NEQSOL Holding has bought 100% stake in Caucasus Online - Interview with Teymur Taghiev

NEQSOL Holding has bought 100% stake in Caucasus Online - Interview with Teymur Taghiev

The 100% of stake in Georgian telecom company Caucasus Online has been bought by the NEQSOL Holding, a major international group of companies that owns Ukraine’s leading mobile operator Vodafone Ukraine,  Azerbaijan’s largest operator BakCell and UK-based oil & gas exploration company Nobel Upstream and Oil Services.

The NEQSOL Holding became the owner of Caucasus Online with the aim to create a new Digital Silk Way that would connect Central Asia to Europe via the internet cables beneath the Caspian and Black Seas. The Caucasus Online is the owner of undersea fiber optic cable that connects Georgia to Europe making it a part of this international project. The Digital Silk Way was selected among the top Strategic Infrastructure Projects by the Global Strategic Infrastructure Leadership Forum in the US and is selected as a part of the US supported Blue Dot Network initiative.

The $61 million USD transaction for acquiring the Caucasus Online was concluded in 2019 and it included a “call option” to buy both 49% shares in the company and remaining 51% of shares.

The interview with Teymur Taghiev, Head of Strategy at NEQSOL Holding:

– Can you give us an update on the situation on what has been going on in the past several months around Caucasus Online?

– There are several major developments around the process, as you might know last Friday the first hearing of the international arbitration took place in Washington DC. At the same time there are court hearings in Georgia related to the lawsuits initiated by NEQSOL against the GNCC. The issue of the latest hearings in Tbilisi appeals court is about the suspension of the authorities of the appointed external administration at Caucasus Online. Leaving the court cases aside, the NEQSOL Holding is continuing its operations worldwide, and we are moving forward with Digital Silkway project. We have made certain significant progress regarding our Trans-Caspian cable project.

– For the last several days everyone has been talking about the decision from the Venice Commission, and the GNCC responded to this decision. Could you comment on this as well?

– Yes, definitely we have paid attention to the latest statement from the GNCC, honestly it caused some questions, because I understand that it is a response to the opinion published by the Venice Commission,  but the title of the statement published by the GNCC on website is misleading – as it refers to the “illegal acquisition of 100% of shares of Caucasus Online”.  First of all it is a mere statement, because I believe that only respective courts – Georgian Court or International Arbitration Court can decide on the legality or illegality of the transaction. Therefore I believe that the title of this statement is incorrect and misleading. Secondly, if we are talking about the whole statement of the GNCC and the issues raised in, including some MOUs that should be signed or not be signed by the Caucasus Online – I would like to comment on that as well.

– Yes, the acquisition of 51% stake is another point of interest for us, can you update us with information about what has happened with the “call option”, with the MOUs and all the rest.

– Just to recall the whole legal process, it is important to emphasize the fact that we had paid for the whole 100% of the shares in 2019, with immediate transfer of 49% stake in Caucasus Online, and the contract included a call option to acquire the remaining 51% stake in the company. The call option for this 51% was exercised in August 2020, following the unpreceded attack launched by the GNCC on the company and resulting in the heavily criticized amendments to the Communication Law pushed by the GNCC and allowing the regulator to appoint a Special Manager with very unusual and almost unlimited authorities. We had to protect our asset from the immediate danger of expropriation and had no other option.

We all saw heated debates about those amendments, the unusual procedure of adoption of those amendments – it was absolutely clear for everyone in the industry that those amendments specifically target Caucasus Online and its new owners. Regardless those unfriendly actions, and notwithstanding with our position that no formal prior approval from the GNCC is required for the transaction in a foreign jurisdiction, showing our good will and our intent to resolve the situation, we have submitted to the GNCC our request to approve the execution of our call option for the acquisition of the remaining 51% of shares, also indicating our plans to make Caucasus Online a part of Digital Silk Way project.

However, the GNCC dismissed our application with no formal grounds for that.  Furthermore, they continued their efforts to take over our company including the adoption of the amendments to the law, basically allowing them to appoint a special manager and to take illegal control of our asset at any time. So, understanding that our company is under the immediate and realistic threat of losing our asset because it can be expropriated without any court decision at any time, we exercised our call option in August 2020 to protect our lawful interests. But once again, I want to emphasize the fact that we paid for 100% of shares of Caucasus Online in 2019.

– Yes, it definitely should not be news for locals who are following the updates regarding the Caucasus Online. But, it would be worth mentioning some remarks coming from the GNCC regarding the MOUs that were proposed with the regional and international companies. In my understanding these memorandums were about the digital silkway project. Can you tell us additional details about it?

– Yes, the whole issue from the GNCC statement on the MOUs sounds a bit strange for me. We need to understand that MOUs are quite normal for any company; it is a part of day to day operations of any business. For me the unwillingness from the special administrator of the company to sign MOUs is a bit strange. We need to understand that the Caucasus Online has been and will be a part of a bigger digital silkway program. As a part of the program MOUs are signed with potential partners. For example, the TransTelecom mentioned by the GNCC is our partner – with them we are building the trans-Caspian fiber optic internet cable and the MOUs are a way to move forward in the program. Regardless of memorandums, we are moving forward, we have finalized a feasibility study and we are ready to start the construction of trans-Caspian fiber optic cable next year.

– Another concern during these days that I have heard, and I’m surprised that it has become one of the hot issues in the local business community and generally in Georgian society, was a concern that “Georgia not might lose, but due to this acquisition has already lost its positions and advantages within the region on becoming the center and hub in distributing the internet.” I need your comment on this issue as well.

– Great question. First of all, we need to understand that this is not a zero sum game and when we are talking about the digital silkway this is a program that will bring huge benefits for the whole Caucasus region. All countries of Caucasus will benefit from it. It will speed up digitalisation and the availability of technologies in the region. We understand some potential concerns on the placements of data centers and internet exchange points but we need to talk about Geography and Georgia is a closest part to Europe within the digital silkway. Basically Georgia is a part that provides connectivity from Caucasus to Europe. From the Geographical point of view it would be logical to put a modern data center and internet exchange point in Georgia. For that to do we need to understand that we need an economy of scale, therefore the connectivity to Azerbaijan and to the Caspian Sea is vitally important. I believe that digital silkway is a truly regional program and the whole region will benefit out of that.

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