Consumers and businesses will pay 13-20 per cent less for telephone calls following an Eircom decision to cut prices during the week before Christmas.

The telecoms firm, which supplies 90 per cent of residential homes in the Republic with telephony services, said yesterday the reduction would benefit its customers by €10.4 million per year.

It is the latest in a series of Eircom price cuts recently enforced by a strict price cap imposed by the telecoms regulator, Ms Etain Doyle. Under the current cap, Eircom must cut the prices on a basket of its services by the formula: consumer price index minus 8 per cent.

It is expected that Ms Doyle will significantly reduce the severity of this price cap within days. This will enable Eircom to raise its prices for the first time in years. Eircom said the new price cuts would bring the total reduction to customers' phone bills nationwide to more than €205 million over the past three years. Since July 1999, the average Eircom business customer bill has fallen by more than 21 per cent, while the average residential customer bill has fallen by about 13 per cent.

The changes to Eircom's current price regime will reduce the cost of national evening calls to 4.92 cents per minute from 6.15 cents per minute. National daytime calls will fall to 8.17 cents per minute from the current rate of 9.37 cents. Both the new rates include VAT. The new rates will apply from December 20th, 2002.

But while call costs have come down, the price of line rental has risen. Before July 1999, line rental cost consumers €15.36 including VAT. It now costs €19.60 including VAT.

Mr Cathal Magee, managing director of Eircom Retail, said that in the current climate of rising prices, it was good news from Eircom to the consumer.

But competitors to Eircom stressed that the price cuts had not gone deep enough. Esat BT said its national call charges were still substantially better than Eircom's new published rates. In a statement, Esat BT claimed its rates for daytime national calls were up to 53 per cent cheaper, whilst rates for evenings and weekends were up to 74 per cent cheaper.

Meanwhile, Eircom is due to supply the telecoms regulator with assurances today that it has put in place strict compliance measures to ensure it conforms with official price regulations.