KEY POINTS:
Telecom stands to earn at least an extra $24 million to $44 million a year from an increase in its monthly line rental charges.
The company announced yesterday it would increase its charges by between $1 and $1.85 from March.
The cost of calling the 018 directory service from a mobile phone will also increase - from 50c to 75c, but calls from a land line to the directory will remain the same at 50c.
The price increase "reflected unavoidable cost increases across many areas of the business", Telecom spokesman Kevin Bowler said yesterday. "We are committed to reducing the actual price of calling so customers continue to get better value for money."
He said national toll calls were now on average 16 per cent cheaper than they were three years ago and international calling was 28 per cent cheaper.
Telecom is allowed to increase its prices by the rate of inflation under the Kiwi Share Agreement, which also keeps local residential calls free.
Vodafone responded to Telecom's announcement by revealing more details of its new home phone service, which it plans to introduce mid-year.
The service will see see mobile phones being used in place of landlines - a move commentators say will open up the market and provide much needed competition.
Vodafone spokesman Kursten Shalfoon said yesterday the new service would eliminate the need for land lines and provide competition in a market largely dominated by Telecom.
Telecom's adjusted profit for the last financial year ending June 30, 2006, was $825 million.
Mr Shalfoon wouldn't comment on the cost of Vodafone's new service, but said it would be significantly better value than Telecom.
"You won't need a Telecom land line any more. You'll be able to make calls from home, at land line prices, using your existing home phone number."
He said new technology meant it was possible to know when a mobile phone was being used from a customer's home.
When a person called you on your mobile (using your land-line number) and you were at home, the caller would be charged at land-line rates, he said. And when a person made a call from home on their mobile (to a land-line number), they would be charged at land-line rates.
From April 1, Telecom and Vodafone customers would be able to switch networks without having to change their numbers, he said.
Telecommunications Users Association chief executive Ernie Newman said Telecom's price increase was a timely reminder of the lack of competing telecommunications services across most of New Zealand.
He said line rental charges were lower in Wellington and Christchurch where Telecom faced competition.
"It's our understanding both Telecom and Vodafone are looking to provide services which are a hybrid between fixed and mobile which will open a whole new paradigm of competition for the user. There's definitely light at the end of the tunnel for the user."
Consumers Institute David Russell said Telecom had a legal right to increase prices by the rate of inflation. He said Vodafone's new service would bring much-needed competition.
