Page last updated at 11:20 GMT, Monday, 1 September 2008 12:20 UK

Vodafone warning on fees shake-up

Mobile phone user
Termination fees are highest in Bulgaria and lowest in Cyprus

Vodafone has warned that 40 million mobile phone users in Europe might switch off their handsets because of proposed EU reforms to call charges.

Cuts in termination rates - the amount one network charges another to connect a call - sought by Brussels could be damaging to the industry, it said.

If mobile firms had to raise fees to make up the loss, users could leave in droves, its research showed.

Brussels says the current system harms competition and keeps prices too high.

'Increasing competition'

It wants termination rates, which vary significantly between different EU countries but which average about 8 euro cents a minute, to come down by about 70% by 2012.

Their aim is to bring down the cost of calling different mobile phone networks, or calling mobile phone operators from a fixed-line phone.

Mobile firms, for whom such fees account for up to 20% of annual revenues, are lobbying for more gradual reductions.

The expectation will be that costs and prices will go up because companies do need to cover their costs
Vodafone spokesman

Vodafone, Europe's largest mobile business, warned that firms "risked bankruptcy" if they weren't able to "recover their costs".

The European Commission is currently consulting on proposed changes to charges - which are reflected in a customer's final bill - with a view to announcing proposals next month.

Speaking in June, EU telecoms commissioner Viviane Reding said the current disparity in rates between different countries meant consumers were paying too much while also disadvantaging smaller mobile operators and fixed-line telecoms firms.

"Call termination markets in the EU need a regulatory plumber," she said. "Truly cost-oriented termination rates will increase competition to the benefit of consumers."

Brussels has raised the idea of the EU moving towards a US-style system where people receiving calls pay part of the cost involved, a change Vodafone says would particularly hit pay-as-you-go users.

'Naive'

Vodafone said it accepted the cost of termination rates would continue to come down but took issue with the speed at which Brussels was seeking the reductions.

If network operators had to absorb these extra costs, they would almost inevitably be passed onto customers, it stressed.

In its submission to the Commission, the firm cited independent research suggesting 10% of EU mobile users would discard their phones if retail charges rose as a result of lower fees.

"If you regulate prices at retail level, there will be consequences of this," a Vodafone spokesman said.

"The expectation will be that costs and prices will go up because companies do need to cover their costs.

"It is naive to suggest they don't".

The final decision on what operators charge each other will rest with national telecoms regulators in individual countries.

But the Commission has made clear that member states must take the "utmost account" of its recommendations.

The Commission has waged a lengthy fight with the mobile industry to reduce what people pay for making calls and sending text messages while travelling abroad.

It recently said it would regulate to bring prices down after accusing firms of not moving fast enough of their own accord.




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