LONDON and TBILISI, Georgia, October 2 /PRNewswire/ --

- With Photo



- Court rejects Megafon appeal, upholding fines by Georgian authorities 
for unlicensed operations in South Ossetia

On Thursday, the Administrative Panel of the Tbilisi City Court rejected 
an appeal filed by the Russian telecom company Megafon, upholding fines 
imposed against the company by the Georgian National Communications 
Commission (GNCC) for unlicensed use of the radio frequency spectrum to 
provide cell phone coverage within the country's sovereign territory.

(Photo: http://www.newscom.com/cgi-bin/prnh/20081002/NY36579 )

The hearing was held to rule on a complaint filed by Megafon
on July 10, 2008, disputing a GNCC fine of about US$3,500. The GNCC also
imposed a second fine against Megafon on Sept. 23 of more than US$360,000 for
allegedly expanding their operations before, during, and after the Russian
invasion in August.

"We view this court finding as a very important step in
bringing accountability to a foreign company operating within Georgian
sovereign territory," said Giorgi Arveladze, the Chairman of the GNCC. "The
fact that this Russian company has appealed these administrative sanctions
within Georgia's legal system represents recognition of the court's
jurisdiction over South Ossetia and other areas where we believe the company
is providing unlicensed service."

As a result of today's court decision, Megafon is obliged to immediately
pay the fine and cease all unauthorised activities in Georgia. Officials from
the GNCC, who claim that the company has operated within Georgia since 2004,
had previously accused Megafon of benefiting from and cooperating with
Russia's military operations during the invasion, comparing the use of the
spectrum to "economic annexation."

Before the war, Megafon only covered part of the former Autonomous
Republic of South Ossetia, namely, Tskhinvali and Java regions. In August of
2008, during the Russian intervention on Georgian territory, the company
expanded the coverage area and exceeded the conflict zone to include the
regions of Gori and Kareli. A report issued by the GNCC on August 23 details
this unauthorized use of radiofrequencies, which has also damaged the
technical operations of licensed telecom providers Magticom and Geocell.

"Whenever you turn on a cell phone in Gori you are greeted with the
message 'Welcome to the Russian network Megafon! Enjoy your stay here!',"
continued Arveladze. "We are obligated to act in response to this blatantly
transparent use of our radiofrequency without license or regulatory
oversight. It is, however, a very positive sign that Megafon has chosen to
engage within Georgia's legal system."

Megafon's appeal, rejected by the Tbilisi Civil Court today, denies any
unlawful operations, coverage, or unlicensed use of radio spectrum within
Georgian territory. However, in an interview given to the Moscow Times on
Oct. 2, 2008, separatist leader Eduard Kokoity claims that "Megafon already
covers the entire territory of South Ossetia and has 36,000 users signed on."

Note to Editors:

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