Interior Ministry organized-crime investigators raided the offices of telecommunications provider Golden Telecom on March 1 as part of a probe the Kyiv City Prosecutor's Office launched last September. Prosecutors are investigating whether Golden Telecom violated telecommunications regulations, depriving Ukrtelekom and its subsidiary Utel of revenue.
Interior Ministry organized-crime investigators raided the offices of telecommunications regulations, depriving Ukrtelekom and its subsidiary Utel of revenue.
The current criminal investigation is just the latest episode of a long‑running and bitter conflict between Golden Telecom, regulators and competitors. Golden Telecom’s management raised eyebrows last year by openly opposing what it described as unfair competition from state‑owned telephone monopolist Ukrtelekom and Ukrainian telecommunications regulators. At the time, Golden Telecom officials alleged that Ukrtelekom and its long‑distance subsidiary, Utel, were using the state’s regulators and their own market muscle to squeeze smaller competitors.
Now, prosecutors say they believe Golden Telecom has used a deceptive call‑routing scheme to cheat Ukrtelekom out of millions of hryvna.
“We have evidence that [Golden Telecom was] receiving incoming international calls under the guise of local calls,” said acting Kyiv Prosecutor Ivan Derevyanko on March 4.
Golden Telecom held firm against the allegations.
“Golden Telecom believes that we worked within the laws of Ukraine and did not violate them,” said Golden Telecom spokesperson Vyacheslav Fedchenko.
Golden Telecom does have the lines and license to handle international calls, but it needs to use Ukrtelekom and Utel lines to route the calls to its customers.
However, tariff agreements between Golden Telecom and other companies, including Ukrtelekom and Utel, govern how Golden can use its lines and the fees it pays.
Fedchenko would not reveal details concerning Golden Telecom’s agreements, but he said Golden maintains that it had paid the appropriate fees.
Still, Derevyanko said investigators found that in just two working days, Golden Telecom deprived Ukrtelekom of about Hr 30,000 in revenues. According to Derevyanko, Golden Telecom was paying about 2 kopeks a minute to send domestic calls through Ukrtelekom’s network, as opposed to $0.10 a minute for international calls.
Experts say it would be technically possible for Golden Telecom to mask a foreign caller’s number with a fictitious local number to avoid detection.
Prosecutors say that’s just what Golden Telecom did. Derevyanko said Ukrtelekom’s losses could be in the “hundreds of millions of hryvna,” given that Golden Telecom has used Ukrtelekom’s international lines for six years.
During a news conference held hours after the March 1 raids, Golden Telecom Director Yury Bezborodov said he saw the investigation as a response to complaints he made to President Leonid Kuchma, the government and parliament days earlier. He said his complaints alleged that Ukrtelekom, Utel and government officials close to the two companies were using their power to harass Golden Telecom.
“Golden Telecom has experienced nothing but problems ever since July 2000, when Stanyslav Dovhy was named director of Ukrtelekom,” one of the complaint letters read. “Ukr‑telekom, using its position as a monopoly on the market, declined to lease lines to Golden Telecom, did not give our company access to general‑use telephone networks, and has not supplied us all of the numbers we have paid for and are entitled to.”
At the news conference, an emotional Bezborodov said things got even worse for Golden Telecom last spring, when Dovhy was moved to head the State Telecommunications Committee, the market regulator.
He said his company has fallen victim to more than 50 raids and investigations by government agencies.
“This appeal was a desperate attempt to save the company and its employees’ jobs,” said an exasperated Bez‑borodov. “It’s up to the president now.”
The State Telecommunications Committee declined to comment on the investigation or on Bezborodov’s allegations concerning Dovhy.
As Bezborodov was ending the news conference, Jeff Howley, a representative of Golden Telecom’s parent company, entered the room and told journalists that the news conference had not been sanctioned by Golden Telecom’s shareholders and that Bezborodov was expressing his personal views, not those of the company. Howley represents Golden Telecom Inc., the majority shareholder in Ukraine‑registered Golden Telecom Ltd.
“This is true,” Bezborodov said in response to Howley’s statement. “The shareholders opposed my holding this news conference. But as general director, I felt that I couldn’t stand by and watch the company disintegrate.”
Golden Telecom Ltd. claims to have invested more than $40 million into its small but fast‑growing telecommunications company since it first entered Ukraine in 1996. Much of the investment cash came from Golden Telecom Inc., a Russian‑American joint venture publicly traded on the NASDAQ stock exchange.
On March 5 Ukrainian News reported that 150 deputies led by Rada Deputy Hryhory Omelchenko had asked that the general prosecutor investigate Ukrtelekom’s actions in the dispute.
