From Liechtenstein, a cheaper call

Kevin J. O'Brien :: International Herald Tribune: "On a business trip to Vienna last month, Jörg Frings, a German steel industry consultant, needed to call his office in Nuremberg.

His mobile operator, O2, would have charged €1.85 a minute, mostly for roaming charges. So Frings popped in a SIM card from a mobile callback service called Riiing. He dialed Nuremberg, the call disconnected, and in 20 seconds Riiing's computer in Vaduz, Liechtenstein, called back his connection.

The 15-minute call to Nuremberg originating from the tiny Alpine principality between Austria and Switzerland cost €5.85, or 39 cents a minute - one-fifth the €27.75 O2 would have cost, he figures.

Long a haven for banks seeking confidentiality, low taxes and little red tape, Liechtenstein has also become a magnet for telephone companies. The tiny wedge of land with 34,000 residents has seven phone companies: four mobile, two fixed-line and one reseller, United Mobile, which sells the Riiing discount service.

It is no coincidence that United Mobile chose Liechtenstein (country code +423) from which to seek a license.

Except for the Duchy of Luxembourg, which has nine phone operators, including three virtual providers, Liechtenstein has one of the most contested telecom markets in Europe. In the number of phone companies per capita, Liechenstein beats Luxembourg (population about 470,000) hands down.

Liechtenstein's crowded phone market, coupled with a population that is one-third German, Austrian or Swiss, has contributed to some of the lowest roaming charges in Europe. The level of competition began rising in 1999 when Liechtenstein joined the European Economic Area, a trading bloc with the European Union that includes Norway and Iceland. As a condition of entry, Liechtenstein opened its fixed-line and mobile phone sectors - until then built and run solely by the Swiss-government-controlled Swisscom - to outsiders.

Starting in 2000, competitors began rushing in. Today, except for the fixed-line operator LTN Liechtenstein TeleNet, which the principality bought from Swisscom in 2003 for an undisclosed sum, the principality's phone sector is in foreign hands.

Tele2 of Sweden runs a competing fixed-line network. Among the mobile operators, Vaduz-based Mobilkom Liechtenstein is a unit of Telekom Austria; Schaan-based Tango is a unit of Sweden's Tele2; and Balzers-based Orange Liechtenstein is a part of France Telecom's Orange.

Swisscom Mobile, which retained Liechtenstein's first mobile network, remains the mobile market leader, with 35 percent, or 9,000, of Liechtenstein's 26,000 cellphone users.

And that's just second-generation networks. Two operators, Orange Liechtenstein and Tele2, also have licenses to run high-speed third-generation mobile networks.

Kurt Bühler, director of Liechtenstein's Office of Communications, the principality's telecom regulator, credits Liechtenstein's small size and quick decision-making with attracting operators. It took United Mobile just three months, Bühler said, to receive a license to operate its callback service, a process that Bühler said could take up to a year in other European countries.

Another lure is Liechtenstein's low tax on business profits: a maximum 20 percent, which can fall to just 7.5 percent the more profits are kept within the principality, said Ralph Böchel, an administrator with Liechtenstein Tax Office. That compares with rates of 38.3 percent in Germany, 37.3 percent in Italy and 35.4 percent in France, according to the European Commission.

Customers of the Tango mobile network in Liechtenstein who pay a flat fee of 10 Swiss francs, or $8, a month pay no roaming charges when they receive calls while traveling in Germany, Switzerland and Austria, said Bernadette Dufour, project manager for Tango. Carriers such as Tango have used roaming discounts as a way to fend off Swisscom and Orange, who are fighting a price war in Switzerland that spills directly into the principality. Under Liechtenstein's 1923 tax treaty with Switzerland, Swiss companies, including Swisscom, operate in Liechtenstein without extra regulatory oversight, setting prices and calling plans at will.

Swisscom Mobile, for example, charges Liechtenstein customers only local rates for calls made to Switzerland. The Swiss operator also gives Liechtenstein residents the option of having Swiss or Liechtenstein phone numbers. So far, 6,000 have chosen Swiss numbers and 3,000 Liechtenstein numbers.

This month, Swisscom introduced a tariff called Natel Swiss Liberty that lets users who pay a flat fee of 25 Swiss francs a month speak for up to an hour for 50 rappen a call. The offer is good also in Liechtenstein.

Orange Liechtenstein, in response, began cutting monthly charges for some users as much as 30 percent. The company has 7,000 customers in Liechtenstein, which it said was about 25 percent of the market. Its general manager, Peter Trinkl, said Orange Liechtenstein had increased its market share by five percentage points during 2004.

Pressure from Switzerland's telecoms regulator also plays a role in feeding Liechtenstein's competitive maelstrom. Regulators forced Swisscom Mobile this month to cut its charges to transfer calls to other mobile networks - so-called interconnection charges - by 40 percent, to 20 Swiss rappen.

To keep pace with the larger competitors, Tango and Telekom Liechtenstein run small, low-cost operations. Dufour is one of just two Tele2 employees in Liechtenstein. If she or her assistant can't handle inquiries in Schaan, Tele2's German-speaking representatives at a calling center in Luxembourg take over.

Mobilkom Liechtenstein has 15 employees. "It's pretty easy to make a profit," said Dieter Eugster, marketing chief at Mobilkom Liechtenstein. To generate new revenue, Mobilkom leased part of its network for the callback service operated by United Mobile, which is based in Winterthur, Switzerland."