Telefonica and Peruvian government reach deal to cut phone costs

(LIP-wb) — After negotiating for almost three months, Telefonica del Peru and the Peruvian government reached a deal on cutting phone rates and the company’s commitment to invest $1 billion in new phone lines mainly for Peru’s socially and commercially excluded rural areas.

During a ceremony held at the Government Palace, President Alan Garcia and high level executives of Peru’s domination phone service provider informed that basic fees for classic phone lines will be reduced from 56 soles (USD 17.56) to 39 soles (USD 12.23) per month, or 102 soles annually to the benefit of 241,000 families. Public phone users will be able to talk up to ten minutes for 1 sol.

In addition, prepaid mobile phone cards will last 45 days and unused balance will accumulate. Mobile phone bills will now be charged per second instead of per minute.

The $1 billion investment will finance the installment of 185,000 new phone lines during the next four years.

Garcia pointed out that negotiations focused on three main objectives: to substantially reduce basic fees and tariffs; to install and extend service in Peru’s poverty stricken rural areas; and to respect and secure contractual and legal stability which would guarantee a continued flow of investments.

Telefonica del Peru CEO Javier Manzanares said the deal would improve the quality of life of every Peruvian. “We are pleased that the agreements were reached after a very constructive discussion between both parts and the strict respect of contractual obligations and legal basis in Peru", he said.

Manzanares added his company will work hard so that the tariff and service changes can become effective as soon as possible. “For our clients of Fonofácil, the tariff adjustment will be effective from December 25th. All other reductions will become effective as soon as our system development work is completed, probably by March 1st, 2007, at the latest," he explained.

On October 4th, 2006, the Peruvian government and the Spain-based international company decided to renegotiate their service contract. A special workgroup headed by Zavala was put together for that task.

Prime Minister Jorge del Castillo informed the renegotiation will seek more benefits for current and future users while respecting the principle of contract stability and legal stability of investments.

Both parts decided on renegotiating seven specific topics, including monthly basic fees, billing by seconds and not minutes, accumulation of prepaid card balances and domestic/international long distance tariffs, and technological innovation and greater service coverage.

– related articles –

Peru’s President Garcia suggests renegotiation of Telefonica contract (LIP, Oct. 4, 2006)
Telefonica to invest $1 bln in Peru (LIP, Oct. 26, 2006)