The Czech telecoms-sector regulator, the CTU, unveiled a new methodology (i.e., LRAIC, long-term incremental average costs) for calculating fixed-to-fixed interconnection prices yesterday. The CTU has not yet set new interconnection prices (this will be done once operators’ cost data is plugged into the LRAIC formula). CTU head David Stadnik said that it is yet to be determined whether the new, LRAIC-based interconnection prices will be effective this year or next.
We expect the change in methodology to lead to a decline (of perhaps up to 50%) in the interconnect price. Alternative operators (such as Contactel, 50% owned by Ceske radiokomunikace) will benefit from this reduction; Cesky Telecom, as the dominant owner of fixed-line access to customers, will be loser. Although we have expected the introduction of LRAIC at some point this year (see our December CT report), the news may surprise some on the market, and may have a negative short-term effect on Cesky Telecom stock. However, any downside should be limited, given that the matter concerns only a small segment of Cesky Telecom’s revenues.
GTS, one of Cesky Telecom’s fixed-line competitors, said it would stop paying interconnection costs to Cesky Telecom, in response to CT allegedly delaying an agreement on interconnection prices. This is one of many arguments among Czech operators about interconnection costs. Neutral for Cesky Telecom stock.
(Ondrej Datka)