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ST monopoly wilting under customer defection to mobiles

Figures released by fixed-line monopoly Slovenské telekomunikácie (ST) in mid August showed that for the first time in Slovakia's history, the number of fixed line telephone links fell below the number of mobile phone users. ST registered a drop of 57,000 in the number of fixed line links in July to 1,630,987. In the same month, the number of new clients using the services of the mobile phone operator Eurotel rose by 64,000, the company claimed.
The new clients have pushed the total number of mobile users of Eurotel, and Slovakia's other mobile operator, Globtel, to 1,635,276. Globtel has yet to release its own customer numbers for July.


ST president, Ladislav Mikuš (right), has said the company won't be adopting low-price tactics soon.
photo: TASR

Figures released by fixed-line monopoly Slovenské telekomunikácie (ST) in mid August showed that for the first time in Slovakia's history, the number of fixed line telephone links fell below the number of mobile phone users. ST registered a drop of 57,000 in the number of fixed line links in July to 1,630,987. In the same month, the number of new clients using the services of the mobile phone operator Eurotel rose by 64,000, the company claimed.

The new clients have pushed the total number of mobile users of Eurotel, and Slovakia's other mobile operator, Globtel, to 1,635,276. Globtel has yet to release its own customer numbers for July.

Mobile phone use in Slovakia has grown rapidly over the last 18 months. Since a set of price hikes by Deutsche Telekom-owned ST as of July 1, many people have complained that it has simply become uneconomic to continue with fixed lines when both mobile operators offer relatively attractive packages.

While a fixed line link costs 250 crowns per month ($5) with tariffs of 1.50 crowns per minute peak time, and .75 crowns off peak, a mobile phone can be bought and hooked up for as little as 600 crowns in some cases, while special offers give users free calls at weekends and charges by the second, not minute.

ST's leaders have not been blind to the fact that they are facing stiff competition from mobile operators. Managers of the firm have already met to discuss how to deal with what they admit has been a steady fall in customer numbers. In May, after the price rises were announced, the firm said more than four times as many customers had asked to unsubscribe to ST services than had in the previous month.

Plans to offset the falling number of clients have already been put into action, though. The monopoly has launched its Light User Programme, under which clients get 12 impulses (each impulse lasts two minutes) free per month. After the 12 have been used, every impulse is charged at 3.69 crowns.

However, ST president Ladislav Mikuš has said that ST will not be setting its future strategy on offering low prices. "Slovak customers are still most interested in the price of a product, and mobile operators exploit this. So far that has not been the strategy of ST," he said.

ST is to lose its monopoly on fixed line voice telephony in January 2003.

Anger over price rises

The July price rises sparked anger among some customers, and not just because they increased the price of fixed line calls; many firms said that the cost of using the internet would also jump dramatically.

The rate for two minute connections to the internet - the time many businesses use for checking emails - rose 80% to 4.50 crowns ($.90). Meanwhile, the cost of using the internet for one hour at off-peak times (between 19:00 and 9:00) rose from 18.75 to 23.62 crowns, a 26% jump, while the hour rate at peak time increased by under 1% from 60 to 60.52 crowns.

ST also introduced a special fee of 1.50 crowns for dialling up to the net. The rate is paid whether the user gets connected to the server or not.

Some smaller businesses attacked the rises as financially damaging, claiming that the prices for a two minute connection would raise their costs dramatically.

As of July 1 ST also changed area codes for phone calls. Some code areas were extended to give towns previously with separate codes, and therefore higher tariffs, the same code. However, not all customers were happy with the change.

In an open letter to Mikuš dated August 21, a group of residents from Banská Bystrica and Zvolen scolded the ST president for not putting the two towns together as a same-tariff area.

The residents said that ST had "arrogantly ignored the wishes of the citizens of Banská Bystrica and Zvolen," pointing out that the two towns were less than 20 kilometres apart and had always and would continue to function as one conglomerate town.

The letter described Slovenské telekomunikácie's actions as "an unfriendly act against the citizens of Banská Bystrica and Zvolen", adding that "in connection with the forthcoming liberalisation of telecoms services we will undertake all necessary actions to make sure that this act carried out by ST does not go unnoticed by the citizens of this central Slovak town."

Representatives of ST were unavailable for comment on the letter.

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