CyTA has strongly defended its decision to slash international call rates but says it is abiding with a decision of the Competition Commission to revoke the price cuts.
CyTA Chairman Stavros Kremmos told a news conference Friday that CyTA will abide by the decision, but will give a strong fight when it will be allowed to explain its case on Monday, April 11, 2005.
CyTA General Manager Nicos Timotheou added that the whole process and the insistence of the Competition Commission to revoke the international price cuts has caused a huge administrative problem for the Authority, which still has outside billboards promoting its price reductions.
“We would have preferred a longer period to adjust to the decision,” said Kremmos, adding that he is puzzled at the constant about-turns made by the Competition Commission.
“Two years ago they (Competition Commission) slapped a CYP 20 mln fine on CyTA for super profits, something which was over-turned, and now they are telling us to revoke price reductions and go back to making super profits. I want to know what do they really want us to do,” said Kremmos.
He added that the price reductions were made after a thorough report showed that CyTA’s costs justified a price reduction. “We have a gross profit margin of about 12.5% on average on international call rates, but now we shall have to go back to our old rates, at the expense of the public,” said Kremmos.
COSTS EXPLANATION
Timotheou meanwhile explained that the cost of a call termination in Greece is 0.92c, plus the 0.849c international carrier charge, which together with the 1.025 charge at the Cyprus leg of the call, gives a 2.8c cost for fixed to fixed calls, including accounting for cost of capital.
CyTA says it reduced its call rates from 3.96c to 3.36 peak and 3.12c off-peak time calls from fixed to fixed to Greece, implying a 20% profit margin based on its 2.8c costs.
For fixed calls from Cyprus to mobiles in Greece, the cost surges to 13c, most of which is applied by the carriers abroad. CyTA says it reduced its fixed to mobile charge from 19.96c to 15.6c peak and 15.0c off-peak to Greece, implying a 20% profit margin.
Similar explanations were given for calls ending in the UK, which by and large gives the same margins.
Asked by the Financial Mirror to respond to complaints by independent carriers that the 12.5% profit margin is not adequate to cover their other costs, Kremmos said the independent carriers are supposed to be working on very low cost base (non-unionised and adopting the latest high-tech ware), which meant that the public should not be burdened by their excessive costs.
Pressed by the Financial Mirror to give a detailed cost breakdown of how much CyTA charges the independents for the Cyprus leg of an international cost, Timotheou said the fee scale is regulated by the Telecom Regulator, but would not confirm the exact rate. The independents complain that CyTA is charging them about 2.4c for each call on the Cyprus leg, which when combined with the international termination call rates, makes them loss-making on every call made, hence the reason why they filed the complaint with the Competition Commission.
Another argument was that CyTA was abusing its dominant position in the market to its advantage in an effort to force its competitors to close. The charge was however denied by Kremmos, who insists that CyTA welcomes competition since it gives it the incentive to perform better.
