We write in response to a number of articles that have recently flooded the local press on the subject of Interconnection Agreement between TNL, Celtel and ourselves The latest of these articles appeared in the "Daily Times" of  Thursday,
22nd March 2001 in which the Managing Director of CELTEL, Steve Torode is quoted to have expressed concern over
the outcome of the meeting called by the communications regulatory authority, MACRA to resolve the interconnection
wrangle. The meeting was held on 21st March 2001 at the MACRA offices.

 Firstly, we hasten to sincerely apologize to our valued customers for the great inconvenience the wrangle has created in
the delivery of our services to our customers since this controversy started. It is our sincere hope that this issue will soon
be amicably resolved.

HISTORICAL OVERVIEW OF THE TELECOMMUNICATIONS SECTOR
 
The general public is aware that Government has traditionally managed telecommunications services in Malawi.
In 1994 MPTC was formed under corporate status and continued to provide both telecommunications and regulatory services.

In 1998, the Government took a deliberate policy to provide a framework for the liberalization of the communications
sector in recognition of its catalyst  role in social and economic development. This led to the first National Communications
Policy Statement which was approved in August 1998.

Noticeably, the principal aim of the policy was to ensure that full range of  modern services are accessible by the whole
population of Malawi, including those living in rural areas at affordable prices. On 31st May 2001, MTL was born and
as sole fixed network operator, MTL has been instrumental as the the Government vehicle to drive rural telephone
penetration.

The launching of the Communications Policy Statement triggered a number of other telecommunication activities including
the birth of the regulator, MACRA. The country has since witnessed unprecedented changes in the sector as new operators
have entered the market.

Although MTL is currently the sole provider of domestic and international fixed telephone services in Malawi, these services
have since been liberalized to spur competition and efficiency. Government recently announced that it is now able to invite a
second national operator and allow all licensees to set up their own telecommunication systems to provide both local and
international telecommunication services. Malawi now awaits to see how the private sector will take up these openings and
challenges.
 
THE BIRTH OF INTERCONNECTION AGREEMENTS

In the now liberalized environment, there are several telecommunication operators necessitating the need for interconnection among the operators.

WHAT IS INTERCONNECTION

In the simplest form, interconnection is the physical linking of telecommunications networks used by different operators in
order to allow the users of one operator to communicate with users of another operator or to access services provided by
other operators.

MTL is currently the major player with the biggest and most prestigious network than the other operators in the country.
MTL with its diverse network continues to provide support to the other operators with infrastructure and other facilities.
These include sharing of masts for their transmitters and receivers in some areas where they do not have such infrastructure;
providing housing and power to feed their equipment in a number of repeater stations. This is accommodated in the interest
of co-existence since Malawi as a country is the ultimate beneficiary.

MTL believes that with its vast network and customer base, if it did not interconnect with the new operators, the new
operators would have little chance of attracting customers of their own.
 
What is this interconnection wrangle about? The wrangle is about the magnitude of the charges to be paid between the
operators for delivery of a call between them MTL believes that the interconnection agreement should be designed to
promote usage of the services and competition among the operators.  The interconnection fee to be applied between the operators for calls originating from one network to the other should not result in prohibitive nor unaffordable charges.
 
The wrangle started when Celtel launched its services in the country and  demanded that the interconnection fee for a call originating from MTL or TNL subscribers to CELTEL subscribers be charged 20 US Cents (K16) per minute. This
implied that MTL and TNL should charge more than 20 Cents to cover the interconnection fee and at the same time be
able to make a profit.  To MTL's dismay, CELTEL further demanded that a call originating from its subscribers to MTL subscribers should only be charged 5 US Cents (K4) as interconnection fee.

As a result of this interconnection agreement , MTL was forced to increase its call charge to 30 Cents (K24) per minute in
order to cover for the 20 Cents payable to both CELTEL and TNL for interconnection fee. Similarly, TNIL had to raise its
call charge to 45 Cents per minute to provide for the interconnection fee demanded by CELTEL.

The increase in the call charges brought an out cry from the consumers.  MACRA was then forced to intervene on behalf of the consumers a few months after the introduction of the interconnection fee. MACRA brought the concerns of the general public
to the operators and ruled that the existing interconnection agreement be scaled down with immediate effect. CELTEL was
not amused with this development to scale down the interconnection fee.  They argued that the interconnection fee is a
standard practice throughout the telecommunications industry worldwide and that it is not specific to only Malawi. On the
other hand, MTL and the TNL were willing to reduce or remove it completely.

As a result of the reluctance by CELTEL to reduce the interconnection fee,  MACRA was forced to overrule the commercial
contracts, removed the interconnection fee and replace it with the Sender Keeps All (SKA) accounting arrangement. TNL and
MTL responded by reducing their tariffs and MTL currently charges K6 per minute from previously K24 per minute for calls
to both mobile operators.

TARIFF REGULATION

The International Telecommunication Union (ITU), a specialized agency of the United Nations (UN) has declared access to
telecommunications as no longer a privilege but a right, and Governments have an obligation to ensure that telecommunications
services are not only available but accessible by all.  To achieve this, it is the role of Government or its appointed regulatory
authorities to regulate telecommunications tariffs to ensure that the tariffs are indeed affordable.

Here at home when cellular services were first introduced in 1994, Government recommended to both MPTC and TNL to
charge promotional  rates. Both complied until the arrival of CELTEL on the market. The cellular call charge between MTL
and TNL was previously K1.50 per minute with an interconnection charge of 0.50 t per minute. The effect of the low tariff
can be witnessed by the fast growth of the cellular service in the country. MACRA's intervention into the dispute and tariff
setting is therefore in the interest of the above objectives.

 WHAT IS THE MEANING OF SKA

This means that if an MTL subscriber makes a call to either TNL or CELTEL, MTL will keep the money it collects from its
subscriber and not share it with either of the mobile operators. With this arrangement, each operator will be at liberty to set
its own tariffs independently.

MTL is committed to seeing this dispute resolved amicably through continued discussions rather than using the court. We
believe that although CELTEL sought an injunction against the MACRA ruling, and the case is still in court,  CELTEL will
withdraw the case from the court to allow MACRA continue with the mediation. We also believe that the interconnection
fee yet to be agreed will not trigger further public outcry. We would like to assure our customers that discussions are still
in progress with CELTEL to negotiate for a reasonable interconnection fee