American Telephone & Telegraph Co. yesterday said it would reduce prices for international telephone calls to 32 countries by an average of 10.1 percent beginning Jan. 2, a savings to customers of about $150 million a year.
An AT&T competitor, MCI Communications Corp. of Washington, said it would reevaluate its own long-distance prices. Analysts said the reduction is a sign that competition in the $6 billion international long-distance market will intensify over the next few years.
International long-distance service is being provided by MCI, GTE/Sprint and a handful of other companies, according to the Federal Communications Commission.
"Clearly, competition is increasing," said Mary Johnston, director of telecommunications research for the Yankee Group, a Massachusetts consulting firm. "AT&T about a year ago had the whole market. MCI has picked up 2 to 3 percent. GTE/Sprint right now has a handful of countries . . . but they'll bring on countries like France and Japan next year."
Donna Jeagers, an analyst with PaineWebber, said, "AT&T doesn't want to see MCI and Sprint do the same cream-skimming they did in the domestic market . . . [AT&T's object is] to try and beat out some of the competition before it gets entrenched."
Analysts said AT&T has been exceeding its authorized rate of return and is looking to lower prices in segments of its business where prices were substantially above cost.
"We are just trying to get prices in line with cost," said Edith Herman, a spokeswoman for AT&T. "Where it doesn't cost as much to provide service, we are able to lower the cost, and that is a fair thing to do." In major international markets, such as the United Kingdom, she added, "We have head-to-head competition, and it is getting to be a very competitive area."
AT&T's proposed price cuts are 10.7 percent for calls to Andorra, Austria, Belgium, Denmark, France, West Germany, Italy, Lichtenstein, Monaco, The Netherlands, Norway, San Marino, Spain, Sweden, Switzerland and Vatican City; 12.8 percent for calls to the United Kingdom; 6.8 percent for calls to Australia, Hong Kong, Japan and Singapore; 6.2 percent for calls to Kuwait, Saudi Arabia and the United Arab Emirates; 18.1 percent for calls to Namibia, Nigeria and South Africa; 5.2 percent for calls to Mexico; 14.2 percent for calls to the Bahamas and Bermuda; 12.2 percent for calls to India; and 13.9 percent for calls to Venezuela.
AT&T has lowered its international rates several times in the last few years: In 1981, it cut international rates by 35 percent; in May 1984, it decreased charges on all international calls by 6.1 percent; and this June, it decreased rates to 87 countries by 6.6 percent. AT&T's proposal will be examined by the Federal Communications Commission to make sure the proposed rates are not priced below cost.
MCI, which now provides international service to 26 countries after introducing the service 18 months ago, said AT&T has no choice but to begin cutting prices for its international long-distance service. "AT&T has been overpriced in this market segment for years," spokesman Benjamin Banta said. "Because they had no competition, they got away with it. With competition in the market, they've got to do what they're doing."
MCI will look at its prices to make sure they are lower than AT&T's, and Banta maintains they still arefor most overseas calls. "We still say we're up to 30 percent lower than AT&T's prices," Banta said.