UK operators protest over planned termination rate cuts

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The UK telecoms regulator, Ofcom, has divulged plans to force mobile operators to make dramatic cuts to mobile termination rates. The official body said that the tariff reductions, which would mimic European recommendations, may see rates falling from 4.3 pence per minute to 0.5 pence per minute by March 2015.

According to Ofcom, UK operators are said to have gained about €5.3 billion in total revenue from termination rates in 2008. The regulator said it was seeking to cut the charges after the European Commission said rates should fall to about 1.5 euro cents to 3 euro cents across Europe by 2012. Regulators in Portugal and Belgium have proposed caps on rates this year.

Commenting on the proposed cuts, Simon Gordon, a Vodafone spokesman, said: "A cut of this magnitude deters future investment, makes it less likely that the UK would continue to lead in mobile communications and was at odds with the government's vision of a digital Britain."

Vodafone said in February that third-quarter UK service revenue excluding currency swings and acquisitions fell by 4.9 per cent following a cut in termination rates last July.

Orange also complained that these measures, if implemented, would stifle innovation. "Handsets may no longer be subsidised, and consumers may have to pay to receive calls," warned an Orange spokesman.

Financial analysts also took a negative view of this move and caution that the proposals would knock Vodafone's profits from pre-paid customers.

However, 3UK welcomed the move claiming that fixed-line calls to mobiles had always been dramatically overstated "and we expect costs to fall by up to two-thirds," said Kevin Russell, CEO 3UK, "and mobile calls will also cost significantly less."

3UK's director of regulatory affairs, Stephen Lerner, added that the reduction would enable it to reduce call prices for customers on both fixed line and mobile by around 25 per cent. "There will definitely be a reduction in the price of voice. There is no reason to believe prices will not continue to fall and from a 3UK perspective, we will be in a position to pass along the reductions."

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