Prishtinë, 23 November 2011
The lawsuit regarding the contract between PTK and Dardafon.net (ex-Dardafone) is on the brink of being confirmed for at least four persons. Despite the fact that the implicated people consider that this contract did not damage PTK, at the same time they try to throw the blame at each other.
This has to do with the contract of the virtual mobile telephony operator, so-called MVNO, which in principle uses the infrastructure of the public operator “Vala 900”. But this virtual operator offers services for consumers on the account of a private company, Dardafone.net, which is a property of Devolli family from Peja, respectively Devolli Company. This contract determined that the company which now operates with the commercial name “Z-Mobile”, should take 73% of the income, whereas 27% should stay with PTK. The contract has been criticized especially regarding the extremely favorable ratio for Dardafon.net.
Earlier documents about the idea of MVNO, obtained by Preportr, date back to mid 2006, when Etrur Rrustemaj was manager of PTK. In August of 2008, an agreement in principle with Dardafon LLC was signed by the follower of Rrustemaj, Adnan Merovci. The agreement was finalized after having been signed by the current director Shyqyri Haxha, but now with a company which had changed its name, transforming from Dardafone LLC to Dardafone.net.
This change of identity of the company is currently being considered illegal by the Special Prosecution of Kosovo, which has accused Haxha and the Head of the Board of PTK, Rexhe Gjonbalaj that they have participated in the forfeiting of the name of this company. When the business name and number were changed, the current shareholders of Z-Mobile, Blerim and Shkelzen Devolli had reached an agreement with the other shareholder, Adrian Shatku, to pay him the shares. According to some written reports during the years 2009/2010, the legal representatives of Adrian Shatku had threatened Haxhaj and Gjonbalaj that they would take action against them if they chose to ignore the fact that ex-partners of Shatku, Devolli brothers, did not pay the shares as they had agreed with the Share Sale Agreement. Shatku had threatened through a legal request which would cost PTK ten million Euros (10,000,000). However, on October 3rd 2009, according to evidence obtained by “Preportr”, it says that “Devolli Group” has paid to UNIFI, respectively to the American company established by Adrian Shatku and a few others, the amount of 700 thousand Euros.
Even after this payment, UNIFI had continued to ask for additional transfers from Devolli and this can be seen from the communication of their legal representatives and heads of PTK, Gjonbalaj and Haxha. Shatku had even used the American Embassy in Prishtina to influence the heads of PTK in order to take action towards Devolli Group, in order that the desired transfer should happen. “You have ignored the warning by the American Embassy” says a letter sent by the representative of UNIFI and UNITEL addressed to Rexhe Gjonbalaj, dated July 28 2008.
Hiding of the income
The service provided by Dardafon.net, under the name of “Z-Mobile”, with a valid contract has 200 thousand available mobile numbers. It is offering numbers starting with 377 45, same as Vala, with the only difference that the following numbers of Z-Mobile begin with 5 or 6. PTK has already up to now handed over to the virtual mobile operator 150 thousand numbers, from which 120 thousand are already active, whereas from the income percentage determined in the contract, PTK during 2010 has earnings amounting to 550 thousand Euros. With 150 thousand additional numbers, the possible profit of “Vala” operator would have been much higher.
The commercial director in “Z-Mobile”, Burim Krasniqi, says that according to the signed contract, for one year of operation of “Z-Mobile” in the market, PTK only from the percentage of the distribution of the profit has earned 548 thousand Euros, whereas it has earned over 1.4 million Euros from calls of Vala consumers towards “Z-Mobile”. Nevertheless, this claim does not hold if we take into account that this 1.4 million Euros would be earned with the same traffic even if the calls from “Vala” would be made towards another operator.
Although he does not hesitate to make public the earnings of “Vala” operator from “Z-Mobile”, Krasniqi does not reveal the earnings of “Z-Mobile” during last year, saying that “the financial statements have not been audited yet”.
But, if a simple calculation is done, it is revealed that if PTK has earned 548 thousand Euros from only 27% of the profits that belong to it according to the contract, then the profits of “Z-Mobile” have been 1.5 million Euros from 73% of the profits that belong to it according to the contract. And if we calculate also the calls made from “Z-Mobile” to “Vala”, then the profits of the virtual mobile operator are millions more.
