Telecom Eireann has announced sweeping reductions in telephone charges, which it says will save consumers almost £150 million (€190 million) in a full year. The company, which will be floated next month, is also introducing per-second billing.
The reductions will see daytime call rates to Britain fall from 19p per minute to 16p per minute and to the US from 29p to 23p per minute. Local call rates, although reduced, will still include a standard minimum charge of 11.5p.
The reductions drew an immediate response from rival, Esat Telecom, which said its own tariffs were still cheaper. Its subsidiary Esat Clear, which is targeting the residential market also, said its minimum charge was 5.1p, compared to Telecom's 11.5p charge.
Telecom said the reductions would reduce current home phone bills by 5 per cent on average and business bills by 7 per cent. The company is targeting Britain, the US and Canada because these destinations account for three-quarters of all calls out of Ireland.
The first phase of the price reduction package comes into effect next month. Telecom says the average reduction on local calls is 7 per cent, on long-distance calls 9 per cent, and on international calls 3 per cent. The saving for a call from a fixed line to a mobile phone is 8 per cent.
Telecom has been steadily reducing its prices - which many felt were exorbitant in the first place - over the last four years. When the latest round of cuts is fully implemented, Telecom will have reduced its charges by £400 million over the past four years.
The latest reductions will amount to about £80 million this year and are part of a £149 million package which will be rolled out over 1999. It is understood that further cuts later this year will concentrate on reductions in national trunk calls (calls made within Ireland).
A Telecom spokesman said the reductions were the biggest announced and would "intensify the competition dynamic in the marketplace".
It is understood that the reductions will be offset through increasing the volume of business and implementing cost savings and redundancies under the transformation plan concluded with employees last year.
One cost is being increased - that of line rental, which will rise from £24.20 every two months to £24.78. The increase, which is 2.4 per cent, will generate £4 million extra per year for Telecom.
EsatClear managing director Ms
Lucy Gaffney said line rental was the single biggest element of a customer's phone bill and expressed amazement it had been increased. She said Esat Clear operated a local call charge for the island of Ireland and accused Telecom of misleading customers into thinking they were making genuine savings.
Esat Clear charges a minimum 5.1p for one minute, but said Telecom's 11.5p minimum charge (for up to three minutes) applies "whether you are on the phone for one minute or three minutes". Esat Clear also said its daytime charge per minute to Britain was 15.7p, compared to Telecom's 16p and its per-minute charge (during the day) to the US and Canada was 21.8p, compared to Telecom's 23p.
The Minister for Public Enterprise, Ms O'Rourke, said yesterday that there was little doubt that deregulation of the market and the competitive environment had contributed significantly to the price cuts.
