Authority disputes Maltacom reasoning

It was not correct to state that reducing international call tariffs by around 50 per cent would automatically knock off 50 per cent of Maltacom`s revenue from the sector because international traffic would increase in response to cheaper rates, a Malta Communications Authority spokesman said.

Maltacom, the largest telecoms company on the island, and the Malta Communciations Authority, the regulatory body, have been involved in crossfire in recent weeks over a number of issues including the question of international rates.

Last week, MCA chairman Joseph V. Tabone said that Maltacom`s international tariffs were discouraging potential foreign investment from being attracted to Malta and added that the rates had to come down by as much as a third or a half to be realistic.

Maltacom chairman Maurice Zarb Adami retorted that the company was prepared to lower its international tariffs as long as this could be balanced by higher local tariffs and line rental.

Mr Zarb Adami explained that if Maltacom`s income from international tariffs amounted to around Lm18 million, reducing its international tariffs by 50 per cent would mean losing Lm9 million in revenue.

"I am also excluding the competition element in this argument. Don`t forget that as from January 1, the fixed line telephony market will be liberalised."

But an MCA spokesman said: "Although it is true that the re-balancing process should have a neutral effect on the bottom line of Maltacom once completed, it is fundamentally incorrect to state that reducing international call tariffs by, say, 50 per cent would automatically knock off 50 per cent of their revenue streams."

He said that once there was competition in international gateway services, prices for such services would become even more competitive and realistic.

"A recent example is the downward trajectory in mobile telephony tariffs since the launch of a second mobile network."

Prices for telephone connections, monthly line rentals and local calls have traditionally been set below cost in many countries and resulting deficits have been subsidised through international tariffs, he said.