China Telecom has confirmed a major rise in international-direct-dial (IDD) tariffs charged to overseas carriers in a bid to boost profitability before applications for its SAR share offering close. The mainland's largest carrier has led the way with price rises of up to 850 per cent for terminating international calls but other mainland carriers are expected to follow suit in a move that will hit SAR residents who have grown used to rock-bottom mainland calling rates. In a fax to five local telecom operators yesterday, the fixed-line behemoth said it had approval from the Ministry of Information Industry (MII) to raise international inter-connection charges for Hong Kong calls to 17 US cents (HK$1.33), from 2 US cents (HK$0.15), effective from Friday. When reports of the price changes emerged last week, local operators warned that increased calling costs would be passed on to consumers. 'A notice recently issued by the Ministry of Information Industry stipulates all the termination rates applied to traffic for all countries and regions to China should not be less than 0.17 per minute effective from 1 November, 2002,' Ou Yan, the director of China Telecom's international services division, wrote to SAR operators. Hong Kong callers, who phoned China for 1.66 billion minutes last year, may see tariffs double from an average HK$0.50 per minute for off-peak calls and HK$1.30 per minute for peak-time calls. News of the new tariff plan came two days before China Telecom closes a planned US$3.68 billion initial share sale. Analysts interpreted its timing as a last-ditch effort by the MII to support the offering and entice investor interest. China Telecom Group president Zhou Deqiang said last week the current interconnection fees were too low and indicated a rate rise was in the offing. Joe Locke, ABN Amro regional telecom research head, said increased termination charges might not choke off the booming mainland IDD market. 'International calls are not necessarily a very price elastic service, so you're not going to affect your volume very much,' Mr Locke said. However, he said other countries could respond in kind in an effort to boost carrier profitability, reversing the downward trend in international calling rates that accompanied liberalisation and international network capacity building in the 1990s. Industry leaders said the MII-inspired price rise did not violate World Trade Organisation rules as tariffs are not covered in the agreement. Under the code, China is free to raise tariffs for telecom services as long as it is not discriminatory, according to a former international regulator. Executives in major telecom companies were yesterday attempting to formulate strategies to deal with the new charges. New World Telephone and City Telecom said they would raise tariffs. Tony Cheung Tung-lan, vice-president of Wharf New T&T, said: 'We will offer competitive pricing, it is perhaps time for consumers to shop around for the best-priced IDD package.' Smartone chief executive Douglas Li said he expected the industry to raise prices. Both China Unicom and China Mobile (Hong Kong) said they were unaware of any changes and had not received notification from the MII. A China Mobile spokesman said any changes in IDD interconnection fees would have a minimal impact on its bottom line as such fees accounted for a small portion of its earnings.