New strategy causes concern

  • 2001-03-08
  • Jorgen Johansson
RIGA - In the ongoing war for mobile-phone network subscribers in Latvia, one of the two players, Baltkom GSM, has adopted a new strategy copied from the West. This new method, subsidizing mobile phones permanently locked to Baltkom GSM's network, is not liked by neither its competitor, Latvijas Mobilais Telefons, nor the Ministry of Transport.

The first round of phones subsidized by Baltkom GSM took place around Christmas last year and was very successful according to its marketing director, Ilgvars Metnieks, with an increase in sales of up to 20 percent.

"We have had to renew our stock of phones, and now this is the second round already," Metnieks said.

He did admit this way of doing business has been copied from Latvia's western neighbors, and that Baltkom GSM will continue doing business this way. Still, he didn't wish to disclose any future business moves in the competition with LMT over mobile phone subscribers, nor did he wish to say how many extra subscribers they had.

"Tele2, our parent company in Stockholm, tells us not to reveal any figures except quarterly, but this is definitely a success story for us," Metnieks said.

LMT representatives are concerned, since they are not even allowed to hook on to this new approach of reaching new clients.

"We cannot subsidize mobile phones according to our network license issued by the Ministry of Transport," Davids Dane, spokesman for LMT, said. "We believe there should be competition between us and Baltkom GSM on equal terms. Their license allows them to subsidize phones."

Ina Bobrova, spokeswoman for the Ministry of Transport's communication department, confirmed that the network-operator licenses issued to LMT and Baltkom GSM do differ on the mobile phone subsidizing point.

"This issue has been sent to the Cabinet of Ministers by Minister of Transport Anatolijs Gorbunovs," Bobrova said.

There's no saying, however, when the two network operators will compete on the same terms.

The phones subsidized by Baltkom GSM have a subscriber identity module lock on them. It means that without reprogramming the mobile phone's software, it is impossible to switch to a new network operator.

Dane said the quality of how a mobile phone functions could decrease due to such undertakings, and that customers who chose to have their phones reprogrammed, and experienced difficulties, could come back to blame the network operator.

"There are no restrictions on subsidizing mobile phones in Latvia. The Ministry of Transport is thinking about restricting it, but there are no arguments for doing so," Baltkom GSM's marketing director said.

If the Ministry of Transport gets what it wants, this will change before this year is over.

Dane said it isn't illegal to subsidize phones in Latvia, but according to the new telecommunications law drafted by the Ministry of Transport it will be illegal in the future.

"This law, however, was drafted six months ago, but it's not been passed yet," Dane said.

The new telecommunication law is currently in its second reading in Parliament but has not been enacted yet. It is not certain when the law becomes effective, but Bobrova said the Transport Ministry hopes it happens before the end of this year.

"Our department does not like this (the sim-lock idea), but we have not decided what we will do about it," Bobrova said.