Maltacom shares in Vodafone may be placed in a trust

Telecoms regulator Joseph Tabone is "very concerned" that the issue surrounding the divestment of Maltacom shares in Vodafone has still not been resolved.

In an interview, Mr Tabone said the Malta Communications Authority was now contemplating placing Maltacom's shareholding in a trust. "We have to find a solution to this issue very soon. It cannot be postponed further. There could be developments over the coming days which might lead to a solution."

He said Maltacom's efforts to dispose of its shares over the past year had been to no avail.

"There was a lot of interest from investors to acquire the 20 per cent shareholding but the transaction never materialised."

Mr Tabone said investors were afraid for two reasons: there was no exit option for the investment and, because of the limited shareholding, investors would not have much of a say on how the company was run.

"I have been constantly encouraging both Vodafone and Maltacom to conclude this matter."

He said a deadline had been set for the end of last year but the matter had still not been concluded.

Mr Tabone said Vodafone had so far not accepted any of Maltacom's offers to buy the shares itself.

"I am very concerned with the situation. My view is quite different to what it was a year ago when I genuinely thought Maltacom was being very difficult about this. Now I have come to realise that both are being terribly difficult.

"Vodafone argues that Maltacom did not pay for the shareholding. I don't buy that argument. What we are contemplating doing is placing the shareholding in a trust. At the moment we are working on a mechanism to see how we can achieve this.

"There is no doubt that Maltacom is in breach of its licence yet I have to acknowledge that over the past year it has invested a great deal of money to dispose of its assets but it has not been able to. It also has a responsibility to its shareholders not to give this away."

As part of the process of transition from a monopolised to a competitive market, Maltacom was granted a mobile operator licence but was asked to shed the shareholding it held in what has now become its direct competitor, Vodafone.

"We are still playing an active mediatory role in this process that will hopefully lead to an equitable and effective disposal of Maltacom's shares in Vodafone."

Asked about statements made by leading exponents of the Labour Party that a new MLP government would remove recently set up authorities, hinting that MCA could be one of them, Mr Tabone said: "If MCA were to be dismantled there would be utter chaos. There are now 120 countries that have a regulatory body. Can you imagine what will happen to the huge amount of work that has already been done?

"It will also harm potential investment because businessmen will only invest if there is an adequate regulatory framework."

Mr Tabone said the telecommunications sector had grown significantly.

"Although I still see a lot of potential for further growth it is remarkable that this sector was generating Lm120 million yearly. As cost comes down further I envisage further growth. This is also a result of the liberalisation process. Some of the impetus for this has come out of the country's drive to join the EU."

He said that now that the telecommunications sector had been completely liberalised "there are indications that a number of organisations are interested in providing a broad range of electronic communications services".

Mr Tabone said the positive effect of liberalisation could be seen through competition in the mobile telephony sector which had, in turn, seen a drop of 60 per cent in the mobile phone tariffs and the number of mobile phone users had increased sixfold.

Mr Tabone expressed optimism about seeing further competition.

"We know that Vodafone is going into international telephony and it is doing that because it sees a good business opportunity. We know that Maltacom is diversifying and is going into the multimedia business. Melita Cable is at the moment trying to strengthen its position. These are all important developments."

Mr Tabone said international telephony was one area where there would be great competition especially as internet service providers were entering the VOI - voice over the internet - and operators such as Vodafone were installing their own gateways to compete in this sector.

"This is an important development as having access to the outside world for a reasonable amount of money is vital for an island like Malta, both from a social and economic point of view."

He said the only uncertainty that remained was about the competition in the fixed telephony sector.

"However, even in this sector there could be developments. Although you may not have a prospective competitor for Maltacom, we are doing things to make it possible for prospective operators to service an area like Sliema or Valletta."

Asked whether there was resistance to this, Mr Tabone said: "There has been resistance to this wherever it has been done. I see it as a very challenging process but it is something which has to happen. We will soon have the mechanics in place to enable this development to take place as from this year.

"Maltacom will have to provide access to its infrastructure, obviously against a fee, for someone who wants to provide fixed telephony service. This is one of the few ways how we can see competition in fixed line telephony."

On Maltacom's request for tariff rebalancing - which would entail doubling the monthly connection rate for fixed line telephony to compensate for an average 50 per cent reduction in international tariffs - Mr Tabone said: "This is a very legitimate application which is being analysed but one argument that I simply cannot buy is that Maltacom or anybody has a God-given right to income deriving from one particular source.

"So I do not buy the justification that Maltacom has to increase local tariffs because it has to reduce the external. We have engaged the services of Ernst and Young so that we can conduct a very extensive investigation of the demand, including a detailed analysis of the cost models provided by Maltacom."

Mr Tabone also said he was puzzled that Maltacom was still refusing to supply its customers with free itemised billing even though the MCA had issued a directive in this sense.

He said that itemised billing was something logical and legitimate.

"If you are in that type of business you have to provide customers with an itemised bill. I am aware they are challenging our directive in court but in the meantime they are legally required to abide by the directive. So at present Maltacom customers are entitled for itemised billing free of charge and people who ask for an itemised bill should refuse to pay any money for it."

Asked whether he was concerned that relations between MCA and Maltacom had deteriorated, Mr Tabone said: "I would rather have that than be accused of being in bed with them. Having said that I am not happy with the situation."