Europe - mobile termination rates

Mobile phone groups split on Reding fees call

The cost of mobile phone use could rise if Brussels insists on sweeping cuts to wholesale fees that operators charge to handle calls from other networks, Vodafone warned yesterday.

Viviane Reding, European Union telecommunications commissioner, yesterday said she wanted the connection rates to be lowered by up to 70 per cent over the next three years.

But Vodafone, the UK's biggest mobile operator, claimed that the industry needed to recover the costs.

Richard Feasey, the company's head of public policy, said: "The cost of owning a mobile phone could go up for some users, particularly hurting the many millions of Europeans on lower incomes who typically pay around €10 [$16, £8] a month today and are on pre-pay tariffs."

Meanwhile, Hamid Akhavan, chief executive of Deutsche Telekom's T-Mobile International, yesterday told Reuters that Ms Reding's suggested cut was "too drastic".

But 3 UK, a newer, smaller group, welcomed the move. Kevin Russell, chief executive, said: "We believe the rates have to come down further and faster to remove the distortions of competition they create." Change was long overdue, he added.

So-called mobile termination rates (MTRs) are levied by one operator to connect a call from another network.

By charging the lucrative fees, Europe's mobile phone groups have been able to recoup multi-million-euro investments that they laid out to build their networks. In the UK, the rates represent 15 per cent of mobile operators' revenues.

While the fees have fallen in recent years, the charges remain far higher than those for fixed-line calls. Ms Reding is keen to address what is seen to be a cross-subsidy between the two.

She is also concerned that high MTRs make subscribers less likely to call people who are signed up to other operators, because the charges will often be higher.

In addition, Ms Reding maintains that MTRs are regulated in an inconsistent manner across the Union, and wants national telecoms authorities' methods to converge. She has said she wants prices to fall to between 1 and 1.5 euro cents a minute in the long term.

Ms Reding insists her action, combined with more competition, could lead to customers' phone bills falling.