Sat, Dec 23, 2006 - Page 12 News List

Chunghwa Telecom to appeal rate cuts

`PROFIT BUSTER' The nation's leading telecom service operator railed against price controls, saying they would compound problems of falling sales and stiff competition

By Lisa Wang  /  STAFF REPORTER

Chunghwa Telecom Co (中華電信), the nation's biggest telecommunications service provider, yesterday said it planned to appeal new regulations requiring telecom operators to reduce tariffs over the next three years, saying the price control measures would erode profits.

Chunghwa Telecom's move came in the wake of the National Communications Commission's (NCC) completion on Thursday of a new pricing formula imposing controls on mobile tariffs.

Under the new rules, local mobile operators have to slash rates for second-generation (2G) services by 4.88 percent per annum to boost market competition and safeguard consumer's interests.

As a whole, tariffs should be cut by 14.64 percent within three years, the NCC ruled.

"The price control measures are unreasonable and against the free competition mechanism. The price adjustment will affect our revenues and profits," Chunghwa Telecom spokesman Hank Wang (王漢朝) said in a telephone interview yesterday.

Wang declined to give details on how the measures would adversely impact on the company's bottom line.

In an attempt to get more leeway before the new rules go into effect in April, Chunghwa Telecom said it would make an appeal within two weeks. The service operator added that the rate cuts are coming amid falling revenues and regular price reduction because of stiff competition.

Chunghwa Telecom chairman Hochen Tan (賀陳旦) said on Thursday that Taiwanese mobile operators would, at best, only see slight revenue growth next year.

The company forecast that its annual earnings would fall 7 percent to NT$44.24 billion (US$1.36 billion) on flat revenues of NT$184.2 billion this year.

Chunghwa Telecom also hoped that the commission would limit the rate cut to a year, instead of three, as an incentive for local telecom companies to speed up investment in next-generation technologies and equipment upgrade, it said in a statement.

Meanwhile, Far EasTone Tel-ecommunications Co (遠傳電信) and Taiwan Mobile Co (台灣大哥大) are seeking help from the Taiwan Telecommunications Industry Development Association (台灣電信產業協會) to persuade the government to adjust the pricing rules.

"We deeply regret the NCC's decision," the association's spokeswoman Rachel Liu (劉莉秋) said. "We will represent local telecom companies in communicating with the government. They did not include some important [capital] spending when they set the pricing rules."

As part of the new price limitation rules, the NCC also requested that local broadband network operators slash leasing rates by 5.35 percent per annum for three years or a total of 16.5 percent.

Chunghwa Telecom, which has over 4 million ADSL subscribers, is the nation's largest broadband service provider.

Shares of Chunghwa Telecom dropped 0.83 percent to NT$59.5 yesterday, while those of Far Eas-Tone and Taiwan Mobile were unchanged at NT$36.8 and NT$32.4, respectively.

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