by CIO Staff

Mobile Operators Cut Roaming Prices Ahead of Regulation

Jun 02, 20063 mins
MobileSmall and Medium Business

Six European mobile phone operators have agreed to slash international wholesale roaming charges in a bid to avert tough regulations from the European Commission, Germany’s T-Mobile said Friday.

The move follows similar initiatives by Vodafone Group of the United Kingdom and 3 Group, a division of telecom company Hutchison Whampoa.

Mobile phone companies are reacting to pressure from the commission, which plans to propose limits on international roaming charges next month.

T-Mobile, together with Orange (France), Wind (Italy), Telecom Italia (Italy), Telenor (Norway) and TeliaSonera (Finland), agreed to cut the cost incurred by other operators when their subscribers visit the six operators’ networks. They’ll be reduced to a maximum 45 euro cents in October, then to a maximum 36 euro cents a year later.

“We need to adjust to the new situation,” said T-Mobile spokesman Klaus Czerwinski, adding, “We can’t do it in one big jump.”

Vodafone has made a similar pledge, while 3 Group said earlier this week that international wholesale roaming charges should not exceed 25 euro cents per minute.

The European Commission welcomed the moves but insisted that a regulation is still necessary. “It’s a good first step,” said Martin Selmayr, commission spokesman for telecom-related issues.

“The decision by parts of the industry to cut the charges confirms our belief that there is plenty of room for cuts, and that this will not kill off the mobile phone industry in Europe, as some companies have implied,” he said.

The commission regulation due in mid-July will not propose specific prices for operators. But it will call on companies to charge the same for international roaming as they do for domestic roaming from one network to another.

“We are not setting prices, but setting a principle,” Selmayr said. “If companies make a profit margin of 30 percent domestically and 300 percent on international calls, that’s what we want to stamp out.”

“The roaming market requires regulation because normal market pressures don’t appear to work. Operators have not passed on savings from lower costs to consumers as they should in a healthy competitive market,” he said.

The proposed regulation will look at profit margins on retail roaming charges as well as wholesale charges that operators charge each other.

The companies that have so far committed to lower their international wholesale roaming charges are generally from northern Europe. Companies in the south, including Spain’s Telefonica Moviles, have refused to commit since they gain the most from holidaymakers visiting in the summer.

02, a division of Telefonica, said Tuesday in some press reports, including an article in The Guardian newspaper, that it decided not to join the six companies’ initiative because it feared being accused by European regulators of belonging to a cartel.

“Our concern is that this may be seen as price collusion,” 02 told The Guardian.

T-Mobile’s Czerwinski dismissed this as a smokescreen. “That’s ridiculous,” he said. “Telefonica is probably saying that because it is one of the biggest beneficiaries from high wholesale prices, because Spain is such an important tourist destination.”

Telefonica was not immediately available to comment.

-Paul Meller, IDG News Service

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