Vodafone outlines voluntary rate cuts

Vodafone has finally unveiled details of a price cut offer made last year in an attempt to stave off regulation of mobile termination rates - the amount it can charge other phone providers for putting calls through to its mobile network.

The Commerce Commission wants to force through a cut in these rates, saying high charges are part of the reason why calls to local mobile phones are much higher than those in the rest of the world.

Vodafone and Telecom last year offered voluntary rate cuts, but Vodafone refused to make its offer public, winning a court injunction to protect it from scrutiny.

But yesterday it relented, outlining a four-year price cut plan and, for the first time, a proposal to also include mobile-to-mobile calls - not just those made from mobile phones.

This offer is permanent and not conditional on the outcome of the commission's investigation.

It had decided to make the offer public now, "ensuring accuracy and transparency".

Commercial development general manager Tom Chignell said its "interconnect" contracts were coming up for renewal in the next few months and customers - including Telecom, TelstraClear and CallPlus - would be offered the new deal.

Previously, different customers paid different rates; a reason Vodafone wanted to keep details of its offer to the commission confidential.

Vodafone wanted to allow the public to make an assessment of the offer. "We think it's a far better solution to the whole thing than regulation," Chignell said.

Telecom has already said it would pass on savings from reduced wholesale termination rates to its customers. Vodafone said this would mean a direct benefit for landline customers calling one of its mobile phones.

Vodafone has the most to lose with lower termination rates because it earns connection revenue from Telecom's fixed-line network.

A commercial arrangement like the one offered yesterday would provide a more certain and immediate way than regulation to "ensure real benefits for customers", said Vodafone.

In June last year, Telecoms Commissioner Douglas Webb suggested that termination rates were too high - at 27c a minute.

The commission, comparing the rate to other OECD countries, estimated it should be about 15c.

Vodafone says it will drop its termination rates to 22.5c a minute next year, then to 20c the following year, 19c the year after that, then to 18.5c in 2010.

Telecom made its voluntary rate cuts public in mid-August. Telecom was charging 26c a minute but dropped that rate by 2c. It says it will incrementally lower rates to 18c a minute by 2009.

* Reuters reports from Sydney that Telecom will receive formal proposals from potential buyers for its Australian business over the next month and aims to decide on the unit's future by May 5.

Telecom said Australia's second-biggest phone company Optus was among trade and financial buyers who had expressed interest in the unit.