7/4/2008 10:59:00 AM
Operators stand to lose up to £1.75bn due to EU plans
Some mobile networks stand to lose as much as 20% of their total revenue under new plans from EU commissioner Viviane Reding to cut termination rates.
Reding (pictured) is threatening to reduce termination rates by 70%, after what she considers is the failure of mobile networks to cut the rates without regulatory intervention.
Termination rates are the cost that an operator levies to another when receiving a call or text message from that network.
It has triggered counter threats from the large networks that such a huge loss in revenues will force them to look to other areas to make up the shortfall.
Threats include charging people more for handsets, and some networks argue that Reding’s plans will hit prepay customers the hardest, as they will be forced to increase the cost of calls.
Networks are estimated to pass around £2.5bn between each other in termination fees, putting the amount under threat at £1.75bn.
One network that bears a high percentage of the cost of the calls is 3, and bosses at the network fully support the EU’s plans for termination cuts.
3 CEO Kevin Russell said: ‘The current level of wholesale mobile termination rates mean inflated costs for calls to mobiles. We believe the rates have to come down further and faster to remove the distortions of competition they create. Change is long overdue.’
The issue has also created conflicts within networks. T-Mobile’s German business is a net receiver of termination fees, as it is the dominant player in the market, and stands to lose out under the cuts.
T-Mobile UK, meanwhile, is a small player by comparison, and considers termination fees as a cost.
The EU and 3 have been criticised for being ‘simplistic and opportunistic’ by some.
One analyst said: ‘The EU has used a bit of a blunt instrument to take this on. There’s clearly a need to review termination rates, but it can’t be done in isolation.