’s VimpelCom that entered the Georgian market in March 2007 says it is satisfied with the company’s works in CIS Countries. But it seems that Georgia is not the case. Despite colourful TV ads Beeline still has a very small number of Georgian customers and it is still unclear which particular segment or niche belongs to the company. Business representatives speak about “Why Beeline Can’t Fly in Georgia”.

“Beeline was never able to establish itself in Georgia properly, as when it entered the local market 70% was already occupied and Beeline failed to immediately acquire the spare 30%, despite offering very low tariffs. When Beeline started activities in Georgia, Magti and Geocell had been constructing their networks for ten years already and were keeping up the process of development and expansion. It would be hard for Beeline to accomplish such a catch-up in just 1 year,” Zurab Gurgenidze, Magticom Communications Director, explains.

 In his words, as of today the number of Magti subscribers is more than 1 million 800 thousand. 

Gurgenidze says Geocell started works in Georgia 6 months earlier than Magti and it took them about 2 years to catch up with the competitor.

At present the company is owned by Telcell Wireless LLC and ITC LLC. The MagtiCom network covers over 97% of the populated territory of Georgia. Gurgenidze says during the 10 years of its operation MagtiCom has contributed GEL 646,183,161 to the state budget.

Magti Airtime Usage: Mobile to Mobile - GEL 0,288, Mobile to Georgia - GEL 0,288, Mobile to International - GEL 0,70 - 0,90 - 1,91.

Bali tariffs 1st Balance (Bali to Georgia) - GEL 0.288; 2nd Balance (Bali to Magti, Bali, Magtifix) - GEL 0.15; 3rd Balance (Bali to Magti, Bali, Magtifix - GEL 0.05; Besides from Bali to Bali there is a special tariff - GEL 0.02
Magtifix tariffs Magtifix to Magti, Bali - GEL 0.15; Magtifix to Fixed lines within Georgia - GEL 0.02; Within Magtifix subs - GEL 0.04

Besides there are two special promos that offer special tariff of GEL 0.05  from Magtifix to Magti and Bali, plus within "Friends and  Family" tariff not only Magtifix subscribers call for 5 tetri/min, but Magti and Bali subs  call Magtifix using the same 5 tetri per minute tariff.

 “Beeline is a new brand on the Georgian market,” Irma Tskitishvili, Head of the PR Department says. “The corporate segment is very important and a priority for Geocell. 877 is generally for corporate service. Almost all large Georgian companies and institutions use Geocell corporate services.”

 Geocell claims it has over 1.8 million subscribers.


Levan Gogichadze, Head of Marketing and PR of Unigroup, says “Beeline failed to be a strong competitor to other operators. Failure to provide competition even with low tariffs only means that the tariff is not the main factor. The coverage of areas would be one of the main issues.”


Unigroup is a corporate client of Magti.


“I’ve been a Magti subscriber since 1998. Magti provides the best coverage of areas and keeps on launching modern technologies. In my opinion based on the characteristics of mobile phones it is more than a little difficult to change the operator,” said Gogichadze.


Teona Mikadze, Marketing Manager of TBC Bank , says she has never been a subscriber of Beeline. She thinks Beeline could not manage to provide good enough coverage of areas, which is a most important factor. If an operator cannot provide good connection, then their low tariff does not mean anything.


“I have been enjoying a Geocell subscription for 7 years already. I have never used other networks. I like everything about Geocell - the services, offices, brand image. However, Geocell has recently had communication and area coverage problems, but I am very loyal so am not going to change the operator. I hope that everything will soon be improved.”


“If they could provide proper coverage of areas like Magti and Geocell do, then their low prices would certainly work in attracting subscribers. However a low price is not the most important aspect for consumers. I spend approximately GEL 150 for my mobile a month,” Mikadze added.


“When I was in other CIS countries and usng roaming, I was connected to local Beeline networks,” Lali Svimonia, PR Manager of ProCredit Bank Georgia. “I think that Beeline is really popular in certain segments in Georgia. Though ProCredit Bank is a corporate client of Magti,” she added. 


“I’ve been a Magti subscriber for about 5 years. I have never been a customer of any other operator in Georgia. Probably all operators have attractive tariff systems for corporate clients but service level is important,” said Svimonia.


“7 years have passed and I’m still a Magti subscriber. I have always liked the Magti advertisements. I also like the strategy of their social responsibility,” said Rusudan Kbilashvili, leading petroleum company Wissol.


“From the beginning Beeline had very bad area coverage and so that’s probably why it could never compete with Magti or Geocell,” Maia Ivchenko, PR of BCI Aldagi, told The FINANCIAL.


“I’ve been a Geocell subscriber from the very beginning. I cannot say what advantages Geocell has. I just like Geocell, I like my number and I feel more comfortable with Geocell. It is important for me to receive calls and that my mobile phone works well”, Ivchenko said.
“When I became a subscriber of Geocell, it was the best operator. Moreover, our company became their corporate client. Therefore I have never thought of changing the operator,” said   Nino Oniani, Axis Marketing Manager.


Nino Oniani, Axis Marketing Manager, was a Beeline subscriber in Russia because of her previous work and she said “they had very good conditions there, which cannot be compared to what they offer in Georgia.” Oniani says an advantage of Beeline could be their low tariffs. She spent around GEL 200-250 a month on telephone conversations.


