In March, Viviane Reding, the EU Commissioner for Information Society and Media, outlined proposals for the introduction of an EU regulation to bring down prices of international roaming on mobile phone networks.
Over the years, mobile operators have justified high roaming charges not only because of the complexity of routing a call over different networks, but also the complex billing process involved for making a call to a roaming mobile handset.
The EU pointed to the fact that for a four-minute call, roaming prices still vary from as little as 0.20 euros ($0.24) for a Finnish consumer calling home from Sweden, to 13.05 euros ($15.78) for a four-minute call by a Maltese consumer in Latvia.
Reding was looking to bring down international roaming charges by addressing inter-operator tariffs (wholesale prices). The world’s largest mobile operator, Vodafone Group Plc, was quick to denounce the proposed regulations, warning that any ill-judged move could have unforeseen effects on the industry. It also said market forces should be left to decide how much roaming charges fall.
Vodafone had already ended roaming charges for its Irish customers visiting the UK. Also in May 2005, it introduced the Vodafone Passport package that for a fee of 75 pence ($1.39) per call, allows customers to use their call packages (including free airtime) in certain overseas markets.
Now however, just four days before the consultation deadline, both Vodafone and T-Mobile, the mobile arm of Deutsche Telekom AG, have announced they are lowering their international roaming charges.
Vodafone has announced a reduction in European roaming prices of 40%, to be in place by April 2007 at the latest. This is in addition to its Passport scheme.
We share the aims of the commission, and we recognize that customers want better roaming charges, said a Vodafone spokesperson speaking to ComputerWire. However we don’t agree that regulation is the answer. It is up to the market to decide.
Vodafone currently has 30 million customers worldwide that are enabled for international roaming, known as Vodafone World. Vodafone Passport currently has 6 million customers worldwide, and 100,000 customers are joining this scheme every week. It believes that further adoption of its Passport scheme would lead to 40% reductions in average roaming charges for EU subscribers by next year.
The Newbury, UK-based operator believes that the average cost of roaming in Europe will fall from over 0.90 euros ($1.14) to less than 0.55 euros ($1.02) per minute. Passport calls will remain at 75 pence ($1.39) per call, plus free airtime if available, otherwise normal international roaming charges apply.
Vodafone also announced that it will enter into reciprocal wholesale arrangements with any other European operator at no more than 0.45 euros ($0.57) per minute for voice calls within the EU from October 2006. This will enable both Vodafone and other European mobile operators to continue to lower the cost of roaming to customers outside of their own networks.
T-Mobile, meanwhile, is also introducing a flat-rate package to cut the cost for its UK-based customers using a phone abroad. From the beginning of June, it will charge contract and pre-pay customers a flat rate of 55p ($1.02) per minute to make and receive calls in 29 European countries, Canada and the US. T-Mobile claims this represents a reduction of average call costs between 45% and 54%, depending on whether the customer is on contract or pre-pay.
It remains to be seen whether the actions of T-Mobile and Vodafone will appease Viviane Reding’s desire to regulate. It seems the market is not convinced it will, as Vodafone’s shares fell 0.98% to 126.75 pence ($2.35) on the London Stock Exchange.
Goldman Sachs believes that the cuts will not be enough to persuade the Commission to abandon its drive to ban roaming charges. Regulation of some form remains likely in our view, although the political support for the rather draconian intervention anticipated by the Commission could be tempered by the operators’ actions, which have included recent moves from Orange and T-Mobile, it said in a research note.
