Mobile operators oppose rate reduction

PROFIT SQUEEZE： Mobile service providers said the regulator's proposed price cuts of roughly 5 percent would be hard to offset, given the difficulties in boosting revenue

By Lisa Wang  /  STAFF REPORTER

Sat, Oct 14, 2006 - Page 12

Taiwanese mobile operators yesterday opposed the telecom regulator's request that they reduce annual phone rates by almost 5 percent over the next three years.

The National Communications Commission (NCC) on Thursday said that local mobile service providers should trim charges by 4.88 percent per year as part of the regulator's efforts to boost the output efficiency of the local telecommunications industry.

Local telecom providers said the proposed price cut would be difficult to offset, as even an increase of 2 percent in annual revenue would be hard to achieve.

First International Telecom Corp (大眾電信), the nation's only PHS low-power system provider, said any price adjustment should be based on the market mechanism rather than a rigid formula set by a government agency.

"We offer rates 50-60 percent lower than other mobile carriers. The planned reduction in charges will drive First International into a difficult situation," company president Charlie Wu (吳清源) said in a phone interview.

In contrast to Wu's call for a "more reasonable" rate adjustment, the nation's major mobile players, led by Chunghwa Telecom Co (中華電信), were circumspect about the proposed rate reductions.

"We are in the process of calculating the effect of the price cuts and will continue to communicate with the NCC," said Chang Feng-hsiung (張豐雄), a spokesman for Chunghwa Telecom, after meeting with NCC officials yesterday.

Chang declined to reveal details about the discussion with the association.

"The price cuts will negatively affect the telecom companies' margins, but we are not clear how big the impact will be," said Daniel Hsiao (蕭黎明), an analyst at Taiwan Ratings Corp (中華信評), a local arm of the international rating agency Standard & Poor's.

But, Hsiao said he did not expect the charge adjustments would affect the companies' credit rating as local telecom firms currently maintain good margins.

The regulator planned to finalize the rate adjustment by the end of the year following a public hearing scheduled for mid-November. Implementation would occur in the upcoming fiscal year beginning April 1.

Before any final decision, the NCC would collect more commentary and opinions from industry representatives, it said.

In addition to mobile charges, the government agency requested that telecommunication companies trim charges for calls made on fixed line phones.

The commission requested a reduction of up to 5.35 percent a year in landline rentals over a three-year period, which could lead to price cuts for broadband connections.