Merger of Azerbaijani State-Owned Internet Providers Faces Lingering Delays Amid Antimonopoly Struggles

The long-anticipated merger of two state-owned Internet giants in Azerbaijan, Aztelekom LLC and Baktelecom LLC, has encountered persistent setbacks, casting doubt on the timeline for their amalgamation. The continued delays in obtaining approval from the State Service for Antimonopoly Supervision and Consumer Market Control under the Ministry of Economy have become an obstacle to this strategic consolidation.

This prolonged bureaucratic tussle recently took a contentious turn when the Civil Service initiated a case against both providers, unearthing signs of antimonopoly legislation violations in their operations. Mammad Abbasbeyli, head of the Civil Service, said at a briefing on January 18 that both Aztelekom and Baktelecom have implemented tariffs exceeding those regulated by the Tariff Council.

The Civil Service mandated the providers to align their service tariffs with the stipulations of the "On Telecommunications" and "On Regulated Prices" laws, along with the decisions of the Tariff Council. As a punitive measure, a modest fine of 16,500 manats was levied on each provider.

In a defiant response, the providers, threatened with legal action, signaled their intent to challenge the sanctions in court. Aztelekom issued a statement asserting, "On 06/24/2023, the Civil Service adopted a resolution on the case brought against providers on grounds of violation of antimonopoly legislation. According to the ruling, the initiated case was dismissed in terms of the "permissibility of price manipulation" of a number of infrastructure services by suppliers. By the same decree, financial sanctions were applied to each of them. By the same decree, a financial sanction was applied to each of them. We have come to the conclusion that this part of the resolution contradicts the current legislation and is not justified. To this end, a lawsuit will be filed in court in accordance with the law."

Mammad Abbasbeyli confirmed the completion of the case review, emphasizing that the providers' swiftness in rectifying the remaining operational shortcomings would be pivotal in determining the trajectory of the merger.

He noted that the trial is being delayed, as the plaintiff has filed a counterclaim. The Civil service will continue to insist on its decision: "It is considered illegal for a natural monopoly entity to change the price regulated by the state in any direction without coordination with the Tariff Council. This issue is at the heart of our decision and proceedings are currently underway around this issue."

In addition, there are facts that the provider has overestimated tariffs for Internet services by as much as 400% of the limit set by the state. "Such cases are an obstacle for business entities operating in this area," Abbasbeyli said.

Deputy Head of the Civil Service Jafar Babayev noted that these tariffs are not tariffs for consumers: "These are tariffs applied by “Aztelekom” to its competitors operating in the local market, that is, to other companies. The consumer does not see these tariffs."

Despite these challenges, Aztelekom and Baktelecom have already begun functioning as an integrated entity, operating under the leadership of a unified head, Tural Pirverdiyev. The extent to which these government providers can overcome antitrust barriers and move forward with their merger remains a key point in this story.