(AFP) The government announced today it would cut rates for fixed-line international calls by up to 67 percent from March in a bid to become a competitive regional communications hub.

But local call charges would be raised by 33 percent in the first tariff review since 1996 to improve revenue for fixed line operators and encourage investment in rural networks.

The move is expected to cause state-owned Telekom Malaysia, which dominates the fixed-line sector, to lose some RM14 million ringgit in revenue a year, official figures showed.

From March, international call charges would fall by between seven and 67 percent with substantial cuts for calls to the US, Japan, Britain, Germany, France, Australia and China, said Energy, Communications and Multimedia minister Leo Moggie.

"The move reflects the government's intention to transform Malaysia into a competitive communications hub and a preferred destination for investment in the region," he told a press conference.

Moggie said the ministry's figures showed that the new tariff structure would lead to a loss of RM1.2 million a month for Telekom.

"The main purpose of the adjustment in rates is not, as many people think, to help Telekom Malaysia. It is to provide competitive rates in an international environment," he said.

Increase necessary

Rates for national calls would be 23 to 54 percent lower but tariffs for local calls - those made within a 25 kilometer radius - would be raised to four sen a minute from three sen previously.

"The increase in tariff for local calls... is necessary to reduce the existing cross subsidies of about 150 million ringgit from other telecommunications segments," Moggie said.

If local calls were not subsidised, he said their current tariff would be five sen a minute.

Existing monthly rebates will be abolished while line rentals for residents and businesses would be slightly raised.

Tariffs for mobile services, which are unregulated, remain unchanged. Internet rates of 2.5 sen a minute will also be maintained to promote usage.

Moggie said the tariff adjustment was aimed at giving "incentives to industry players to invest on infrastructure roll-out particularly to the rural areas".

Service providers had been reluctant to invest in local area networks due to the high costs involved and the low rate of return, he said.

But the increased domestic rates now provide a "revenue stream that is slightly fairer than before" while an existing fund for those investing in rural networks would help partly fund the capital cost, he said.

"We hope the combination of that will encourage telco companies to be more willing to invest... we can then hopefully increase the penetration level for currently unserved areas," Moggie added.

Lost monopoly

Telekom lost its monopoly on fixed telephony after the sector was opened up in 1993 but still commands about 95 percent share in a market of close to five million subscribers.

Other operators are Celcom, TIMECel and Maxis Communications.

Despite its move into a knowledge-based economy, Malaysia's fixed telephony penetration is still low at 22 percent with rural areas lagging behind with a reach of only 11 percent, officials said.

The government has allocated one billion ringgit under a five-year development blueprint to raise the country's penetration level to 35 percent by 2005.

Telecommunication companies are also required to contribute to a service provision fund used to improve networks in rural areas.