The contract with “Z-Mobile” is being considered as detrimental even by the Special Prosecution, which has filed a lawsuit against two of its main leaders, because according to the prosecutors, “This contract makes ‘Dardafon’ company privileged and competitive to PTK”. Furthermore, this contract enables “Z-Mobile” to compete in same public tenders with PTK, where usually “Z-Mobile” is the privileged winner.
The lack of a reasonable billing system for the contract with Z-Mobile
In some public tenders, Z-Mobile has taken consumers from PTK. Such a privilege is not awarded to the other virtual operator “D3 Mobile”. The contract signed between this operator and “IPKO” does not allow it to bid in tenders. “Dardafone.net” company which operates with the name “Z-Mobile” has taken from “Vala” clients from state institutions.
The Kosovo Customs, on the tender with the date 26.08.2010, on providing mobile services, have declared “Z-Mobile” as the winner of the public tender where in competition were IPKO and PTK. Furthermore, the Office of the Auditor General has declared “Z-Mobile” the winner of the tender.
The heads of PTK continue to defend this contract which they value as favorable. The Chief Executive of PTK admits having lost in these tenders, but says that “Vala” does not have a billing system and this is the reason why it cannot win in these projects. He says that PTK has an agreement with “Z-Mobile” through a contract-annex which indicates that where the public company can enter, the virtual company should win and not the other operator, IPKO.
The lack of a billing platform continues to serve as a justification by the representatives of PTK, when asked on the reason of losing the market. They say that the lack of this platform limits them, since for the “post-paid” service, PTK has a billing capacity for only 20 thousand clients.
A contract for building a billing system for PTK was awarded to a British company “Amdocs”, but it was canceled by ex-minister of finance, Ahmet Shala, exposing thus PTK towards a court case initiated in the Arbitration Court in London. PTK director, Shyqyri Haxha says for “Preportr” that up till now only the engagement of lawyers for the case has reached an amount of 300 thousand Euros. The platform in entirety cost 20 million Euros, and it was cancelled by ex-minister Shala under the justification that PTK is in the process of privatization and such investments should not commence.
However, Haxha says that during a conference of investors in Prishtina, the most emphasized request of Telekom Austria was particularly the cancellation of some projects, such as the billing platform.
The lack of this platform, according to director Haxha, has made “Z-Mobile” appear as “the savior” against competition. “We have an agreement with them that places we cannot obtain, they should. We have an agreement. Over 95% of our clients are pre-paid. Only 5% are post-paid. We do not have the capacity to do the billing. The system that we have can cover only 20 thousand clients”, says Haxha. “We have topped it to 40 thousand and each moment we can collapse, we can experience a block”.
“Z-Mobile has its own system of billing and can win such tenders. But even in this case Z-Mobile invests for PTK”, says Haxha, who seems to be pleased with the scenario that Vala takes only 27% of what till recently used to take in full.
Haxha says that even as it is, the contract is favorable for PTK. As an example he mentions the contract between “D3 Mobile” and “IPKO” for which he says he has a copy of. “D3 has space for 300 thousand numbers. All products, every detail will be developed by IPKO for it. It will develop them. We have an agreement with Z-Mobile that we should not compete with each other. We go together. They do not take our clients”, says Haxha. From each minute of calls and other services, according to Haxha PTK takes 27%. Even for calls within “Z-Mobile”.
“It does not say in the contract but we do take 27%. This has reached up to 40%. We take the 27% each time. Because it is out traffic, and that traffic is recorded”.
The free market of ART
But this is not where privileges for Z-Mobile end. ART even enables this operator to compete in discounts. The price for one minute of conversation in “Vala” network from this operator costs 9 cents, whereas one minute within “Z-Mobile” and towards “Vala” costs only 7 cents. “Z-Mobile” sells its phone minutes even cheaper than PTK, despite the fact that it buys the same from the virtual operator. Furthermore, “Z-Mobile” gives a lot of minutes for free to clients for fillings of 5, 10 and 20 Euros, but this could be done by the public company which does not grant any bonus minutes for the clients.
Each “Z-Mobile” client who buys five-euro filling automatically wins another 8 other Euros, for fillings in the amount of 10 Euros, they get 20 for free, whereas for fillings of 20 Euros they get another 48 Euros bonus. The justification of PTK officials even in this case, is the lack of the billing system.
