After receiving the government approval, the phone company introduced new rates on Feb. 1 that will increase the cost of local calls and subscriber fees, while decreasing the costs for inter-city, international and mobile phone calls.
Rates for local calls will increase by from 0.08 to 0.09 litas ($0.02 to $0.023) per minute during peak hours. Also, subscriber fees have also gone up from 13 to 17 litas per month.
Inter-city calls (calls between Lithuanian cities), the phone company said, will be lowered by 1 centas (from 0.38 to 0.37 litas) per minute. Rates for international calls are dropping as well an average of 5 percent - from 3.43 litas per minute to 3.26.
Calls to Poland, Germany, Denmark, Finland, Sweden and Norway - which it says are "especially popular," will go down 59 centas (2.95 litas per minute, a 17 percent reduction. The biggest reduction was to calls to the United States or Canada, which will now cost 4.13 litas per minute, a 29 percent reduction.
Calls to mobile phones have gone down by 10 percent during the days and by 16 percent in the evening. (Even with the reduction, however, calls to mobile phone are at least 10 times more expensive than local calls.)
Opposing the price hikes, the Lithuanian Competition Council made a recommendation, rejected by the government, that the government review the new pricing plan. These prices, it said, will add insult to injury for a population riddled by decreasing purchasing power. The new rates, the council argued, will cost Lithuanian consumers 60 million litas ($15 million) more per year.
Lietuvos Telekomas claims that the increases are meant to level out its fees. "Local tariffs were too cheap in Lithuania, and calls to other countries or cities were too expensive," said Diana Rociene, a press officer for Lietuvos Telekomas. "In all countries this process is going on. In some countries this process is finished."
The Lithuanian Competition Council questioned that motive. "It is obvious that there is no desire for Telekomas to balance income for tariffs for services, but its main objective is to increase its income," said Palmira Kvietkauskiene, the council's press attache.
Politicians added their salt, some with great fury.
In a sardonic statement full of anti-European Union sentiment, MP Rimantas Smetona contended that the underlying message from Prime Minister Andrius Kubilius' government was: "Talk less on the phone or keep saying that everything is all right. Maybe then we will get into the European Union sooner."
Using figures released by Telekomas to bolster his argument, Smetona chided the government for selling 60 percent of telecom to foreigners in the first place. "In 1999 the income of this company was about 980 million litas. The profit might be about 140 million litas (in other calculations more than 200 million litas). Maybe the Lithuanian state doesn't need such income. And perhaps there is not enough income for Finnish and Swedish companies.
"Lithuanian authorities sold the largest part of Lithuanian Telecom shares to foreigners for a mere trifle and allowed them to boost prices for services up to 10 percent each year. Perhaps people who, in the name of Lithuania, signed this deal knew what they were doing and why they were doing this."
A possible why was provided by MP Laima Andrikiene, chairman of the new Homeland People's Party. She said the government still owned one-third of the company and would benefit. "As a recipient of dividends on its 35 percent share stake, it has already planned the target use of this money and new tariffs promise even higher dividends," she said.
Andrikiene once headed the now-defunct Ministry of European Affairs and was almost single-handedly responsible for Lithuania's unpopular shift to Central European Time in 1998. Now Andrikiene has turned populist with this and other issues.
"Given the difficult situation of the state budget and the necessity to save money, a government decision on compensation of local conversation hours or their reduction to a minimum could be justified. But we couldn't justify the government's decision to increase Lietuvos Telekomas' service rates for the same reason - a difficult economic situation and a decrease in residents' purchasing power," Andrikiene said.
There has also been criticism that Telekomas' new price structures and service improvements favor big businesses. That is perhaps most evident in the revised costs of new line installations. Digital line installation fees, normally the province of well-endowed companies and government offices, are being lowered from 600 to 500 litas, while analog line installations, usually the choice of less-wealthy customers, have been increased from 250 to 300 litas.
The phone company's Director General Tapio Paarma added that the phone company is not raising rates for local calls as much as it could. The company's agreement with the government would allow it to raise prices by 10 percent plus inflation each year until 2002, when the fixed-line industry will be opened to competition. Paarma said that the phone company was only raising its fees by 6 percent on average.
The Lithuanian Competition Council countered that lower rates for inter-city and international calls would not help consumers as much as increased prices for local calls will hurt them. "Telephone subscribers are making local calls seven times more often than inter-city calls," Kvietkauskiene said.
The council also contends that Telekomas is lowering rates only for services that are already profitable.