Croatian Telecom is one of the most profitable Croatian companies in general, their annual net profit is more than half a billion kunas (about seventy million euros – or to simplify it – every day their profit amounts to two hundred thousand euros). A giant in terms of our market.
Such a profit was achieved even during the Corona-19 pandemic years, so Croatian Telecom has never been affected by the crisis, they are really an exception in that. It is interesting to try to understand the roots of such a success and huge profit, which absolutely nothing can undermine. It is certain that their leading position is unassailable, however some incentives were also unassailable which, at the very least, helped them establish that position. Let’s just remember the already forgotten affair with unjustified subscription charges or extracting profits through payments to various off-shore companies, in order to reduce the dividend for their small shareholders…
However that’s not the topic, at least not this time…
The topic is prices, more precisely, the announced silent price changes, or to use the terminology; changes to the General Terms and Conditions. Everything about Croatian Telecom is about timing… The mentioned change should take place in March, without threats from the Government and ministers, who were much less favourable towards the mere rounding of prices in cents by small entrepreneurs and craftsmen, who often rounded the prices only and exclusively to avoid complications in handling the smallest coins of the new currency… They were harshly condemned, and frequently punished, unlike the often praised company Croatian Telecom. HT’s “alignment” hasn’t produced any outrage, on the contrary!?
There is a general crisis, the purchasing power of the population has been badly hit, uncertainty has become a constant after a long time, therefore this move of the company that has an impact on the unavoidable cost of being able to function normally for around 3 million inhabitants is a more than a sensitive issue. An issue that can be boiled down to morality, but also to some other aspects that prompted us to think along these lines. Whether this price change is moral, we have our own opinion about it, but we leave it to everyone’s personal judgment, but what is important for us is to single out a few things that leave the very sphere of morality and enter a much darker area that may be called illegal business activity. We are going to list several facts, and let you figure out what this is all about!?
Namely, after HT was fined 28 million HRK (3,7 million euros) under a final judgment in 2019 because it had not submitted the retail prices from the price list to the Croatian Regulatory Authority for Network Industries, recently an even more drastic measure was imposed on Croatian Telecom – under a final judgment passed by the High Misdemeanour Court in Zagreb, this time HT was fined 36 million HRK (4,8 million euros) because of the illegal way of selling one tariff, meaning that HT had done it without first providing the regulator with a proof of the so-called “margin squeeze test for retail prices”.
HT is quick on the trigger, in rare occasions that lead to a fine, as far as we hear, HT always uses the option, known to the ordinary public when it comes to traffic and parking fines, according to which if the fine is paid immediately, it is reduce by some 30% – and that is exactly what HT did – saving money by using the power of their wealth and liquidity even when the fines are in question…
These fines that we have mentioned are described using a very administrative language and to a common man they do not seem so harsh in relation to the size of HT, its total revenues, and earnings, as well as its importance in the overall economic life of the state – they may not seem to be, but they are, they are very high. The reasons for the fines are gross non-compliance with the market and the market rules resulting in the creation of conditions in which everyone else is prevented from fair market competition, and based on the conditions thus created, in the realization of large excess profits.
A company with such a reputation, significance and profits should be appalled by such behaviour, or!?
Market Competition or Precluding Competition
Some other proceedings are currently being conducted, which, following everything mentioned above, give our story additional gravity. We have seen a document from the Croatian Competition Agency, which states strong indications that HT violated the market competition rules by setting prices that resulted in “squeezing out competition”, this time on the bulk SMS market, in the period from 2013 until 2019.
At the moment, those proceedings are still ongoing, without signs of being completed, so we still do not know if that is a misdemeanour case or something much more serious. When it comes to HT, we have already seen that anything can be expected. They were already fined for the same thing in the Slovakian branch of DT, Slovak Telekom, when the fine was also in the tens of millions of euros (57 million euros to be exact), but it did not prevent them from behaving in the same way again, and to put it in legal terms – again the amount of the fine obviously failed to achieve its preventive effect.
We tried to find out some information about this from HT, but we have not yet received any response, although we were told that we will be called to come to a meeting. However, what have we found out, which horrified us, is that in this proceeding HT, during the duration of the proceedings, bought, hired, or rather acquired the Head of the Office for Market Abuse at CCA, who was the head of those particular proceedings against HT.
The proceedings are ongoing, and the head of the proceedings against HT, through the Croatian Competition Agency, is now working for HT, which is the accused party in the proceedings, in the Department for Regulatory Affairs. His name is Marko Brgić, and whether his actions represent a criminal offense or just a conflict of interest has yet to be determined.
A company that prides itself on strict adherence to rules and regulatory compliance should not expose itself to such risks, but we see that this is not the case – thereby risking potential criminal liability, both for the company and for the persons responsible, which brings our legal system before a new challenge. At the moment when we look down on the legal systems of, say, Congo and Zambia, these kinds of challenges give an answer to the question, is that justified!?
The European Commission was clear regarding its zero tolerance for conflicts of interest and corruption – all persons who are in any way involved in the investigation of abuses must avoid participating in activities that may cause suspicion of a conflict of interest for a reasonable time, even after leaving office. And that is almost certainly the case here.
After this information, it may be easier for you to understand the change in the General Terms and Conditions and the possibility of price increases. It is never enough money, the profit must be protected in any way, but also, we do everything to protect ourselves from that premise!
That’s why we will continue to write and investigate further, we have other information about some new related cases, but also about the big topic of distribution-telecommunication canalization and the HT – Zagrebački Holding (City of Zagreb) dispute over DTC, which we will be writing about soon…