The Telecommunications Regulative Authority has determining powers of telecommunications pricing in the market. It considers this competition between “Z-Mobile” and “Vala” as a free market. The contract between “IPKO” and “D3 Mobile” prohibits the competition from the virtual operator. In a written answer from ART, they do not deny that there is in the market a cheaper offer by “Z-Mobile” compared with “Vala”.
“Vala, as vertically integrated operator offers services in the wholesale and retail market. The competition facing Vala from Z-Mobile in the retail market is fair and an aim of the legal and regulative policies of the sector”, says ART.
To the question how it is possible that an operator which buys minutes from the public operator is cheaper in the market, similarly to the chief of PTK, ART answers with the rhetoric of “the benefits of the citizen”. “The value for the citizen is generated here, when a part of the surplus from the operator/provider of the service goes to the citizen for the same services with the same quality”, ART has said. They of course do not believe in magic, but they say that the advantage of using new technology enables such a thing. But, the technology that Z-Mobile uses, in reality for most aspects is in the property of PTK, being that Z-Mobile is a user of “Vala 900” network”
“The effects in general are measured through evaluating the benefit that the citizen/client reaps”, says ART, avoiding any discussion as to how much PTK is damaged due to this contract.
On the other hand, Valon Basha, legal officer in “Z-Mobile” similarly to ART and PTK, thinks a lot about the citizen. “The biggest beneficiary of this contract is the Kosovo citizen, who benefits due to the rise of competition”. After having mentioned the benefits for the citizen, Basha adds that “Z-Mobile” is continuing to operate with losses and that this is expected to happen till year 2015 when it expects to profit. “The benefits of PTK from ‘Dardafone.net’ are multifold, which for year 2010 are 7-digit numbers” Basha has said.
The indifference on the alarm regarding the contract
The contract signed between PTK and “Dardafone.net” has been opposed by the employees of PTK delegated to evaluate it. But these evaluations were not taken into account by the Board of Directors and the management of this public enterprise since year 2008. According to the drafted contract, PTK takes only 27% of the earnings from the sale of services by “Z-Mobile”, whereas the latter takes no less than 73%.
“The Group unanimously states that the final offer of ‘Dardafone.net’ with the percentage of the distribution of income...does not have strategic reasoning, let alone a commercial one for PTK”, says a report prepared by experts. One of the experts of PTK, who at that time was against signing the contract, gives the reasons why he did not support such a contract.
“The contract is extremely unfavorable for ‘Vala’. The profitability for Vala was projected only if the percentage would be 73% in the favor of ‘Vala’, whereas according to the contract signed, we cannot speak about any profitability”, says the expert, who prefers to speak anonymously. According to him, the distribution ratio presented in the draft-agreement for MVNO, generates a considerable reduction of income for ‘Vala’, whereas in some product categories it generates losses, such as: International forward traffic, etc., this is when we take into consideration the price of minutes per unit, etc.
According to this report, PTK would suffer inevitable losses from this contract, since the model chosen for the MVNO does not oblige the virtual operator to calculate the total monthly income, but the accumulated income, excluding bad debts which would result from non-payment of bills from MVNO clients.
The biggest concern of the experts is the fact that the payments of services received by ‘Vala’, which as determined, would be executed by ‘Dardafone’ every four months, cannot be justified in any way, especially in the case of payments for pre-paid clients.
None of the acts of the contract, which exists only in the English version and signed by Albanians between PTK and the virtual operator Dardafone.net, specifies the floor which would prohibit the virtual operator to operate with cheaper offers than PTK. This represents for the experts the biggest mistake which is costing to the public company.
PTK had also made mistakes in the steps it made, when making plans to sell its capacities to another operator, despite the fact that this operator belonging to private parties targeting the same market. International experts have also criticized the agreements with the virtual mobile operator. According to international experts, who have been quoted in this report, it is not wise for an operator to sell its capacities to another operator, if the latter aims at the same market, or the same segmentation of the market. They recommended that a better strategic approach would be if PTK would use the virtual operator to offer services, which the operator does not deem as first-hand services.
