This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS LJUBLJANA 000532
DEPT FOR EUR/NCE, EB USDOC FOR 4232/MAC/EUR/EERIS/CEEBIC/BURGESS/ROGERS USDOC FOR MAC/ADVOCACY/NUGENT
E.O. 12958: N/A TAGS: BEXP ELAB ETRD PHUM SENV AMGT SI SUBJECT: SLOVENIA: EB/CBA MERMOUD RAISES THE STAKES ON WESTERN WIRELESS INTERNATIONAL CASE
Sensitive but Unclassified. Please protect accordingly.
1. (SBU) SUMMARY: During his 28 May visit to Slovenia, Department of State Special Representative for Commercial and Business Affairs Frank Mermoud encouraged senior GoS officials, including the Minister of Information Society Pavel Gantar and State Secretary Matjaz Logar of the Ministry of the Economy, to continue market reforms; expressed the USG's desire to work closely with the GoS in light of Slovenia's membership in the European and Transatlantic organizations; and urged them to address U.S. Western Wireless International's claims pending before the Telecommunications Agency and the Competition Protection Office (CPO) expeditiously. Minister Gantar promised to direct the regulator (the Telecommunications Agency) to respond to WWI's claims promptly and to make its analysis and findings public. State Secretary Logar indicated that the CPO is diligently assessing WWI's arguments with the support of DG-Competition, and hoped for a prompt resolution. Mermoud also hosted a business breakfast with representatives of U.S. firms operating in Slovenia, visited the International Center for Promotion of Enterprises, and concluded his visit with an exclusive press interview with the leading business newspaper, Finance, which attracted significant attention. END SUMMARY.
2. (U) Mermoud, accompanied by Chief of Mission, hosted a business breakfast with representatives from Goodyear, Merck, Microsoft, Pfizer and Oracle. The business people described the challenges they face in Slovenia, highlighting the intricate business relationships that exist in a country of less than 2 million people, and their direct and indirect impact on business deals. Richard Johnson, Goodyear's General Manager and AmCham President, criticized overly bureaucratic, cumbersome, and time consuming regulatory procedures, while Oracle's Vasja Herbst voiced concerns over the non-transparent government decision-making process in public procurement. Merck's Helmut Deffner and Pfizer's Barbara Kosler expressed their displeasure over non- competitive market conditions, citing the current national drug reimbursement plan as an example. Microsoft's Jaka Stele noted Slovenia's inadequate support of research and development opportunities and the lack of an integrated IT policy to stimulate the economy. In general, however, the representatives find Slovenia a democratic, open economy with a talented labor force with tremendous potential.
MINISTRY OF INFORMATION SOCIETY
3. (SBU) Mermoud, accompanied by COM, Econoff, and Commercial Specialist called on Minister of Information Society Pavel Gantar. Mirijam Sencar, Head of the International Affairs Department, Mojca Jarc, State Undersecretary from the Ministry, and Mira Zupancic, Chief Advisor to the Director of the Telecommunications Agency, participated in the meeting. Mermoud provided Gantar with a succinct explanation of his position in EB/CBA, underscoring the office's responsibility to support U.S. businesses interested in foreign ventures, and to advocate on their behalf should they encounter obstacles in their markets of operation. He proceeded to tell Gantar that his primary reason for visiting Slovenia was to follow-up on the current status of Western Wireless International's USD 200 million investment in Slovenia. Mermoud thanked Gantar for his willingness thus far to work with the Ambassador and Embassy staff on this matter, reiterating the importance that this case has on future foreign investments in Slovenia. Mermoud summarized WWI's claims arguing that Mobitel's monopolistic behavior has prevented fair and open industry competition, costing the company customers and contributing to significant financial losses. He pointed out that WWI filed separate complaints before the Telecommunications Agency and with the Competition Protection Office last year, but that the company has yet to receive an official response to their claims. Mermoud recognized the vital and cordial bilateral relationship, and explained that it would neither be desirable nor in Slovenia's interest to have a black mark as a result of this case.
