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Mobile costs will fall

Commission orders 15 percent price cuts across the board

Telco watchdog Oftel today won its battle to force mobile operators to cut the cost of calls from fixed lines to mobile networks as the Competition Commission demanded 15 percent reductions.

Oftel asked the Competition Commission to slash so-called termination charges levied on calls to rival networks by up to 12 percent back in April and today they went one better, pushing savings up to a massive 15 percent — an estimated saving to consumers of £190m a year.

Operators have been ordered to make the cuts before 25 July 03, with further charge controls to be introduced after that over three years to 2006.

"Consumers are being overcharged for calls to mobile phones and the mobile operators need to reduce their charges to a fair level," said David Edmonds, director general of telecommunications at Oftel.

But not all operators are happy with the decision. In a statement released today, Vodafone says it plans to seek a judicial review of the price cuts. The findings of the Competition Commission, said Vodafone, are "fundamentally flawed" and the outcome is likely to mean that the country's 49 million mobile phone users will actually end up paying more.

Primary beneficiaries of the price cuts, according to Vodafone, will be the five million households in the UK without a mobile phone rather than those with mobile phones.

The UK, according to Gavin Darby, chief executive officer of the Vodafone group's local subsidiary, is among the most competitive in Europe. Mobile phone bills, he said, have dropped by 70 percent in the past five years.

BT, the UK's biggest fixed-line provider welcomed the decision.

"This is good news for BT customers. As the charges appeared on their BT bill, it was often BT that was blamed for the prices they had to pay when in fact we simply collected a large part of the money on behalf of mobile operators," said Angus Porter, managing director of BT's consumer division.

"The decision to reduce the cost of calls will lead to lower overall bills which will lead to better value for money for our customers," he added.

Today's announcement will see a significant reduction in BT's wholesale and retail revenues. Last year the company recorded £1.2bn in revenue from customer calls to mobile phones and more than £1.2bn in transit revenue from calls terminating on the networks of other operators. But profitability in both these sectors will remain unaffected as most of the revenue connected is paid back to the other mobile operators anyway.


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