“Beeline’s case is like a war - if you want to win, you have to be 8-10 times stronger”, Axis Financial Director Shota Modebadze says. “Today Magti is equivalent to Mercedes, Geocell BMW, in other words more for youngsters and I cannot say where Beeline is,” said Modebadze.


“I am a subscriber of two operators Geocell and Magti. I have had a Geocell subscription for 9 years already and Magti for about 1 year as a corporate client. Our company is a corporate client of Magti,” Tinatin Gugberidze Director of Marketing and PR Department of Caucasus University, told The FINANCIAL.


Tinatin has never been a Beeline subscriber. She thinks Beeline cannot compete with Geocell and Magti, as its coverage area and products do not meet subscribers’ requirements.


“It cannot satisfy the requirements of quality oriented subscribers. It is for tariff oriented subscribers, who concentrate on price rather than service spectrum. Therefore Beeline has become more popular with youngsters and by this volume only it cannot achieve popularity in the big market segment. In average I spend GEL 150 in a month on mobile phone costs,” noted Gugberidze.


According to the PR Manager of LLC Mobitel, Tata Sakvarelidze, “The revenue of Beeline is increasing according to the results of every quarter and according to the report of 2007 this figure is as follows: First quarter, 2007 (from 15 March including 31 March) - USD 39,251, Second quarter, 2007 - USD 200,000, Third quarter, 2007 - USD 300,000, Fourth quarter, 2007 - USD 900,000. Operating income before depreciation & amortization (OIBDA) in 2007 made USD 7,430,000.


As for the year 2008 - the revenue of the first quarter of 2008 made USD 2,440,000. Operational income in Q2 2008 is USD 3,891,710. OIBDA is USD 2,110,542.


“We are satisfied with the strong results we achieved in the second quarter of 2008. The company showed a serious increase of income compared to the previous year. We are also satisfied with our works in CIS countries, where we are also seeing a considerable increase of incomes,” summarized Alexander Izosimov, General Director of Vimpelcom.


The company increase dynamic was very rapid from the beginning, which was shown in a rollout plan. By the end of 2007 the company covered Tbilisi , Rustavi, Kutaisi, Batumi, Marneuli, Senaki, Poti, Zugdidi: practically entirely covering the coastline, Kakheti region and also Gudauri resort and Bakuriani.


“Beeline is the first company to offer tariff plans to its clients. Every new tariff plan meets the market requirements. Various tariff plans offer affordable prices to the segments with diverse income - accordingly the company gives clients the opportunity to talk for various prices within the various tariff plans,” noted Sakvarelidze.


The company’s plan is to cover 90% of territory until the end of 2008, which will improve the service quality in the following regions: Guria, Imereti, Kakheti, Mtskheta-Tianeti, Samegrelo, Zemo Svaneti, Tbilisi , Shida Kartli, Adjara, Racha-Lechkhumi and Kvemo Svaneti.


The company says it has more than 250,000 subscribers.


Mobitel was founded in November 2003 and at that time was not engaged in commercial activity. Company Mobitel, subsidiary of the United Joint-Stock Company VimpelCom (Russia), obtained the license to use the radio-frequency spectrum under GSM-1800 standards on 16 December, 2005. The company passed the authorization procedure on 26 August, 2005. Mobitel Ltd. started providing cellular communications services under the brand mark Beeline on 15 March, 2007.


JSC VimpelСom has a 51% share in Mobitel Ltd. The VimpelCom Group consists of telecommunications operators providing voice and data services through a range of wireless, fixed and broadband technologies. The Group includes companies operating in Russia, Kazakhstan, Ukraine , Uzbekistan, Tajikistan, Georgia and Armenia, in territories with a total population of about 250 million.


The Group’s companies provide services under the Beeline brand. VimpelCom was the first Russian company to list its shares on the New York Stock Exchange (NYSE). VimpelCom’s ADSs are listed on the NYSE under the symbol “VIP”.
In summary it seems that the local corporate segment has turned out to be remaining loyal to veteran operators.


Turnover in Georgia’s electronic communications market reached GEL 1.114 billion (about USD 784 million) in 2007, up from GEL 1 billion in 2006, the Georgian National Communications Commission (GNCC) said in its annual report.


The sector is worth 6.6% of the country’s GDP, down from 7.5% in 2006.


Mobile phone service providers lead the pack, with 63.28% of the entire sector, as opposed to 65% in 2006. Fixed-line phone operators have 29.53%, which is only slightly less than in 2006 and TV and radio broadcasters take 7.19% of the sector against 5.22% in 2006.


Revenues of the mobile phone operator companies in Georgia were over GEL 704 million, up from GEL 650 million in 2006.


The number of mobile phone users increased by 895,000 reaching 2.6 million in 2007, which is “a record high,” the report said.


Fixed-line phone operators’ total revenue was up to GEL 329 million in 2007 from GEL 299 million in 2006. The number of service users increased slightly, reaching 556,000.


An average monthly income from each user of the mobile operators was GEL 57.7 in 2000; the figure increased up to GEL 217 in 2007, according to the GNCC report.


Written By Sopho Kheladze



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