Customers save as Eircom cuts minimum charge

Eircom has cut its minimum call charge for phone calls from 11.5p to 5p in what it claims is the largest single reduction in Irish telephone prices to date. The company left its rates unchanged, but said that lowering the minimum charge would bring down the average bill by 16 per cent. All customers will benefit when the minimum charge is introduced on October 24th, it said yesterday.

Once the new regime is implemented, Eircom will be cheaper than its competitors, Esat, NTL and Spirit, for local calls of more than five minutes' duration made in the evenings and at the weekends, according to Eircom's calculations. Evening and weekend calls comprise 71 per cent of local calls and 75 per cent of national calls, made across the Eircom network, the company said yesterday. No figure was given for the average length of calls.

"There is no argument that we are extremely competitively priced in this market," said Mr Cathal Magee, the managing director of Eircom Ireland.

The reductions follow the entrance last week of NTL into the residential phone market with a service based around its cable TV network, the former Cablelink system. NTL has a minimum call charge of 3.5p and Mr Barry Moore, the head of sales and marketing at NTL, said Eircom's move was a direct response to its entry into the market. "It is curious that they kept the minimum charge so high for so long," he said yesterday.

Mr Moore accused Eircom of publishing selective figures to give the impression it was cheaper than NTL.

"They have not compared the cost of calls of less than three minutes or the cost of calls to mobile phones, where we are cheaper. We are also cheaper to the UK and internationally," he said.

Mr Magee denied they were reacting to NTL. The changes had been sent to the telecommunications regulator for approval in September and were part of a strategic plan, he said. Eircom's rates remain 4p per minute for daytime local calls and 1p per minute for evening and weekend local calls. Its national rates are 7.4p per minute during the day, 4.9p in the evenings and 1p at weekends. Eircom has 1.7 million fixed line customers, representing 85 per cent of the market. Last year Eircom carried 10.3 billion minutes of calls of which 71 per cent were local calls.

National calls made up 23 per cent of traffic and international calls the last 6 per cent.

Eircom has indicated that it may have to increase its line and equipment rental charges as part of the restructuring of its charges.

"As significant reductions take place in call charges, it requires a small increase in access charges," he said.

No decision has been taken about when to increase the charges, said Mr Magee. The cost of the package is £82 million (€104.2 million). Eircom said yesterday the reduction in the minimum charge brought the total of price cuts announced by the company in the last six months to £120 million.

Eircom gave examples yesterday of how the reductions would affect customers. A typical subscriber with an average bill of £69 will see it fall by 15 per cent to £58.50. A customer whose bill averages £11 will save 22 per cent. The figures are just for the cost of calls and do not include line rental, phone rental and other charges. Mr Magee said reducing the minimum charge would reduce the firm's revenues on an annual basis by £82 million. Last year, revenue was £1.3 billion and earnings before interest, depreciation and tax was £520 million.

"It is built into our business plan," he said. Eircom will shortly announce the next part of its strategy to retain a dominant position in the fixed-line market. "We plan to unveil our plans for the introduction of XDSL in six to eight weeks," he said.

XDSL technology allows standard copper phone wires to be upgraded to a level were they can offer high-speed Internet access and video on demand, and carry commercial TV channels. Eircom will use the technology to compete with NTL and Irish Multichannel, which plan to use their cable networks to offer these products bundled together with telephone services.

To date, NTL has only rolled out its new service in Tallaght and is offering a hybrid service elsewhere on its network.