4. (SBU) Gantar responded as he has in the past that there is "room for three mobile telephony providers" in Slovenia, reiterating his desire to keep WWI in the market. He noted that WWI's complaint before the Agency did not fulfill the
legal requirements, but it was because of his personal intervention that it was not dismissed on procedural grounds. He explained that WWI entered a highly competitive cellular market. Addressing WWI's arguments on the industry's retail price structure, Gantar acknowledged that low retail prices hamper Western Wireless' ability to build its market share. Nevertheless, low prices were the result of fierce competition between Mobitel and SiMobil - the second mobile telephony provider. He continued to state that Mobitel's on-net/off-net tariff structure was not unusual when compared to those found in other EU member states. Mira Zupancic presented an Agency-prepared market analysis showing that the EU's on-net off-net ratio is 0.05 higher than in Slovenia (1.75 vice 1.7). According to Zupancic, the analysis also showed that termination rates in the EU are 0.09 Euro, whereas Mobitel's rate is 0.15 Euro. Mermoud, however, remarked that the study also showed that Mobitel's market domination surpassed all EU countries. At Mermoud's request, the Minister promised to make the analysis public, posting it on the Internet soon.
5. (SBU) Gantar continued on to say that the GoS had offered asymmetrical tariffs as a solution to WWI's predicament. As a case in point, he indicated that SiMobil has taken advantage of the asymmetrical price termination model (whereby the Significant Market Player pays higher termination fees), increasing its number of pre-paid customers. Instead of taking advantage of this opportunity, WWI continues to push for retail pricing control, which Gantar stressed the GoS will not support. Although appreciative of the Minister's and staff's remarks and explanations, Mermoud asked that WWI's core question be addressed. At the end of the meeting Mermoud asked the Minister to provide WWI a written response on their decision in a timely fashion. Minister Gantar pledged to continue working to find a solution that will allow WWI to remain in the market.
MINISTRY OF THE ECONOMY
6. (SBU) Mermoud then proceeded to meet with State Secretary Matjaz Logar at the Ministry of the Economy.
SIPDIS Logar, who is in charge of Domestic Access issues, welcomed Mermoud, highlighting that FDI promotion is a top priority of the new Minister and is included in the country's development blueprint entitled "Benchmarks Slovenia." Addressing the WWI case in particular, he was quick to point out the independent Competition Protection Office (CPO) is the entity charged with investigating the validity of the claims. Logar was aware that the CPO is coordinating its efforts with the staff of DG-Competition, focusing on developingQsessment tools. Citing the independent nature of the investigation, Logar could not provide Mermoud with a precise date when the report would be produced, but he promised to underscore the case's importance and the need to expedite the process with CPO staff.
INTERNATIONAL CENTER FOR PROMOTION OF ENTERPRISES
7. (U) Mermoud paid a visit to the International Center for Promotion of Enterprises (ICPE). Established in 1974, ICPE is an intergovernmental organization made up of 19 member countries whose goal is to promote and support public and private sector enterprise development in developing countries and countries in transition. As part of Slovenia's humanitarian assistance to Iraq, the GoS decided to use ICPE to train five Iraqi executives in management (executive MBA). Mermoud expressed an interest in ICPE activities and complimented the director for the center's role in fostering business education in countries in transition.
WESTERN WIRELESS REGIONAL REPRESENTATIVE
8. (SBU) Mermoud told WWI's Regional Manager Roger Blott that GoS officials consider WWI an important investment, but that work remains to be done in order for the respective government officials to take action. "The case has been now elevated to a political level," indicated Mermoud. Blott thanked him for his efforts and promised that WWI will keep the Embassy in Ljubljana and Mermoud's office in Washington abreast of any changes or decisions made by the company.
9. (U) Mermoud concluded his visit to Slovenia with an interview with the leading financial daily, Finance. In it, he stressed the need to establish transparent enforcement mechanisms to substantiate the legal framework. Commenting on whether or not there is a lack of political will on the part of Slovenian authorities, Mermoud indicated that "I do not want things dragging on even more and that Vega -- its existence is important to quite a large number of people in Slovenia -- does not become a black mark in our relations as there are many business and investment opportunities." The interview made the front-page news, and TV morning news.
10. (U) Post appreciates Mr. Mermoud's productive visit and well crafted message that conveyed the importance of fair, transparent, and open systems to our Slovene interlocutors. As a rising EU member state, enjoying a strategic location, Slovenia offers ample opportunities to U.S. investors. The Mission stands ready to support U.S. firms in pursuing local opportunities. We would like to reiterate the importance of the Commercial Specialist position we are losing at the end of the current fiscal year. That specialist organized this visit and used his business contacts to create this successful program. This work is vital to our MPP goals.