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Ofcom proposes cuts to UK mobile charges

The UK’s largest mobile phone companies may be forced to cut the price of their calls following new proposals unveiled by Ofcom, the UK telecoms regulator.

The watchdog is proposing deep cuts in termination rates on the 02, Orange/T-Mobile, Vodafone and 3UK networks as it works to set the rules on mobile termination rates for the four financial years to March 2015.

 “We expect these reductions to be passed on to consumers through competition,” the regulator said.

In doing so, Ofcom stepped back from an initial proposal last year that could have seen consumers face higher monthly bills if telecoms companies had to cut or scrap charges for connecting calls to their networks.

Mobile termination rates are the fees are paid by fixed-line and mobile operators when their customers make calls to people on other networks. However, reform is a highly contentious issue among the bigger mobile operators, not least because they secure a total of about £2bn ($3bn) a year from the fees.

Ofcom sets a price ceiling on the wholesale fees that mobile operators can levy on each other, as well as fixed-line phone companies led by BT Group.

Its proposals on Thursday suggested Vodafone, 02 and Orange/T-Mobile would cut termination rates from 4.3p a minute to 0.5p by March 2015, with 3UK’s charges falling from 4.6p to 0.5p in the same period.

Ofcom expected the changes would mean the payments made between mobile operators, and by fixed-line networks to mobile operators, would fall. Shares in Vodafone opened down 0.7 per cent at 150.95p while BT rose 1.2 per cent to 125.4p.

However Orange described the moves as a backward step which would stifle innovation. “If these proposals come into force, the way our consumers currently buy, use and enjoy their mobiles may be forced to radically change,” it said.

“Handsets may no longer be subsidised, you may have to pay to receive calls and the rollout of Digital Britain and other network investment may be stalled considerably.”

The proposals fall into line with moves by the European Commission, which has pressed for cuts in the fees because of concerns that mobile operators make excessive profit from connecting calls to their networks.

BT said it welcomed Ofcom’s statement and would pass on prices to consumers, but questioned the four-year time frame.

“In this case what is being proposed is just the elimination of excessive prices and the mobile operators have had plenty of notice that termination rates are likely to fall,” it said.

BT also noted that the proposed change would bring the methods used to set mobile termination rates in line with the EC’s recommended approach.

Morten Singleton, an analyst at Collins Stewart, said one of the consequences of this move would be the decreasing profitability of the pre-paid customer.

“For years it has hardly mattered how many calls such customers made, so long as they were on your mobile network. With these rates finally coming down to a level more commensurate with the costs of providing the service, operators will have to reassess the profitability of their prepaid customer base,” Mr Singleton said.

He expected the industry would either aim to push more people on to contracts or raise pre-paid prices.

In a separate statement, Ofcom also confirmed that consumers will be able to transfer their existing mobile number to a new provider in just one working day rather than the current two days.

Ofcom expects this changes to come into effect in the first half of 2011.

Источник: Financial Times

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