Vodafone in clash with EU over termination rates

Vodafone claimed that 40 million mobile users may have to stop using their phones if EU commissioner Viviane Reding’s proposed cut of termination rates is implemented.

It is the latest attempt to challenge Reding by Vodafone, which has been the UK’s most vocal opponent to Reding’s plans.

The operator maintains that it would have to pass on the potential losses from the revenues it receives through termination fees onto customers in the form of higher prices.

The network warns that the proposed reduction in termination fees, from the current eight Euro cents to one-two Euro cents could lead to a US-style model, where customers pay for incoming as well as outgoing calls. Vodafone is aiming for around five-six Euro cents in fees by 2012, while Reading is hoping the more drastic cuts would be implemented by 2010.

Smaller operators that are currently paying more for call terminations, such as 3, would gain from lower termination charges and are expected to undercut Vodafone if the changes go ahead.

Reding has called the high termination rates as ‘guaranteed money’ and ‘a real distortion of competition’. Vodafone has responded in its submission by saying failure to recover the costs could ‘risk bankruptcy’.