Lattelekom under pressure

  • 1999-01-21
  • Sandra L. Medearis
RIGA - The dust had not settled on protests after a Jan. 6 announcement of telephone rate increases when Latvia's transport minister sent a letter leaning on the agency responsible for approving the increase sought by Lattelekom. The new prices raise costs of local calls and monthly subscription fees as of April 1 but keep them under the rate of inflation, the phone company says.

Transport Minister Anatolijs Gorbunovs told Latvia's Telecommunications Tariff Council in his Jan. 18 note to get more information and reconsider Lattelekom's request for rate increases.

Pressure made him do it, Gorbunovs said.

Political pressure did not generate the letter, but flack on radio, newspapers and a demonstration against the new prices in Daugavpils caused him to analyze the decision and draw conclusions, Gorbunovs told reporters Jan. 18.

The tariff council did not consider how firmly the facts and figures shore up a rate increase, he said. It should consider the economic situation of the country and work toward a rate structure that reflects the actual cost of services.

Gorbunovs acknowledged that the tariff council is independent of the Transport Ministry. When the laws have been observed, the ministry can then make suggestions, he said.

"I'm not saying what and how much to change the tariff. I'm asking them to get more information and to reconsider," said Gorbunovs.

The minister could have the wrong number, John Steel, Lattelekom CEO, told reporters at Lattelekom's press conference an hour later.

Gorbunovs is putting illegal pressure on an independent panel and Lattelekom will get legal advice, international legal advice, Steel said.

"There is no reason to think that an independent council that has been asked to make a decision should be asked to reconsider that decision."

Tariff balancing has been put on the front burner to allow Latvia to shed the Lattelekom monopoly by 2003 to meet requirements of Latvia's membership in World Trade Organization, Steel said.

"I have to ask this afternoon if the government has changed its mind in regard to telephone sector policy," he said. "[The letter] would indicate this is the case. Tariff balancing has to be complete by 2003 if the company is to remain viable."

Gorbunovs suggested also that there should be different rates for customers with digital phone line service and those who have the old analog lines.

"Now there seems to be a change in policy that we should change tariffs in keeping with different technologies," Steel said.

The council's tariff decision did not follow the law on telecommunications, Gorbunovs said. The council did not have information that the law requires it to have before considering Lattelekom's bid for a rate increase.

The regulatory agency needs to have a revenue and expenditure analysis for 1998 and another analysis on how Lattelekom spent its 1998 profit on network development and updates. The tariff group should have also Lattelekom's 1999 business plan on the table, Gorbunovs said.

Nope - Lattelekom will not release its business plan or its costs, Steel said.

"If we were working in a monopoly situation under the umbrella agreement, we would be glad to provide it, but I could be in competition with other operators in months. Why should I provide valuable information to the competition?" he asked.

The rate increases fall short of actual costs, Steel said, and tariffs do by themselves increase revenue.

"If we looked at the cost of service to residential customers, we would not be asking an increase of 50 santims ($0.88) [on the monthly subscription charge] but an increase of 100 percent," Steel said. "We are not manipulating figures. We do not invent figures." The facts substantiate an increase and have been provided by two independent consultants retained not by Lattelekom, but by the Latvian government, he said.

Lowering of costs on international calls and calls to mobile phones along with special programs for certain customer groups will increase phone use and, with rate increase, raise revenues, Steel hopes.

"If we do not achieve this increase in revenue, we can't make the investments we plan." Lattelekom intends to invest 60 million lats into the network in 1999, Steel said.

Costs and specific rates are just elements of a tariff basket containing many factors, Steel said. Items in the package cannot be compared country by country to get a picture of the overall situation. Countries cannot be compared in terms of networks and costs because countries are not equally advanced in development progress and may not have started major investment in modernization.

"I don't think the tariffs are out of line with any other country put in the same situation as Latvia," Steel said.