Cesky Telecom yesterday revealed its tariff proposal for 2001, which we find the relatively favorable for the company. The weighted basket of CT’s tariffs will increase by just 0.8%, after a 0.5% increase this year (this is less than expected), but within this minor change in the basket index there are major changes in individual tariffs. CT’s tariff structure has been completely overhauled; it now allows CT to offer different tariff packages to different user groups. There will be different tariffs for residential and business customers, and as of April 1, 2001, there will be different tariff packages within these two groups. Residential customers will be able to choose a higher monthly fee (CZK 225 vs. CZK 175 in 2000), combined with lower per-minute tariffs, and vice versa. Business customers will all pay the higher monthly fee (CZK 225), but will automatically receive a discount from their calling bill if their monthly calling charges exceed a certain level. Local calls will be more expensive for all users (this is slightly surprising, we expected unchanged local tariffs), with long-distance calls likely cheaper for most users. International tariffs will also be reduced, but CT has not yet revealed its exact proposal. Moreover, CT will introduce time-based billing (as opposed to the current pulse-based billing), and will bill international calls by seconds (after the first minute).
Overall, we consider the package clever in terms of preparing CT for competition. Also, it should not be so excessively damaging to next year’s P&L, because of the increases in local tariffs and the monthly fee. The new tariffs are still to be approved by the regulator, but there should only be minor changes, if any.