Britain’s telecoms regulator on Tuesday ordered mobile phone operators Vodafone, Orange, T-Mobile and mmO2 to slash the charges for calls to their networks by up to 34 percent from September.
Effectively condoning price cuts already partly enforced by its predecessor, watchdog Ofcom told mobile groups to cut the price they charge for connecting incoming calls to their networks -- so-called termination charges -- between September and next March.
In a 200-page document which ends a six-year investigation that has enraged the UK mobile industry, media-to-telecoms regulator Ofcom said Vodafone Group and mmO2 should slash prices by 30 percent and T-Mobile and Orange by 34 percent.
Ofcom said the new prices would remain in place until March 2006, allowing consumers to save “hundreds of millions” of pounds, depending on how companies adjust tariffs to try and recoup the income lost from a key revenue-spinner.
Vodafone and O2, the British unit of mmo2, have to cut termination charges to 5.63 pence from 8p per minute, while T-Mobile and Orange, the mobile units of Deutsche Telekom and France Telecom, have to cut their charges to 6.31 pence per minute from 9.5p.
“Today’s decision closes a lengthy process, where we have concluded that price controls are currently a necessary market mechanism,” Ofcom Chief Executive Stephen Carter said in a statement.
Ofcom said the new charges would not apply to new, high-speed, third-generation (3G) networks.
Resignation
Orange, T-Mobile and Vodafone went to court last year after former telecoms regulator Oftel, which handed over to Ofcom last year, accused the industry of overcharging consumers by up to 40 percent for connecting calls from rival networks.
Although mobile phone companies in one of Europe’s most competitive telecoms markets argued they had already slashed the price of calls by 70 percent and termination charges by about 44 percent over the last five years, their case failed.
T-Mobile UK struck a positive tone on Tuesday, saying it was “quite satisfied” with the price reductions, though others said the review remained as harsh as ever.
“Orange does not agree with the conclusion of Ofcom’s review that detailed regulation of mobile termination rates is necessary,” the company said. “There is no need or justification for further regulatory intervention in this market.
“However, we welcome an end to the uncertainty that this lengthy process has created.”
Some analysts said Ofcom’s cuts in termination charges, which account for around 20 percent of the UK mobile industry’s revenues, appeared a little more favorable than Oftel’s, partly because the cut had been delayed until September.
But while the industry digested the document, mobile phone shares, which have already factored in price cuts, traded roughly one percent lower, in line with a weak, broader market.
Under the original three-year plan that kicked off last July, British regulators called for an immediate 15 percent price cut followed by three further inflation-linked reductions of up to 15 percent each year until March 2006.