MCA approves international phone rates cut, but not local rates rise

The Malta Communications Authority has approved Maltacom's application to drastically reduce its international rates, but has approved only minor changes to the local rates.

Maltacom will be entitled to introduce the approved tariff revisions after giving subscribers a 30-day notice period.

The corporation had wanted to raise its revenue from local calls, mostly by changing the time limit of each pulse, but only that for calls made at night has been approved, from a 5c39 charge for a call of unlimited duration, for the same charge every half hour.

Even the application to raise line rentals has been watered down, with residential rentals going up from Lm25.92 per year to Lm30.78, and business rentals going up from Lm52 per year to Lm68.

However, the MCA, not surprisingly, approved all of Maltacom's applications to lower its international rates, meaning calls at peak time to the UK will go from 30c to just 0.071c.

Maltacom was not commenting about the MCA decision yesterday but may issue a statement today.

"The MCA has carried out a comprehensive analysis of the local call charges proposed, taking into account the revision to the time bands, duration, call charging structure, international benchmarks and the proportion of local calls' cost represented within an overall bill," the authority said in a statement.

"The MCA's assessment to this effect is that Maltacom's proposed tariffs would result in a sharp overall increase in local call charges and consequently to the total average bill (both residential and business) when compared to the current tariffs. A benchmarking exercise carried out by the MCA (as part of this analysis) also indicates that Maltacom's current local three-minute call charges (both peak and off-peak) are at the higher end of the EU benchmark (including EU accession countries).

"Furthermore, the proposed tariffs would result in an increase in all call charges, irrespective of duration, as well as a significant increase in bills for all subscriber categories (both business and residential). Maltacom's own submissions indicate that the increases in local call charges would contribute significant additional revenue over and above the additional revenue generated from the removal of free pulses.

"As a result of this analysis, the MCA sees no cost justification to revise the local call charges as proposed.

"Having said this the MCA would be amenable to consider (as a separate application) a local call charging structure based on a per-second billing system in the future."

Maltacom will have been left in a quandary by the decision, as its plans were to offset the fall in revenue from international calls against increases from domestic revenue.

Maltacom Group recorded a pre-tax profit of Lm20.6 million last year, up from Lm13.5 million in 2002 (+53 per cent except for exceptional items).

The company has seen a 26.6 per cent drop in its international call revenue, as Voice over Internet Protocol became more and more popular. The company lost the exclusive rights to provide fixed line and international voice telephony in 2003.

The company also saw domestic fixed line revenue drop by 16.9 per cent.

It maintained its profitability partly by cutting administrative expenditure by a quarter. This was also reflected by the reduction of 500 staff over the past years through early retirement schemes.

MCA said it had taken into consideration all the cost accounting and operational information provided by Maltacom, as well as the various representations made by a number of interested parties and stakeholders during the broad consultative process undertaken.

MCA chairman Joe Tabone said the authority carried out a detailed analysis of the impact of the proposed tariffs on the various subscriber profiles (both residential and business) in order to measure their potential financial impact.

A review will be undertaken with regard to the future regulatory treatment of VoIP services.

Copies of the decision can be downloaded from the MCA's web site or free of charge from the MCA's offices.

Decision summary

The MCA's Decision with regard to each aspect of Maltacom's proposal can be summarised as follows:

¤ Revised International tariffs - approved,

¤ Adjustments to residential rental to Lm30.78 (inclusive of VAT) per annum and business to Lm68 (excluding VAT) - approved,

¤ Adjustment in Peak and Off-Peak local call charges (business and residential subscribers) - not approved. Instead, night tariffs (i.e. calls that take place between 6 p.m. and 6 a.m.) will be charged at 5.39c for every 30-minute pulse (including VAT) for residential subscribers and 5c for every 30-minute pulse (excluding VAT) for business subscribers,

¤ VoIP per minute call charging and Lm10K rental per annum - not approved,

¤ ISDN tariffs to be considered as a separate tariff application,

¤ Full removal of free pulses not approved. Instead, removal of 60 per cent of free pulses (residential subscribers) has been approved. These free pulses can only be consumed by "Night" local call charges (i.e. calls that take place between 6 p.m. and 6 a.m.) and not through VoIP/Internet access,

¤ Social rebate capped at 5,000 subscribers - approved.