Haxha knew the contract was detrimental
The man now defending the contract was aware a few months ago that he was signing a contract damaging to the company he leads. Since the time when he came as head of PTK, Haxha had in his disposal all the evidence and analysis which showed that if the contract would be signed between PTK and Dardafone.net, as it was later signed, then the public company would be damaged in millions of Euros. Haxha had admitted in the Special Prosecution that the contract was unfavorable, but had steered this process forward, despite having evidence and expertise in his table opposing this. Not only did he not take into account these recommendations, but had degraded the experts through establishing another working group which would then deem the contract as favorable.
What tops the responsibility of Haxha in all this story is his power to change the contract and increase the percentage in the favor of PTK for 5%, despite the lack of a decision by the board to allow such a thing. On the contrary, Shyqyri Haxha and Blerim Devolli, on January 16 2009, signed the final agreement including here the project-agreement in the annex 7 of the contract. But even in this annex the price floor under which “Z-Mobile” would operate in the market was not determined and which would serve as a sufficient preventive measure to protect the public corporation. The virtual mobile operator, according to the contract, was entitled to offer all types of services in telecommunications at any consumer base throughout Kosovo. The company is also allowed to target current business clients of PTK.
Defending the contract
PTK’s chief executive in no way agrees that PTK has losses. On the contrary, it is experiencing increase. According to him, there is no sign of losses. Furthermore, this increase is happening due to the operation of MVNO. Haxha defends himself in the court case saying that the contract was devised by the Board before he came to PTK, but contradicts himself when se says that the contract with “Dardafone.net” was opposed by people who aimed to enter the market themselves.
For this he accuses ex-head of PTK, Ilir Salihu, ex-chief of the sector for economic issues in ICO, Andrea Capusella, and ex-chief executive in PTK, Etrur Rrustemaj, that they have intensively worked to obtain this market themselves. “The other plan is that Tibor Kartik (government advisor for the privatization of PTK) made a bid and wanted to take it but could not. This is an aversion of foreign companies, which they come here and want to take the cream and our peoples’ money here”.
According to Haxha, none of the 150 thousand clients that “Z-Mobile” has are clients who belonged to “Vala”, but they are new clients of a market which was empty.
Furthermore, officials in PTK tell Preportr that in the first meeting between PTK and the Transaction Advisor for the privatization of PTK, Tibor Kartik from Telco AG, he was asked to elaborate on the conditions and possibilities of cancelling the contract between PTK and Dardafone.net, respectively Z-Mobile. “In the first meeting we had with the Transaction Advisor, he was asked to tell of the possibilities of cancelling the contract with Z-mobile”, says this official of PTK for Preportr.
But ex-chief executive of PTK, Etrur Rrustemaj, does not want to deal with Haxha. He says that the damage of the contract requires no comment since it was documented that 70% of the contract should have been in the favor of “Vala”.
According to him, the worst point of the contract is the ratio of profit distribution, the allowance of competing packages within PTK itself and the frauds “that had happened with the forfeiting of the firms”.
Haxha’s predecessor had not signed the contract
Sabahudin Ramaxhiku, who exercised the office of the Chief Executive, was in charge by the Board of PTK to sign the contract for the virtual operator. He had refused to do this in order not to ruin the goodwill obligations towards PTK. According to the file of the Special Prosecution of Kosovo, Blerim Devolli had visited Ramaxhiku in order to inquire about the reasons why the agreement had not been signed yet. Ramaxhiku had told Blerim Devolli that he was not satisfied with the agreement and therefore he would not sign it. During this time PTK had announced the vacancy for the position of chief executive.
They do not accept Z-Mobile
The potential buyers of PTK have said either to cancel the contract signed with Z-Mobile or otherwise none of the bidders would agree with the existing terms of this contract. This is the information leaked by a source inside the Ministry for Economic Development. This source has explained that it is being considered with legal counselors regarding what to do with this Contract. “When they are seeing the details of the contract, there is no chance they would agree with it. They have requested that if the cancellation of the contract is not possible, at least the annex which speaks about the distribution of profits should be changed”.
“There is no way that the contract as such with 70% profits for Z-Mobile and 30% for PTK would be accepted, the one privatizing it would not accept this Contract, unless the percentage of profits is turned upside down”, the source inside the Ministry for Economic Development has said.