23 February 2005

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Taking liberalisation to task - challenging a monopoly
KARL SCHEMBRI speaks to MaltaTel General Manager Mario Gatt about the Gozo-based telecommunications company’s bid to end Maltacom’s monopoly once and for all by introducing its own fixed line service. The new company has, however, encountered resistance in the form of ‘exorbitant’ interconnection rates and frustration over the lack of interest in the project from the authorities

A new player in the telephone business is promising to end Maltacom’s monopoly on fixed line telephony as well as to challenge Malta’s two mobile telephone operators, go mobile and Vodafone.
Gozo-based MaltaTel has been has been granted a licence by the Malta Communications Authority to provide telecommunications services, although the company says it is already facing unfair conditions which are only benefiting Maltacom.
MaltaTel General Manager Mario Gatt says Maltacom is imposing prohibitive tariffs on the company for the use of its telephone network, which MaltaTel would use to provide its service.
“The interconnection rates we were offered were much higher than Maltacom’s retail prices for its customers,” Gatt says. “That makes it virtually impossible for us to operate through their network.”
For a five-minute call during peak time, the interconnection rate MaltaTel was offered is 11c68 – a difference of 6c2 from the actual Maltacom tariff. An off-peak 10-minute call would cost them 23c78 in interconnection charges – a difference of 18c39. A 30-minute call at night, meanwhile, would cost the company 30c68 while a night weekend call would cost 39c45 just for interconnection when Maltacom charges its customers just 5c39.
“This costs a fortune,” Gatt said. “They are basically telling us they don’t want competition in the local market, and this against the EU directive. That’s why we have filed our case with the European Commission. Maltacom, being the dominant market player because it owns the network, is duty-bound to offer us reasonable prices so that competition can take place.
“We’ve already started paying the Lm20,000 yearly licence fee but we are still not in a position to begin operations for the reason that we still have to reach a technical agreement with Maltacom. We should reach such an agreement within in two days’ time, but Maltacom seems to be in no hurry to conclude it. According to the regulator, Maltacom has a deadline of May within which to reach an agreement with us, so I’m assuming Maltacom is taking all the time it can. Our first appointment is scheduled for 1 March, with Maltacom’s CEO. We’ll have to start from there.”
But Maltacom’s delays may only serve to accelerate Gatt’s plans to set up his own telephone network, which he says would involve a massive capital investment of Lm17 million.
“It has always been our intention to set up our own network, but I think we’ll have to speed up the process in view of the circumstances,” he said. “I will be calling a press conference in the coming weeks to announce some very important decisions.”
Without giving further details, Gatt says the network will not involve the laying of cables or wiring.
MaltaTel forms part of a group of companies with diverse international and local interests providing quality, affordable telecommunications Gatt says.
Behind MaltaTel one finds ICM Inc, a large corporation in the US specialising in the provision of a variety of goods and services. ICM’s interests range from the provision of international and local telephony, affinity programmes, the establishment of worldwide call centres, textiles, compact discs and electronic equipment.
“This will be viable as given that we form part of ICM, we have formed a consortium with suppliers of the necessary equipment who are very interested in investing here,” Gatt says.
To handle the telecommunications requirements of the entire international group, ICM Inc established ICM Globalnet SA in Geneva.
The first presence of ICM Inc in Malta was through International Call Management Ltd Malta as a licensed internet service provider to provide VOIP international services. The company has been active since November 2003.
“My vision is to give our clients good-quality telephony services for the price they should be charged,” Gatt says. “I want the people to phone as much as they can, as much as they need to, and to not be afraid. Maltacom’s philosophy, and also that of other operators, is to make the maximum profits out of their clients. So when one uses a mobile phone, there is this feeling of brevity, of having to cut quickly being on a mobile. This is ridiculous. If you see the advertising abroad, the idea is to get people to use the telephone as much as possible, not to make them afraid of using it. We want to instil this idea: phone, phone as much as you like, and don’t be afraid to lift that receiver.”
Listing his company’s new tariffs, Gatt says a three-minute call to the UK would only cost six cents, including the local call.
“We’re showing how much Maltacom was charging over and above its real costs, mainly because of the extra staff it has. We know how much a telephone call really costs and when you look at Maltacom’s rates, they’re exorbitant.”
Calls to go mobile will cost 10 cents per minute, while calls to Vodafone will cost nine cents per minute, as opposed to Maltacom’s fee of 12c4 per minute for calls to both service providers.
Explaining how the system will work, Gatt said: “We’ll have a pre-select number. When you raise the receiver, you decide through which operator you want to call by dialling a special number. You can also become a subscriber to our services and benefit from even better rates without having to dial our number.”
MaltaTel will also be providing specially customised packages to corporate users “so their telephony costs would be further reduced drastically”.
Gatt says he would also be “very interested” in entering the mobile telephony sector.
“The reason I haven’t so far is that government hasn’t yet decided how to allocate the frequencies. Government wants to leave the frequency for go mobile and Vodafone free of charge, while a third operator would have to bid from Lm2.5 million for a licence – something which has happened abroad as well, with companies raising their bids so high that they went bankrupt.
“We already have an agreement with a large foreign company that specialises in this sector and which would like to make a heavy investment here.
“We asked to operate from Gozo in order to increase employment there, but one way or another we will be participating [in the licence bid]. We will come to Malta and see who’s interested in the licence and work for it together. I can assure you that nobody will be bidding at Lm2.5 million, because we will get it together in agreement.
“Our wish is to get that licence granted to a Gozo-based company. The government should realise this is a great way to attract foreign investment there and raise employment levels. It’s a disgrace that we haven’t been given the importance we have deserved, when similar enterprises abroad receive the red carpet treatment if they promise to invest the equivalent of just Lm100,000.”
Gatt complains that his company did not find the support it expected from the authorities.
“For example, we pay Lm12 per square meter for our factory in Xewkija and there is no other factory in Malta or Gozo that pays so much. We are made to pay those prices just because we don’t fall under the Business Promotion Act. Other companies are charged Lm1 per square meter. Why should I pay 12 times as much as the others?
“We dealt with the Gozo Ministry, and we didn’t receive the support we needed. We’ve also tried to meet with the relevant people at the ministries concerned, but nobody was bothered. We clearly stated our goals, what we want to achieve, but they probably thought we were living in fantasyland, which is definitely not the case. Had they supported us – and I’m not expecting anything we aren’t entitled to – we would have already been in a much more advanced stage than we are now. Austin Gatt knows about us and Censu Galea met with us a year and a half ago. They know where we want to go but they are, effectively, protecting Maltacom.
“We joined the EU - great, but government isn’t prepared. Issues of competition and monopoly have been left pending while other accession countries have already opened their markets and they have a functioning liberalisation. The red tape we’re facing just to start operating is unbelievable. The government still hasn’t decided how to allocate the frequencies. This doesn’t make sense and it’s keeping our country from developing. Competition is healthy and the consumer is its net beneficiary.”

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