EU aims to cut mobile costs abroad

Viviane Reding

BRUSSELS - The cost of using a mobile phone abroad in the European Union will be halved by June next year under proposals outlined this week, in a move that would hit hard the earnings of wireless operators.

Shares in companies such as Vodafone fell as the European Commission said it had given industry plenty of time to cut prices but operators had failed to listen.
"It's unacceptable that consumers are punished on their telephone bill simply for crossing a border," EU Information Society and Media Commissioner Viviane Reding said.

"This regulation I intend to propose will end international roaming charges as we know them today," said Reding.

Vodafone stock fell 4 per cent and it slammed the move.

"Since they have not properly represented and defined what the problem is we don't think the solution is a sensible one and will have adverse and unintended consequences," said Richard Feasey, director of public policy at Vodafone.

JP Morgan bank said up to 10 per cent of the group's earnings were at risk should roaming rates fall by 80 per cent.

The add-on or "roaming" charge of using a mobile phone on holiday or business trips is the bane of travellers but operators say it helps keep down the cost of other services.

Brussels estimates international roaming revenues total €10 billion ($20.15 billion) and regulation would save the consumer between 40 and 60 per cent on mobile calls abroad.

Roaming charges per four-minute call vary from 20c to €13 across the 25-nation bloc with profit on receiving calls abroad at 90 to 100 per cent for operators, the EU executive said.

"Operators will lose the excessive profits they are making," said Peter Rodford, a senior commission official.

Analysts were surprised by the short timetable."I think people would have assumed a 50 per cent cut in roaming charges over three years. If they did it by the end of 2007 - a year quicker - then it's a little bit negative," said John Davies, an analyst at Dresdner Kleinwort Wasserstein bank.

Operators expected to suffer the most are those in popular south European holiday destinations. Spain's telecoms regulator has refused to back measures which are supported by its EU peers.

Reding said the proposed changes would scrap roaming charges on receiving calls abroad and consumers would pay for local and international calls made abroad at the same rate as if at home.

A price cap on wholesale roaming charges - those paid between operators - within the EU will be considered.

Reding said competition in domestic markets and vigilance by national watchdogs would ensure operators did not bump up national charges to make up for lost roaming revenues.

Dutch operator KPN, whose mobile unit gets 10 per cent of its revenue from roaming, said making it free to receive calls abroad was not practical as it still incurred costs.

The European Regulators Group, which has been advising the commission, said wholesale roaming charges between operators should be cut to about 30c a minute from about 70c to 80c now.

"The cost of international roaming is completely disproportionate," said chairman Kip Meek.

The commission said the new regulation would be proposed in June and would need approval from member states and the European Parliament to become law, possibly by the summer of 2007.

EU lawmakers welcomed moves to end what some called rip-off roaming costs. EU leaders agreed last week that lower roaming charges would improve competitiveness.

The commission wants to regulate wholesale roaming charges and retail roaming charges, or the cost the consumer has to pay.

Meek said national watchdogs backed Reding's moves on the wholesale side and would do likewise on the retail side if operators failed to pass on savings to customers.

KPN and Nordic operator Teliasonera said any regulation should be limited to the wholesale level.

"Such a heavy intervention at both the wholesale and retail levels would be unprecedented in the mobile market and appears disproportionate," said Michael Bartholomew, director of industry group ETNO. He warned that competitiveness could suffer.

- REUTERS 


Kiwis may not benefit

It remains unclear whether European Commission regulation of international mobile roaming charges will cut the cost of calls made by visiting New Zealanders.

Hayden Glass, regulatory manager for Vodafone New Zealand, said more detail was needed about the proposals.

"We don't know is the short story."

Vodafone New Zealand makes agreements with operators in other countries to carry the calls of its visiting customers.

The wholesale fee paid by Vodafone to the foreign operator for handling these calls is in turn passed on to the customer.

"If the European Union were to regulate these wholesale charges ... we might be able to access lower rates and therefore we might be able to offer lower retail prices for customers who are going to Europe," Glass said.

However, if the regulations are applied only to European-based telcos then New Zealanders might not benefit from the cheaper costs.

"It's not obvious that they would care terribly much about what New Zealanders pay when they go to Europe," Glass said.

"They are mostly going to care about what Europeans pay when they go to other parts of Europe."

- Owen Hembry