The Telecom Regulator is widely expected Wednesday to announce sweeping price reductions in the Reference Interconnection Offer (RIO) rates that CyTA charges the independent telecom operators, which will hopefully lead to some price reductions for the public and more competition in the telecom sector.
The existing RIO charges for fixed connections are currently 0.48 cent per minute for single and 0.66 cent per minuted for double transit while for mobile networks, the charge is 1.81 cent per minute.
Informed sources told the Financial Mirror that the price reduction on the single transit RIO, widely used by most independent telecoms will drop by 50-65% to 3 to 3.2 cent. Details will be available on the web site of the Telecom Regulator as of Wednesday.
In layman?s terms, if a call originates in Nicosia and the independent telecom has a routing centre in Nicosia, then the cost is charged as single until it reaches CyTA. If it originates in another town and until it reaches the routing centre, it is described as double.
By slashing the RIO charges, the Telecom Regulator wishes to give adequate cushion to the independent telecoms to generate a satisfactory profit margin and introduce new services as part of the deregulation drive.
The ruling affects the level of charges that independent telecoms like Telepassport, areeba, OTEnet, Callsat, Thunderworx and Teledome charge their clients.
The Telecom Regulator is also widely expected to block CyTA’s attempt
to hike the monthly rental on fixed lines from CYP 5 to CYP 8, setting the new price around CYP 7 per month.
Tselepos to rule
The exact level of charges on international calls however will be known only after April 21, 2005, when CyTA will be given the opportunity to defend its price cuts before the Competition Commission.
During the Monday (April 11) hearing, CyTA was officially handed the Competition Commission report, revoking its price cuts effecting from February 1, 2005.
CyTA defends rate cuts
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 fixed to fixed 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, 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.
