EU may scrap some mobile phone charges abroad

Huw Jones

BRUSSELS: EU consumers could end up paying less for using their mobile phone abroad under plans being put forward by EU Information Society and Media Commissioner Viviane Reding on Tuesday.

Reding will unveil an outline regulation for cutting the cost of using handsets abroad on Tuesday -- a step that will raise a cheer among business travellers and tourists, but which analysts say could hit earnings of mobile operators hard.

Reding said an EU regulation could also ensure that calls made abroad could be priced as if they were made back home.

For example, a British tourist making a local call in Spain would pay the same amount as if he had made the call in Britain, with a similar arrangement for pricing international calls.

"The EU regulation would ensure that operators do not charge operators from other countries substantially more than the actual cost," Reding said.

Reding hopes the European Commission will adopt the proposal for a regulation in June after further consultation. It is expected to come into force next year after approval from member states and the European Parliament.

Brussels says it has given the industry enough time to get its house in order after launching probes into roaming charges in December 2004.

Two months later it formally charged Deutsche Telekom's T-Mobile unit and Vodafone for overcharging visitors from abroad when they use mobile phones in Germany.

In July 2005 the Commission said it was again not satisfied that roaming charges reflected competition and that it would take action, though mobile operators say prices have come down.

Figures compiled by the EU executive show that roaming prices for a four-minute call vary from as little as 0.20 euro cents for a Finnish consumer calling home from Sweden, to 13.05 euros for a Maltese traveller in Latvia.

Telecom groups have said Reding is acting in haste and should use existing competition and regulatory tools.

WHOLESALE AND RETAIL

The new rules would affect the entire industry, with member states and lawmakers signalling strong backing.

"To ensure that operator savings at the wholesale level are actually passed on to the consumer, the Commission sees also a need for regulation at the retail level," Reding said.

EU leaders agreed at a summit on Friday that cutting roaming charges was important for boosting competitiveness.

"This regulation will ensure that operators cannot charge an international roaming charge that is higher than that imposed nationally," said Sharon Bowles, a competition spokesperson for the European Parliament's liberal group said.

Credit Suisse said the new rules could crimp earnings.

"An outright scrapping of international roaming surcharges for intra-EU roaming would cause a loss of up to 7-9 percent of European mobile operator revenues, and about 15 percent of earnings overnight, well beyond the downside currently already factored in," analysts at the Swiss bank said.

Dresdner Kleinwort Wasserstein bank analyst John Davies said roaming income accounted for 8 percent to 15 percent of operators' revenues and typically carried higher margins, with inbound roaming margins typically higher than outbound roaming margins.

(Additional reporting by Santosh Menon in London)