Grid goes nuts as Brazilians ring up £35m of free phone calls

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The Independent Online

National Grid admitted yesterday that it had lost £35m on its new Brazilian telephone service because millions of customers have been able to make free calls on the network.

National Grid admitted yesterday that it had lost £35m on its new Brazilian telephone service because millions of customers have been able to make free calls on the network.

The problem has arisen because the service, known as Intelig, is being used by huge numbers to make off-peak calls that individually generate such little revenue it is uneconomic to bill each customer.

The Grid has a 50 per cent stake in Intelig, which launched voice services in January, and had expected its share of start-up losses to reach £40m in the current half-year. But the company said yesterday that the actual figure would be £75m because of the billing problem. Intelig has so far attracted 9 million users.

Intelig, which operates long-distance services in Brazil, has now rectified the problem by getting local telephone companies to include its charges when they bill their customers and then pass the revenue on.

The Grid refused to say how much higher than expected its Intelig losses would be in the second half but it insisted that the operating losses would peak in the current year. "This does not affect our strategy in Brazil and we have full confidence in Intelig," said the Grid's finance director, Stephen Box.

Telecoms analysts expressed surprise that Intelig had not put an interconnect charging arrangement in place before it launched the services. However, a Grid spokeswoman said that no heads had rolled as a result of the higher-than-expected losses.

The Grid expects to invest a total of £200m in Intelig over the next four years, believing there is huge scope for growth in the Latin American telecoms market. In May, the group announced that it was investing a further £125m to take a 50 per cent stake in a new long-distance telecoms network spanning Argentina and Chile and a 30 per cent stake in a "local loop" operator in the Chilean capital Santiago.

News of the increased Brazilian losses came as the Grid announced details of its $3bn takeover of the US electricity group Niagara Mohawk. The integration of the business with the Grid's existing US electricity interests is expected to yield cost savings of $90m in four years and result in 500-750 job losses. Ten senior executives of Niagara will share in a $10m-$15m phantom stock options windfall.

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