Vodafone locks horns with EU on roaming regulation

LONDON - Vodafone Group Plc has warned the European Union against rushing to bring in regulation to force down prices of mobile calls made abroad, wading into a red-hot debate that has bedevilled the sector.

British-based Vodafone, Europe's top mobile operator with around 100 million users in the region, told Reuters it had written to the EU that competition among operators was in any case forcing charges down and warned any "ill-judged" move could have unforeseen effects on the industry.

The intervention by the world's top mobile company by sales comes at a time when European politicians and officials are stressing the need to cut or even scrap roaming charges, long seen as a bane for travellers and tourists.

European Union Information Society and Media Commissioner Viviane Reding, who has previously said roaming charges were too high, is due to present an update on roaming charges and outline a new regulation to bring down roaming charges.

Any new regulation, which could come into force in 2007, will need the approval of member states and the European Parliament.

Irish Prime Minister Bertie Ahern last week called roaming charges "an unnecessary evil" as Ireland moved a proposal at a two-day EU summit in Brussels to look at eliminating or reducing them.

Roaming revenues are a lucrative source of revenues and earnings for mobile operators and analysts estimate a steep cut could hit them hard.

Investment bank Credit Suisse expects an outright scrapping of international roaming surcharges for intra-EU roaming to cause a loss of up to 7 to 9 percent of revenues for European mobile operators and around 15 percent of earnings overnight.

Vodafone, which some analysts believe is the most vulnerable to a steep cut in charges, said the EU needs to explain why it feels there is a case for regulation in a market where prices were in any case falling.

In Vodafone's case, they fell 30 percent in the last year for contract users on its Passport roaming scheme.

"The normal reason why you regulate is that markets are failing in some way. They will need to explain, given that national regulators have looked at this market and not found any market failure, why the Commission comes to a different view," said Richard Feasey, Vodafone's director for public policy.

Last week, the GSM Association, the industry's global trade body, said any new regulation on roaming would increase uncertainty and could put at risk further investment and development of new services.

Vodafone said roaming charges were just one element in which mobile operators competed with each other, and urged that market forces be left to decide how much they fell.

"Although it might appear to be an attractive and politically popular objective, there is no reason why retail prices for roaming and those for domestic mobile calls should be expected to 'converge' or be exactly the same," the company said in its submission to the EU.

Feasey said consolidation in the sector and the emergence of more pan-European operators would also help bring down roaming charges as "we see people getting into a strategic position where they can drive costs out of the business through scale".