SLOVENIA: EB/CBA MERMOUD RAISES THE STAKES ON

UNCLAS LJUBLJANA 000532

SIPDIS


DEPT FOR EUR/NCE, EB
USDOC FOR 4232/MAC/EUR/EERIS/CEEBIC/BURGESS/ROGERS
USDOC FOR MAC/ADVOCACY/NUGENT

SENSITIVE

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.

BUSINESS BREAKFAST
--------------


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.


PRESS REPORTS
--------------


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.

COMMENT
--------------


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.


11. (U) Mr. Mermoud cleared this cable.
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