US embassy cable - 04LJUBLJANA532

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. 
YOUNG 
 
 
NNNN