Telecom failing to cut prices says Vodafone

A dispute between Telecom and Vodafone had reignited and needed to go to arbitration, the New Zealand arm of the British giant said yesterday.

Releasing its annual report, Vodafone New Zealand said Telecom had failed to reduce prices for calls from fixed lines to mobiles despite an agreement that saw Vodafone provide a discount on its mobile termination rates.

Those rates are the wholesale fees Vodafone charges Telecom for calls made from Telecom landlines.

Telecom yesterday declined to comment on the issue.

The annual report shows that Vodafone NZ increased its revenue by 8.5 per cent to $1.3 billion but profit dropped from $182 million to $152 million.

Vodafone said the profit drop was caused by a decrease in mobile calling prices - a result of a regulatory framework that stimulated investment and promoted competition.

Acting chief financial officer John Tombleson said Vodafone had reduced rates by 10 per cent for low users, 50 per cent for medium users and 15 per cent for high users over the past year. He said despite the lower profit, the company continued to show solid growth.

Revenue was up due to the wider range of services, such as video calls and music downloads via a handset.

"It's a relatively solid result, it's about where the market is in terms of maturity and, with more advanced technology, it just costs more to do business," said Tombleson.

The dispute with Telecom over termination rates dated back to a Vodafone proposal to the Commerce Commission last month - that mobile termination rates would begin at 20c and fall to 14.4c by April 2010.

Telecom said last month it expected to see lower prices for fixed-line calls to Vodafone mobiles, but Vodafone says it has seen no evidence of this.

"Telecom is not passing it on to the consumer, so the regulation is pointless, it is just passing money on from company 'a' to company 'b' and it's not achieving the end game, which is cheaper calls for consumers."

Figures released last month show Vodafone NZ added 32,000 customers in the three months to the end of June, to reach 2.1 million customers.

VODAFONE NZ
Year to March 31

* Revenue was up 8.5 per cent to $1.3 billion.

* Profit dropped from $182 million to $152 million