Ofcom hits UK operators with 80% mobile termination rate cut

The four UK mobile operators have been told by the telecoms regulator, Ofcom, to reduce their mobile termination rates (MTR) by around 80 per cent over the next four years. The hardest hit will be O2, Vodafone and Everything Everywhere, which will see their current MTRs of as much as 4.48 pence per minute fall to 0.69 pence by 2015. 3UK, the country's smallest operator, will have to cut its rates by 85 per cent.

The reaction by operators to cut in MTRs, which are the charges operators make for connecting calls on their networks, was predictably angry, even though Ofcom is only implementing EU recommendations. "We are really disappointed that Ofcom has ignored the evidence that termination rate cuts will mean higher costs for pre-pay customers," Vodafone UK CEO Guy Laurence said in an statement to Bloomberg. "We are studying Ofcom's decision and considering all of our options."

Everything Everywhere suggested that the move was unfair and hinted that it was considering an appeal, claiming that the Ofcom decision could damage a sector of its customer base. According to Mobile Europe, the company said in a statement: "Our concerns focus on the impact of the decision to our vulnerable pay-as-you-go customers."

"By applying pure Long Run Incremental Cost methodology in setting call termination rates going forward, Ofcom has suggested we recover a larger share of our costs from retail charges," Everything Everywhere, the combined operations of T-Mobile UK and Orange UK, said in a statement. "This may force us to change the pay-as-you-go model as we know a large number of these customers will now become uneconomical."

However, Ofcom seemed unconcerned by these protestations, stating that the new rules should mean improved consumer choice with the introduction of more pricing flexibility. "Ofcom expects these savings to be passed on to consumers in the competitive UK landline market," it said in a statement, according to Reuters. "Some operators have already promised to lower their charges."

The potential savings to UK mobile customers were estimated to be around £800 million annually.

For more:
- see this Bloomberg article
- see this Reuters article
- see this Financial Times article
- see this Mobile Europe article
- see this The Register article

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