BT to offer air miles and free gifts in telephone price war: Mercury savings expected as competition complicates tariffs

BT IS TO cut the cost of international calls by up to 33 per cent and offer air miles and free gifts in the latest round of telephone price wars. Residential customers will be offered discounts of up to 15 per cent, for an annual fee of pounds 24.

The changes, which include new deals for businesses, are the latest in a series of price cuts which BT must make to keep within its regulatory price controls. They bring total price cuts in the last 12 months to pounds 550m.

Don Cruickshank, director general of Oftel, the industry watchdog, said that the cuts were needed under the industry's rules. The new price-control year started in August and customers might look forward to more reductions later this year, he added.

The air miles or gifts will be given in return for points awarded for each pounds 1 on telephone bills (excluding VAT), to encourage people to make more calls.

The new prices include discounts for residential customers of 15 per cent on basic local, national and international call charges and discounts of 10 per cent on calls to mobile telephones. There are also discounts of 10 per cent on calls to premium-rate entertainment and information services. To qualify for the discounts, customers must pay an annual fee of pounds 24.

BT will bring in cuts of up to 33 per cent on cheap-rate calls to Ireland and of up to 20 per cent on standard calls to Japan and Bahrain. There are also savings on calls to Hong Kong, Israel and Scandinavia.

Businesses are being offered five new discount packages with savings of between 14 per cent and 18 per cent on inland calls, plus an additional 3 per cent off most international calls. Companies must pay upfront fees ranging from pounds 7.50 to pounds 515 to qualify.

The Telecommunications Users' Association said that it welcomed the prospect of lower bills but that the cuts helped customers who used the telephone most. The TUA said it would be fairer to cut the costs of local calls for everyone, especially at cheap-rate periods, without making a special charge.

Mercury attacked BT for making call charges more complicated. Mercury, which is expected to announce new prices before BT's changes take effect on 30 June, said that it would continue to offer savings on long-distance and international calls.

The discounts and special tariff packages offered by telecommunications companies have become complex as they fight for market share. BT has 98 per cent of the residential market and 90 per cent of the business market in the United Kingdom. But Mercury has made substantial inroads in specific areas, including the City of London and international calls.

----------------------------------------------------------------- HOW THE TELEPHONE COMPANY RATES COMPARE ----------------------------------------------------------------- BT 30 June Mercury now Cheap Standard Cheap Standard Birmingham 20p 30p 14.1p 24.7p 16p* 24p* 12.7p* 22.2p* Glasgow 20p 30p 14.1p 24.7p 16p* 24p* 12.7p* 22.2p* Dublin 60p 89p 74.0p 95.5p 47p* 70p* 66.6p* 86.0p* Tokyo 296p 311p 331.7p 347.6p 234p* 246p* 298.5p* 312.8p* New York 144p 153p 125.8p 135.4p 113p* 121p* 113.3p* 121.8p* Paris 89p 109p 79.7p 95.5p 70p* 86p* 71.7p* 86.0p* ----------------------------------------------------------------- Calls from London weekday rates. Three-minute call, VAT inclusive. * Minimum payable using discounts and special packages. Mercury offers an additional 5 per cent reduction on all call charges above pounds 60 per quarter. -----------------------------------------------------------------

View from City Road, page 35

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