ARMENIA:
COMMERCIAL NEWS SUMMARY
APRIL 2006
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SUMMARY
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1. THIS CABLE SUMMARIZES PRESS REPORTING ON
COMMERCIAL DEVELOPMENTS IN ARMENIA FOR APRIL 2006. MAJOR HEADLINES INCLUDE:
-- Greek
Hellenic Telecommunications Organization (OTE) to Sell its 90 Percent Share in
the Armenia Telephone Company (Armentel);
-- Goam
Sells Hrazdan Thermal Power Plant (Htpp) Russia To Subsidize Domestic Natural
Gas Consumers;
-- Air
France Initiates Flights To Armenia;
--
Enterprise Incubator Foundation (EIF) Opens a Representation in Vienna,
Austria; and
-- March
2006 Economic Data.
END SUMMARY.
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OTE TO SELL
ITS 90 PERCENT IN ARMENTEL
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2. ON APRIL 4, GREEK HELLENIC TELECOMMUNICATIONS
ORGANIZATION (OTE) ANNOUNCED PLANS TO SELL ITS 90 PERCENT STAKE IN THE ARMENIA
TELEPHONE COMPANY (ARMENTEL). THE GOAM
OWNS THE REMAINING 10 PERCENT OF ARMENTEL SHARES. THE ARMENIAN COMMISSION ON PROTECTION OF ECONOMIC COMPETITION HAS
REPEATEDLY FINED ARMENTEL OVER THE PAST TWO YEARS FOR ABUSING ITS DOMINANT
POSITION IN THE MARKET AND SOME PRESS REPORTS SPECULATE OTE DECIDED TO LEAVE
THE ARMENIAN MARKET BECAUSE OF THESE FINES. ARMENTEL’S MARKET PRESENCE HAS ALSO
DECLINED BECAUSE A SECOND MOBILE PHONE SERVICE PROVIDER ENTERED THE MARKET IN
JULY 2005. OTE PURCHASED 90 PERCENT OF ARMENTEL'S SHARES FOR 142.5 MILLION IN
1997. EXPERTS ESTIMATE THAT OTE WILL
NEED TO SELL IT SHARES FOR USD 350-400 MILLION TO RECOVER INVESTMENT
COSTS. PRESS REPORTS SUGGEST THAT THE
MOST LIKELY BIDDERS FOR OTE'S SHARES ARE THREE RUSSIAN TELECOM OPERATORS,
VIMPELCOM (THE OPERATOR OF BEE-LINE), SISTEMA (OWNER OF MTS, MGTS AND COMSTAR),
AND MEGAPHONE. ARMENTEL CURRENTLY
CONTROLS APPROXIMATELY 80 PERCENT OF THE MOBILE TELECOMMUNICATION MARKET AND
100 PERCENT OF THE LAND-BASED TELEPHONE MARKET.
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GOAM SELLS
FINAL UNIT OF POWER PLANT TO RUSSIA
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3. THE ARMENIAN GOVERNMENT ANNOUNCED PLANS TO
SELL THE FIFTH UNIT OF THE HRAZDAN THERMAL POWER PLANT (HTPP) TO RUSSIAN ENERGY
GIANT GAZPROM IN THE COMING MONTHS. THE
GOAM TRANSFERRED THE FOUR OTHER UNITS AT THE SAME LOCATION TO RUSSIAN OWNERSHIP
IN 2002 AS PART OF A DEBT-FOR-EQUITY AGREEMENT. THE GOAM INTENDS TO USE THE PROCEEDS OF THE SALE TO PROVIDE
SUBSIDIES TO NATURAL GAS CONSUMERS TO HELP OFFSET THE ALMOST 100 PERCENT PRICE
INCREASE FOR NATURAL GAS IMPORTED FROM RUSSIA WHICH TOOK EFFECT ON APRIL 1,
2006. ACCORDING TO PRESS REPORTS,
RUSSIA WILL PAY THE ARMENIAN NATIONAL CURRENCY EQUIVALENT OF USD 248 MILLION
OVER THE NEXT THREE YEARS, ON THE FOLLOWING SCHEDULE: USD 58.8 MILLION IN 2006, USD 70 MILLION IN 2007, USD 120 MILLION
IN 2008.
