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. Last Updated: 07/27/2016

2 German Telecoms Kick Off Price War

FRANKFURT, Germany -- Germany's round of telephone fee cuts reached a dizzying pace Monday as Deutsche Telekom AG pledged to halve its minimum price and Mobilcom AG offered free calls for up to one minute.

Telekom chief executive Ron Sommer said his company would cut fees for calls inside Germany to as low as 6 pfennigs per minute in 1999, in addition to a package of cuts of as much as 63 percent taking effect in January.

It remained unclear when the new cuts would come and what call categories they would cover.

A Telekom spokesman said the additional cuts would apply irrespective of whether customers had digital or analog lines and would be implemented "hopefully very soon," provided Telekom got regulatory approval for the move.

"The current price measures are certainly not the end of the road," Sommer told Bild newspaper, referring to the January price cuts recently approved by Germany's telecommunications regulator.

"You can expect to be able to make telephone calls with Telekom for just six pfennigs per minute throughout Germany in the coming year. And that is a price that is unique worldwide," he said.

The reductions mark the latest broadside in a price war that broke out with deregulation of the German telecoms market at the start of 1998.

Shares in Telekom, 74 percent-owned by the German government with the remainder in private sector hands, fell as much as 3.4 percent or 1.90 Deutsche marks to 53.50 marks amid investor fears that the cuts will eat into its earnings.

But its private sector competitors, led by Mobilcom AG, suffered bigger price drops due to fears they were not as well equipped as Telekom to maintain the pace of reductions.

Mobilcom fell as much as 7.4 percent or 44.50 marks to 555 marks. Mannesmann AG, which operates the Mannesmann Arcor telephone company, fell as much as 4.8 percent to 190 marks.

Since losing its monopoly, state-controlled Telekom has seen its share of the lucrative long-distance calls market shrink to about 75 percent.

Meanwhile Mobilcom, which has carved itself a 10 percent niche, announced on Monday it would offer long-distance calls of up to one minute free of charge between 7 and 11 p.m. from Jan. 1.

In a bid to woo customers, Mobilcom had offered free long-distance calls of unlimited duration between those times on Christmas Day and Saturday.

Telekom's other main private sector competitors, Otelo and Mannesmann Arcor, said they would match Telekom's price cuts once it became clear when and under what terms they would apply.

"You can be sure that Telekom's private competitors will do all they can to offer similarly attractive terms," said a spokesman for Otelo, the telephone joint venture between utilities RWE and Veba.

Another competitor, Viag Interkom accused Telekom of "competition-distorting behavior" and said the company was exploiting its remaining monopoly in the local calls market to subsidize its long-distance business.