30 November - 6 December 2000

Let the battle begin

For the first time in over 10 years, the consumer is about to enjoy the benefits of competition in the local mobile telephony sector. The news last week that go mobile had started offering excellent rates for its service that is expected to commence on 1 December was welcomed by all. Proof of this is the thousands of people who flocked to the company’s retail outlets requesting information on the new packages and rates.
On the other hand, Vodafone, which enjoyed a monopoly for the past 10 years, is now also gearing up to announce further cuts in its rates. Over the past few days, the company has pumped thousands of liri into an advertising campaign aimed at holding on to its existing customer base with promises of even better deals than those offered by go mobile.
This is what this country needed – healthy and fair competition. Now, individual clients and businesses are in a position to choose the mobile telephony operator of their choice and compare prices. The mobile telephony battle has begun. This newspaper has long campaigned for lower prices and competition and the granting of a licence to go mobile has facilitated a speedier process towards liberalisation of this ever-growing sector.
Admittedly, the playing field is still not completely level, however the new telecommunications regulator is tackling each issue head-on. We feel, however, that his role in this sector must change somewhat. By having to approve the changes in tariffs proposed by the two operators, he has, albeit unwillingly, given a slight advantage to one operator. By approving go mobile’s tariffs, the regulator has given the operator a good market advantage that may be detrimental in the short-term to Vodafone.
The regulator should have considered both their requests at the same time and then given the go-ahead thus enabling both operators to announce their rates together. It is perhaps the right time for Mr Tabone to step out of the scene and let both companies set the agenda for further cuts in tariffs.
We suggest that the regulator establish the parameters for mobile telephony tariffs, for example, by stipulating the minimum price allowed for the next two years. Thus, both operators will be able to reduce tariffs as long as they do not go below the stipulated price. This will be conducive to fair competition yet at the same time guarantee a level of regulation.
The coming months will prove decisive for both operators. go mobile’s presence will not, we believe, cause major problems for Vodafone. On the contrary, lower tariffs will undoubtedly increase the number of mobile phone users in Malta. That, certainly, will be beneficial to both go mobile and Vodafone.

Business Promotion Act

Among the points raised by critics of this year’s budget one finds the lack of incentives to create wealth and promote local industry. The only reference to industry made by Mr Dalli was the publication of the Business Promotion Act.
The BPA is an extensive revision of the Industrial Development Act of 1998. The IDA provides for a package of incentives to encourage new and expand investment in Malta. Such incentives, however, were geared towards enterprises producing for export. However, membership of the World Trade Organisation has made export-based incentives unacceptable.
The government is now revising the IDA with the aim of introducing a comprehensive system of incentive to assist the country’s manufacturing industry in the future. These incentives are expected to foster an environment that is conducive to increased investment, technological innovation and the development of a highly skilled labour force. The BPA is based upon the identification of certain manufacturing activities that the country needs to promote. This is an important step for the government. It has taken great care to ensure that those already enjoying incentives, such as 10-year tax holidays, will continue to do so under new conditions. However, the Act will also establish new terms for local companies that do not necessarily export their products. This is one of the major revisions in the BPA, a feature that will help to stimulate additional investment in the manufacturing industry as a whole.
The BPA identifies target sectors which can enjoy additional incentives. These include: reduced rates of income tax and investment tax credit. The non-target sector will also be able to benefit from value added incentive scheme and investment allowances and reduced rate of tax on re-invested profits. There are also special provisions for small businesses aimed at providing a higher level of aid to them.
In principle, the Act is and should prove to be an important tool to increase productivity in the Maltese industry. This augurs well of the future of this important area of the local economy in the coming years.