LONDON-The U.K. mobile landscape looks set for change after the U.K. Competition Commission recommended in a report released today that the four U.K. mobile operators reduce their mobile termination charges by 15 percent before July 25 this year.
MmO2 said it would delay its U.K. third-generation launch until the second half of 2004 because of the findings. Vodafone Group plc said it will seek a judicial review of the Competition Commission proposals. Other operators are expected to follow suit.
The calls for price cuts come at time when average revenue per user figures have just begun to slowly increase again for some European operators after several quarters of declines, following mobile market saturation in many European countries.
The commission’s year-long review of U.K. termination charges found that mobile operators charge 30 percent to 40 percent above “fair charges,” and consumers pay too much for calls from fixed lines to mobile as well as from one mobile network to another.
The findings, which were widely leaked in advance of their publication, are in line with conclusions released by U.K. telecom regulator Oftel in 2001. Those findings were dismissed by the U.K. operators, although the latest proposed measures are at least as stringent.
Operators are accused of making excessive margins on termination charges, which account for the majority of the cost of mobile-phone calls. “Consumers are being overcharged for calls to mobile phones, and the mobile-phone operators must reduce their charges to a fair level,” Oftel said in a statement.
The European Commission is also investigating mobile termination fees across Western Europe. In the United States, the Bush administration has launched an investigation into whether U.S. telecom carriers are being overcharged by their wireless counterparts in Europe and other regions.
In addition to the initial 15-percent cut, the commission said MmO2 and Vodafone should further reduce their charges by inflation minus 15 percent annually between July and March 31, 2004. Orange and T-Mobile should reduce their termination charges by inflation less 14 percent annually during the same timeframe, the findings stated.
O2 UK, MmO2’s U.K. subsidiary, said it will implement several actions to recover lost revenue based on the price reductions. In addition to its 3G services delay, it will defer previously planned reductions in the outgoing charge elements of certain tariffs and seek additional operational efficiencies, including handset subsidy reductions.
Vodafone called the report findings “fundamentally flawed” and said the 49 million U.K. mobile-phone users would pay more due to the price cuts, although the Oftel director said U.K. consumers should save $307 million annually through the initial 15-percent reduction in prices for fixed-to-mobile calls.
