National Regulatory Agency for Electronic Communications and Information Technology of the Republic of Moldova

The National Regulatory Agency for Electronic Communications and Information Technology (ANRCETI) identified the market for access of end-users, natural and legal persons, to fixed locations of the public telephone network (market 1) as susceptible to ex-ante regulation and designated JSC Moldtelecom as SMP provider on this market. This Administrative Board Decision (doc. in state language) was approved, in a public session, on October 24^th. It came into effect on the date of approval and will be published in the Official Gazette.

This market is the only retail market of the 9 (8 – are wholesale) defined by ANRCETI in 2009 to be subject to analysis in order to determine whether they are relevant for ex-ante regulation. Two years ago, during the first cycle of relevant market analysis, by Administrative Board Decision no.11 of 26.05.2011 market 1 was identified as susceptible to ex-ante regulation, whereas JSC „Moldtelecom” – was designated as SMP provider on this market. Later, by Decision no.12 of 25.05.2012 (doc. in state language), ANRCETI Administrative Board imposed special ex-ante obligations on this provider.

After two years, pursuant to Art. 53 (1) of the Law on Electronic Communications ANRCETI conducted second cycle of market 1 analysis, in order to find if this market was effectively competitive and review the ex-ante regulatory remedies in terms of maintaining, modifying or withdrawing certain obligations previously imposed on the designated SMP provider. As a result of the repeated analysis of Market 1, ANRCETI experts found that the market still had significant barriers to entry, lacked a visible tendency to competition, while the remedies stipulated by the Competition Law were not sufficient to resolve the market deficiencies.

The analysis of Market 1 show that in 2012, JSC Moldtelecom had 93,15% market share by number of subscribers, the others 22 providers jointly - 6,85%. The fact that in the recent four years the share of JSC Moldtelecom” dropped by 4,35 percentage points speaks in favor of its stability rather than a decrease of share. Based on these and other evidence, the authors of the analysis concluded that this market remained to be susceptible to ex-ante regulation, and JSC Moldtelecom continued to have SMP on this market.

Among the main competition problems on this market identified by the authors of the analysis is the provision by JSC Moldtelecom of local fixed telephone services under cost. According to the reports of JSC, in 2012 this provider had 455 mil. lei revenue deficit from fixed telephone service provision, which means that JSC Moldtelecom recorded on average 33,8 lei monthly loss per subscriber line from the provision of local fixed telephone services. ANRCETI consider that JSC Moldtelecom’s practice of applying tariffs below cost is a destabilizing factor for the market and a significant barrier both for the new entrants and for the competition development on this and adjacent markets. Under such conditions, alternative fixed telephony providers are placed in a non-competitive situation, having to align their tariffs to the ones applied by JSC Moldtelecom. Long-term application of tariffs under cost by JSC Moldtelecom can bring about the elimination of competitors from the market or restrain their development.

To eliminate these risks, the authors of the market analysis consider it necessary to maintain the specific ex-ante obligations imposed to JSC Moldtelecom by Administrative Board Decision No.12 of 25.05.2012. Among these are cost-orientation of tariffs for access to the telephone network at a fixed location and admitting of no predatory tariffs, separate accounts and publication of separate accounting reports and the methodology used. These obligations are intended to help resolve competition problems on this market and reduce the risk of market distortion.

October 26, 2013