Friday, August 26, 2005

Regulator to Tele2: adjust interconnect rates or die!

NOTE: Some corrections added late Friday

The Latvian Public Utilities Regulatory Commission has extended for six months (until March 1, 2006) Tele2's mobile radio spectrum useage rights, in effect warning the company that these rights will be withdrawn if the company does not bring the interconnect rates it charges fixed line incumbent Lattelekom into line with the rates it charges other operators. This means that it must either cut the interconnect charges to other operators, or persuade Lattelekom to re-negotiate its interconnect agreement (dating back to before the current regulatory regime and market deregulation). The rate differential is a fraction of a santim (1/100 of a Latvian lat), but Tele2 has been fighting a court battle with the regulator, appealing an administrative fine that it must pay because of the interconnect tariff discrepancy.
In a clear swipe at Tele2 (but also a move circumventing the courts?) the regulator said that Tele2's alleged arguments that «we are big, therefore we deserve to get something» would not be accepted and extension of the frequency rights beyond March 1 was dependent on compliance with its ruling on interconnect charges. Without spectrum use rights, Tele2 with some 800 000 (mostly pre-paid) customers and LVL 75 million in turnover will have to shut down. That, in turn, would cause a major international scandal. Once deprived of its spectrum rights, Tele2 could only recover them in an auction, something for which it could be disqualified if the interconnect dispute is still ongoing.

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