Telecom fails to get away with increased tariffs

  • 2001-08-16
  • Virgilijus Savickas
VILNIUS - Lietuvos Telekomas, Lithuania's fixed-line telecommunications monopoly, is currently considering lowering service rates for pensioners, Tapio Parma, the company's managing director, told journalists in Klaipeda on Aug. 13. After Lietuvos Telekomas introduced a call-set-up charge of 0.12 litas ($0.03) and increased service rates as of Aug. 1, a growing number of Lithuania's residents, mainly pensioners, started to decline its services.

In July and early August, Lietuvos Telekomas lost about 2,000 subscribers in the Vilnius region alone. In the second largest Lithuanian city of Kaunas, some 500 customers refused fixed-line telephone service and 600 customers used the possibility of disconnecting fixed-line telephones temporarily, the Lithuanian daily Lietuvos Rytas reported on Aug. 10.

The total number of company's subscribers is 1.18 million.

Parma said that Lietuvos Telekomas has already started calculations to lower its tariffs and that slight changes to its earlier decisions are possible. He said this might take two to three weeks. Parma said the company will be looking for ways "to make life easier"for pensioners before the end of 2001, when Lietuvos Telekomas' fixed-line monopoly ends.

Apparently, the customers' walk-out was a strong enough reason for Telekomas to change its position as public discussions over increased tariffs slowed down despite critical attacks by some politicians and members of Parliament.

Apart from introducing a call-set-up charge, Lietuvos Telekomas cut the price for local calls from 0.12 to 0.11 litas per minute and started to charge for calls on a per-second basis.

The call-set-up charge and subsequent tariff increase, which was announced in January, provoked much political involvement in Telekomas' privatization.

In an open letter, former Prime Minister Gediminas Vagnorius argued that responsibility for the tariff increase lay with the Lithuanian government. The initial privatization agreement for Lietuvos Telekomas provided a clause on tariff limits. According to the telecommunications act, it was the government's obligation to set an upper price limit for communication services, but it had been abolished by the conservative government of Andrius Kubilius.

On November 11, 2000, a government decree granted permission to increase local communication prices by 28.6 percent, and starting with 2001 the price limit was entirely abolished. The law on price limits is still in effect.

As a result of the government's position, Lietuvos Telekomas increased its tariff rates twice over two years. According to estimates from Gediminas Vagnorius, the additional costs to customers may total 50 million litas ($12.5 million).

Lietuvos Telekomas on Aug. 6 was the recipient of a sharp barb by one of the leaders of Lithuania's ruling majority, Gediminas Jakavonis. He claimed that it should be everyone's right to have free access to the Internet, this should be declared in the country's constitution, and he then urged Lietuvos Telekomas to annul the fixed-line set-up charge, which also applies to Internet connections. "The set-up fee is totally unacceptable for the Internet,"Jakavonis, the New Union's vice chairman, said in a press release issued by the party.

The parliamentarian, who has on several occasions publicly criticized Lietuvos Telekomas, also called upon the communications regulatory service to take measures against the monopoly fixed-line telephone operator and force it to cancel the charge. "These days, when the Internet is more and more often referred to as an inseparable part of human life, and when the right to Internet use should be stated in the constitution, Lietuvos Telekomas introduces measures that cannot be supported by any person of progressive thought in any part of the world,"said Jakavonis.

In contrast to previous tariff increases, no protest gatherings were held at Telekomas' headquarters in Vilnius.

Prime Minister Algirdas Brazauskas invited Parma for a meeting only on Aug. 10. Brazauskas assured Parma that the government would stick to all effective previous agreements with Lietuvos Telekomas but expected a more flexible and more socially oriented price policy from the company in the future. It has been agreed to form a joint working group to discuss tariffs.

According to Violeta Uleviciene, a spokeswoman for Lietuvos Telekomas, all the tariffs are in balance with each other. Only the pricing for the first minute has been increased, from 0.12 litas to 0.15 litas, while rates for subsequent minutes for local calls have been reduced. A local call lasting three minutes and 10 seconds, for example, is now cheaper by 0.01 litas. Previously, it was 0.48 litas. As call charges are now calculated on a per-second basis, calls to mobile phone operators' networks have become substantially cheaper.

According to a company press release, subscribers in parts of the Vilnius and Klaipeda regions will get bills for telecommunications services by post for the first time in September. Free bills for telecommunication services will be sent by post to residential customers every second month. The new bill delivery procedure will be implemented across the country in stages. After presenting the counterfoil of the received bill, residential customers will have the flexibility to pay bills at any post or banking office, irrespective of where the telephone line is installed. Information about payment locations will be given in the bills.

Lietuvos Telekomas announced its unaudited results for the first half of 2001. The consolidated net profit for the first half of 2001 was 66 million litas, up by 24 percent from last year's first half, excluding the one-time gain on sales of shares in Bite GSM. Revenues increased by 3 percent to 535.6 million litas during the first six months compared with 519.8 million litas during the same period in 2000. Operating expenses decreased by 8 percent, year-on-year, amounting to 236.7 million litas. Earnings per share were 0.81 litas, an increase by 23 percent compared with the same period in 2000, again excluding the one-time gain on sales of shares.