Warning on higher mobile charges

Mobile phone users could face excessive charges

Mobile phone users could face higher charges as a result of the government's £22bn auction of mobile operator licences two years ago, a panel of MPs has warned.

A report from the House of Commons Public Accounts Committee said that hefty debts incurred to meet the cost of the licences may force mobile operators to merge, restricting competition and driving up prices.

"It will remain important to ensure a competitive market if the consumers are not to be left with an excessive share of the high costs incurred by the companies," the committee said.

The MPs said mobile phone operators should be allowed to share networks or trade spectrums in order to avoid a surge in costs which would then be passed on to consumers.

Cash crunch

They also called on the telecoms watchdog Oftel to intervene to protect the consumer from overcharging when the next wave of internet-enabled mobile technology becomes available.

In April 2000, the government raised a total of £22.5bn in a five-way auction for licences to use the radio spectrums needed to support third generation mobile phone networks.

The five companies bidding for the licences were Vodafone, BT, One2One Orange and TIW.

The cost of paying for these licences, together with a downturn in the global telecommunications sector, have since hit mobile operators hard.

Slowing demand

Vodafone, once the star of the UK new telecoms sector, has lost nearly 70% of its peak value after a steady decline in its share price.

There is growing evidence that Vodafone, in common with other mobile network operators and handset makers, overestimated demand for mobile services.

Nokia shocked investors by downgrading its sales forecasts earlier this month, while rival handset maker Ericsson this week unveiled steeper than expected losses and announced plans to axe 20,000 jobs.

Earlier this month, the Competition Commission - the UK's anti-trust watchdog - launched an investigation into "excessive profits" at four of the big mobile operators.