Landlines rates increase…Consumer body accuses GT&T of hiding profits

Oct 03, 2014 News

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An application by the Guyana Telephone and Telegraph Company (GT&T) to

substantially increase its landline charges and rates has been totally rejected by the Guyana Consumer Association (GCA). As a matter of fact, the advocacy body said in its reply to ongoing hearings before the regulatory Public Utilities Commission (PUC), the possibilities must be examined for the present charges and rates being reduced.
In rejecting the application, GCA warned that any increases at this time could disturb or distort the market as the telecommunication industry is about to be liberalized, allowing new players to enter.
The consumer group recommended that “the PUC should ensure that it is in no way instrumental in disturbing or distorting the flow of the free market of which telecommunication liberalization is a manifestation and to which policy the Government of Guyana is committed. To hastily inject rates produced by a monopoly regimen into a newly liberalized industry would be a distortion, in that it attempts to forestall the free market from shaping rates.”
According to GT&T’s application made earlier this year, the US-owned company wanted increases in charges for application, installations, transfers, additional jacks, wake-up call, 3-way, voicemails, call forwarding, reconnection fees, and for peak and non-peak calls. The rates range between 20-60 percent.
The consumer body stated that it would be a contradiction for the PUC to allow rates manifesting monopoly profits to be injected into the new liberalized structure, since such action would negate liberalization.
GCA also rejected GT&T’s “attempts” to link rate increases by the Guyana Water
Incorporated (GWI) and Guyana Power and Light Inc. (GPL) to its demand for increases in landline rates and charges.

CONCEALING
“GWI and GPL are not analogous to GT&T and could not be compared. GWI and GPL have always been loss-making corporations, depending on Government’s subventions for survival, while GT&T has always been a highly profitable company.”
GCA argued that GT&T had ten years to prepare for liberalization.
“In its application, GT&T is giving the impression that liberalization has been suddenly sprung upon them and that there is desperation for them to be granted land line rate increases. For over 10 years the Government of Guyana had given public notice that there would be liberalization and GT&T had intimate knowledge of this.”
GCA said that GT&T is attempting to conceal the fact that its landline operations is owed US$90M… monies used to finance the cell phone service.
“GT&T started out as a landline operator and its later cellular business was grafted on to what was then its core landline operations. In this process, GT&T used about US$60M of funds generated by the landline to invest in the cellular business. No bank loan was taken; landline money was used. With interest accruing at 15% per annum, GT&T’s loan from its landline to help expand its cellular phones division would see that former being owed around US$90M.”
The consumer body also stated that GT&T is not telling the whole story as its landline infrastructure – fibre optic and copper lines – is being used to transmit internet and mobile traffic – yet the landline does not receive a cent for the use of its facilities.
With over 20,000 internet customers, this could add up to about US$1.2M annually.
“These monies must be added to the landline revenues,” GCA said in its arguments to PUC.

QUESTIONABLE TRANSFERS/ACCOUNTING
The body also accused GT&T of transferring its fibre optic, undersea cable, to a foreign company in an “involuted” manner. “Whatever was the transaction, there was a huge money value for this cable, a proportion of which must be allocated to landline revenues.”
GT&T has reportedly spent US$30M for the cable – a project it shares with Suriname.
“Gains from depreciation must be credited to landline revenues. The landline assets are old and depreciated and there has been little or no capitalization. The Guyanese consumer pays the 15% rate of return on these fully depreciated assets and since the landline assets book value is nil, it means the company is harvesting super profits on the landline. These super profits monies must be credited to the landline revenues.”
In rejecting the rates increase application, GCA also noted that GT&T collects from every customer a deposit which so far totals US$3.7M.
“On this money, by PUC ruling, GT&T must pay annual interest of 12% to every customer for his deposit. GT&T has invested this money and made good returns over the years.”
The consumer body also asked that consumers be paid their interest as well as the investment gains from his money.
“At this time, we are asking GT& T to credit the landline with any revenues properly theirs from this deposit arrangement.”
Another problem that the advocacy body had was the fact that GT&T has failed to have printed and distributed telephone directories for two years.
“GT&T by law are bound to print and distribute telephone directories to every subscriber. For two years running they have not done so. The money allocated to this activity must be credited to the landline revenues.”
In accusing GT&T of practicing questionable accounting, GCA said that the company had, when it bought the operations in the 1990s, started with approximately 1200 employees, doing landline business. “This was slashed to 600 employees who now, not only do landline, but internet and cellular work. In other words, the labour costs for the landline have been progressively diminishing.”
GT&T is owned by Atlantic Tele Network of the U.S.
The rates increase is evoking much interest in light of the fact that legislation is before the National Assembly to break GT&T’s monopoly on landline operations. Under its contract, GT&T has control over landlines and international calls. There have been criticisms that GT&T has not been moving fast enough to address demands for landline services, especially in new housing schemes. At the end of 2011, GT&T had said that it has over 150,000 landline customers with more than 34,000 of them for business customers.

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