July 2000

Slovenia Update Memo

The following report outlines new developments in the past three months and the state of on-going developments.

1. Current licensing regime may threaten competition

During the last three months, neither the legislation nor the regulations concerning alternative networks have been changed. The alternative infrastructure is still only partially liberalised and the licensing regime with its highly administrative provisions continues to be one of the largest barriers to the flourishing of the market.

After the Regulations on the issuing of licences for the provision of commercial telecommunications services (O.G. RS, No. 75/98) were implemented in 1999, several internet service providers and alternative infrastructure operators were issued only temporary licences for a period of one year. The licensing regulations require, for example, that the construction of telecommunications networks and the equipment used comply with the Law on the Construction of Buildings (O.G. SRS, No. 34/84; later amended several times). The procedure, however, is complicated, time consuming and costly. It represents an administrative barrier to the provision of otherwise liberalised services, as service providers need to go through the entire procedure even if they are installing equipment as simple as a computer or a few modems into an office. Only temporary licences have been granted by the Telecommunications Administration to those Internet service providers and alternative infrastructure operators that have not met the requirements set by the Law on the Construction of Buildings. Representatives of ISPs and alternative infrastructure operators claim that the proceedings could be discriminatory, especially as the historic operator has an important role in them.

One of the victims of the present licensing regime was Telemach d.o.o., one of the leading alternative infrastructure providers and cable TV operators. Through no fault of its own, Telemach could not obtain all the documentation required in order to comply with the Law on the Construction of Buildings in time. After the expiration of the temporary licence, the Telecommunications Administration did not issue another, so Telemach lost its licence for the operation of the network.

2. Operator watch

Telemach plans to expand and upgrade its network. At the general meeting of Telemach on 20 April, the owners decided to increase the capital of the company by a total amount of 1 milliard Slovene tolars (approx. € 4,9 million). The owners – BTC, Slovene Railways, Municipality of Ljubljana, Materline, Gorenje, Eon, Prviinvest, Rebus and Andrej & Matjaž Meglic – will implement the investment in two parts, the first one in May. The partners shall invest with respect to their ownership share. This is their second increase of capital this year. The first one was performed in February, also in the amount of 1 milliard Slovene tolars.

At the general meeting, partners also decided to expand and upgrade the network, which will require further investments.

The partners also agreed on the company’s revised business plan and so agreed on strategic goals and vision in order for Telemach to become a leading Slovene multimedia company.

Slovene Railways intend to enter the telecommunications business. On 20 April, the Government discussed the plan of Slovene Railways d.d. for the commercial provision of telecommunications services. The Government approved the plan and agreed with the commercial provision of free capacity in the optical network in accordance with the Law on Telecommunications. The Government also agreed to a buyout of the share in Telemach in a total amount of 234,7 million Slovene tolars (€ 1,15 million).