Fierce market competition means Bulgaria's three leading telecoms live in a state of uneasy truce at the best of times and it does not take much for them to start trading barbs.

The latest exchange, starting in September and yet to be resolved, had a twin cause - Bulgarian Telecommunications Company's (BTC) plans to merge with its mobile arm Vivatel, and the Communications Regulation Commission (CRC) decision to reduce fees paid by landline operators for calls made to mobile networks. The regulator's decisions made life unreasonably easier for BTC, the leading two mobile operators in Bulgaria, Mobiltel and Globul, argued. Nor would the two processes mean tangible benefits for consumers.

While the two cellphone operators cannot prevent the BTC-Vivatel merger, they have warned that, if it is allowed to go ahead, the regulator would lose control over the prices BTC could charge consumers.

"The merger of BTC and Vivatel, which goes against European Union rules and European practices, would not be in the interests of end users and the development of the market as a whole," Globul has said in a statement. "It would lead to the creation of a new type of operator, who would inevitably take advantage of BTC's position as a monopoly in all types of services, mobile excluded, at the expense of free competition." BTC, as the former state landline monopoly, dominates the market on the landline and broadband internet markets, resisting attempts by would-be competitors to gain access to the underground shafts it uses for its cables.

Vivatel has already benefitted from BTC cross-subsidies, Mobiltel chief executive Josef Vinatzer told mass circulation daily 24 Chassa on October 6, a charge BTC has rejected. Bulgaria's third-largest operator, with a market share estimated at about 12 per cent, would also be exempt from having to reduce the fee it receives from landline operators for calls made to its customers.

Its rivals, Mobiltel and Globul, are asked to bring down their prices sooner and by a larger margin than initially planned. Earlier this year, CRC and the mobile operators agreed to cut the fee, known as the call termination price, by 35-48 per cent by July 2009. In September, however, the CRC ruled to reduce fees to 50-63 per cent over the six months to January 2009.

"The regulator made a commitment not to insist on more price cuts for 18 months after we accepted the first schedule to reduce them by mid-2009, unless market analyses show that actual costs are much lower," Vinatzer told 24 Chassa. "Unfortunately, this commitment was not kept. Now the proposal is to cut [prices] by more than 60 per cent even though market analyses do not show a similar decrease of costs incurred by operators."

Both Mobiltel and Globul were quick to point out that the losses they would incur from a cut in call termination fees would be only a small percentage of their revenues. They were more concerned with the "rising unpredictability and instability of the regulatory environment in Bulgaria", as the Globul statement put it, and the impact on consumers. Vinatzer argued that BTC maintained a profit margin 10 times the costs of the wholesale price of the service.

BTC has blamed the high prices it charges its clients on the high fees it pays to mobile telecoms, which it says are double the average in the European Union. Its chief executive Bernard Moscheni, in his first interview with the Bulgarian media nearly nine months after taking the job, told Trud daily that 80 per cent of all telecoms traffic in Bulgaria was generated by cellphone operators. The sector needed more regulation, he said, and warned that unless CRC stepped in, landline operators were threatened with virtual extinction.

Long seen as the jewel in the crown of government assets, in spite of losing its monopoly of landline services, the former state telecom can use all the help it can get with its planned restructuring, which includes halving staff levels by offering voluntary redundancy packages. Bought by US insurer AIG scarcely 12 months earlier, it cannot count on the financial muscle of its parent company, nationalised in September, to prevent what could become the widest-ranging bankruptcy in history. BTC is rumoured to be up for sale, as AIG plans a sell-off of assets to repay a $85 billion loan from the US federal reserve. And it cannot use the other revenue stream it was counting on to finance the restructuring - selling real estate properties estimated to be worth 281.6 million euro - after the Government used its preferential stock to block the motion at the general shareholders meeting on September 23.

In 2007, the EC had launched an infringement procedure against Bulgaria - since withdrawn - over what it saw as the CRC's "lack of independence and effectiveness". While politicians are busy debating the length of CRC members' terms, the institution could find itself in the dock once again and its decisions overturned in Brussels.