MINISTER OF
ENERGY ARMEN MOVSISYAN SAID GAZPROM ALSO COMMITTED TO INVESTING USD 150 MILLION
TO COMPLETE CONSTRUCTION OF THE FIFTH UNIT INCLUDING THE INSTALLATION OF A GAS
TURBINE WITH A CAPACITY OF 140 MEGAWATTS.
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AIR FRANCE
INITIATES FLIGHTS TO ARMENIA
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4. ON APRIL 6, AIR FRANCE BEGAN OPERATING
THRICE-WEEKLY FLIGHTS BETWEEN PARIS AND YEREVAN. AIRLINE MANAGEMENT ANTICIPATES THERE WILL BE A HIGH DEMAND FOR
THESE FLIGHTS BECAUSE OF THE LARGE ARMENIAN DIASPORA IN FRANCE AND BECAUSE
FLIGHT ARRIVAL TIMES ARE SCHEDULED FOR THE EARLY EVENING, AS OPPOSED TO OTHER
INTERNATIONAL CARRIERS, MANY OF WHICH HAVE SCHEDULED ARRIVALS AFTER
MIDNIGHT. THESE ARE AIR FRANCE'S FIRST
REGULARLY SCHEDULED FLIGHTS INTO THE
SOUTH
CAUCASUS.
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EIF OPENS
REPRESENTATION IN VIENNA
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5. ON APRIL 11, DIRECTOR OF THE WORLD
BANK-FUNDED ENTERPRISE INCUBATOR FOUNDATION (EIF) BAGRAT YENGIBARYAN ANNOUNCED
THAT EIF HAS OPENED A FIELD OFFICE IN VIENNA TO PROMOTE INVESTMENT AND SALES
OPPORTUNITIES FOR ARMENIAN IT COMPANIES IN EUROPE. ACCORDING TO YENGIBARYAN, 60
PERCENT OF ARMENIAN IT COMPANIES WORK WITH U.S. PARTNERS, WHILE ONLY 10 PERCENT
HAVE REPRESENTATION IN EUROPE. EIF
EXPECTS THAT ITS VIENNA OFFICE WILL ATTRACT USD 300 THOUSAND WORTH OF ORDERS
FOR LOCAL IT COMPANIES IN 2006. EIF
ALSO MAINTAINS A FIELD OFFICE IN CANADA.
SINCE ITS OPENING IN 2004, EIF ESTIMATES THAT THE CANADIAN OFFICE HAS
ATTRACTED APPROXIMATELY USD 800,000 IN ORDERS TO BE FILLED BY ARMENIAN
COMPANIES AND IS DEVELOPING NEW PROJECTS VALUED AT USD 1 MILLION.
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ECONOMIC
DATA FOR MARCH 2006
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6. ACCORDING TO PRELIMINARY DATA FROM THE
NATIONAL STATISTICAL SERVICE, ARMENIA'S REAL GDP THE FIRST QUARTER OF 2006 GREW
BY 7.9 PERCENT YEAR-ON-YEAR TO USD 589.65 MILLION. INDUSTRIAL PRODUCTION
TOTALED USD 234.76 MILLION, DOWN BY 4.7 PERCENT COMPARED TO JANUARY-MARCH 2005,
IN PART DUE TO A SIGNIFICANT DECLINE IN DIAMOND PRODUCTION. GROSS AGRICULTURAL OUTPUT FOR THE
JANUARY-MARCH 2006 GREW BY 3.5 PERCENT COMPARED TO JANUARY-MARCH 2005 REACHING
USD 89.16 MILLION. CONSTRUCTION WAS
VALUED AT USD 61.8 MILLION, A 25.2 PERCENT INCREASE. FOREIGN TRADE TURNOVER WAS DOWN BY 5.6 PERCENT AT USD 606.4
MILLION, WITH IMPORTS OF USD 422 MILLION AND EXPORTS OF USD 184.4 MILLION. THE AVERAGE USD/AMD EXCHANGE RATE WAS
450.93.