Go Mobile, Melita in telephony deal

Go Mobile yesterday signed an interconnection agreement with Melita, meaning that the cable company's telephony subscribers can now call Go Mobile subscribers and vice versa. Vodafone's interconnectivity agreement with Melita took effect last weekend.

However, Maltacom is still fighting its corner against interconnectivity for its fixed line subscribers, claiming the absence of a level playing field.

The announcement about the Go Mobile agreement was made yesterday by Maltacom chairman Sonny Portelli when briefing journalists on the group's half-yearly results.

He said that the agreement was made as soon as Go Mobile had received all the information it required but that the situation was different for Maltacom.

"We were a monopoly but we no longer are. But we are now being challenged by a monopoly that wants to become stronger. This is why we want a level playing field. If our tariffs are regulated, then theirs should be too. We do not agree that there should be cross-subsidisation between the different Melita companies," he said.

Chief operating officer Joe Azzopardi explained that the regulator, the Malta Communications Authority (MCA), had declared last year that Melita and its internet service provider Onvol were in breach of the cross-subsidisation rules but that nothing happened for nine months, until the MCA recently announced that the retail rates being applied by Hello were not subject to regulation.

In the meantime, Maltacom is facing fines of Lm10,000 plus Lm200 a day, which Mr Portelli described as substantial. Was this comment justified when one compared the Lm80,000 annual fine to Maltacom's Lm26 million half-year turnover?

"The amount may not seem large compared to our turnover but this is not the way that we look at it. This is very serious and something that we, as a publicly listed company, could have done without. You have to bear in mind that these were the highest fines that the MCA was able to impose.

"We feel that the fines are out of place and this is why we are contesting them. The principle of the fines bears no relation to whether we can afford them or not. Even if the fines were a fraction of the ones actually levied, our reaction would have been the same," he said.

In his speech, Mr Portelli spelled out his view of the MCA's decision.

"The MCA is right to ensure a competitive environment; it is in the best interests of our clients, our country and consequently in the best interests of our shareholders and of our people. However, I must express my concern at some of the regulator's recent decisions. In my opinion they do not take into account the macroeconomic environment of this country. Such disregard for local realities is a serious cause for worry and might prompt reconsideration of investment plans," he said. Asked whether Maltacom's social obligations were also skewing the matter (Maltacom provides Telecare to around 10,000 subscribers and lower tariffs to 5,000 pink card holders), he said that the group would continue to offer these services.

Speaking about the future, Mr Portelli said that Go Mobile would introduce 3G service in the first half of next year, while Datastream will be merged into Maltacom and would aim to broaden its client base by making its services more affordable.

Chief executive officer David Kay later said that Maltacom would be revisiting all its tariffs but in particular those related to the purchase of more than one service (fixed line, mobile, broadband and television), known as bundling.

Maltacom has also launched a voluntary early retirement scheme, open until the end of this month, which Mr Portelli said was being offered as a reaction to several requests from employees.

Mr Portelli also commented on what decisions had been delayed by privatisation. Work on 3G had been 80 per cent completed before privatisation but he admitted that the final decision had been put off.

"This is one of the biggest decisions taken by Go Mobile - and perhaps even by Maltacom - and it would have had a tremendous impact had we taken the wrong decision," he said.

With television, he said the company had dropped its plan for television over internet as being unstable technology, having already expended considerable time and money on the relevant studies.

"We are now looking at the business case for digital but we would once again be competing against the strongest monopoly existing in Malta."

Mr Portelli said he remained reasonably confident of Maltacom's future.

Half yearly financial results - The highlights

Turnover: Lm26.6 million (2005 Lm26.7 million)
Profit before tax: Lm6.3 million (2005: Lm7.7 million)
Earnings per share: 4c1 (2005: 5c)
Interim dividend: 1c5 per share