Bloomberg News

EU May Force Mobile-Phone Operators to Cut Roaming Charges

July 06, 2011

(Updates with analyst comment in fourth paragraph, company responses starting in seventh paragraph.)

July 6 (Bloomberg) -- Vodafone Group Plc, Telefonica SA and other mobile-phone operators may have to offer customers separate, cheaper contracts for mobile-phone use abroad starting July 1, 2014, under a European Union proposal.

The EU also plans to cap prices for Internet data roaming at 90 euro cents ($1.30) per megabyte starting July 1, 2012, falling to 50 cents by July 2014, the Brussels-based European Commission, the EU’s regulatory arm, said today. The draft rules retain retail price caps for voice and text messages until the middle of 2016.

Phone companies are trying to maximize revenue from users of smartphones and tablet computers surfing the Web, to make up for a decline in voice calls. Network owners have also been facing reduced revenue in their home countries as national regulators award competitors cheaper access to wireless infrastructure.

Roaming revenue “will continue to decline but there will also be an uptick in users who haven’t enabled roaming before” as prices fall, said Katja Ruud, an analyst at Gartner Inc. in Solna, Sweden. Roaming revenue on average accounts for about 10 percent of a European phone company’s sales, Ruud said. “Operators have seen regulation coming and have slashed prices beforehand, to be seen as playing the game and to stave off tougher caps.”

‘Outrageous Profit’

Telecommunications companies currently make “outrageous profit margins” from data roaming, Neelie Kroes, the EU’s digital agenda commissioner, said in a statement. Separate contracts would give customers more choice and allow more operators to compete, she said.

Deutsche Telekom AG introduced a data tariff on July 1 in 10 European countries which allows region-wide data use for less than 20 cents per megabyte, spokesman Andreas Middel said. Vodafone has cut the price of mobile data transfers in Europe by more than a third over the last two years and typically charges 2 euros a day for 25 megabytes of daily traffic, spokesman Mark Street said by e-mail.

“We’re strictly opposed to a decoupling of roaming offers from other products,” Guido Heitmann, a spokesman for Royal KPN NV’s German E-Plus unit, said in an e-mailed statement. “This introduces a process that’s very work-intensive for consumers and operators,” and new caps on retail prices are “unnecessary.” KPN is the largest Dutch phone company.

‘Aim and Intent’

Telefonica, Spain’s biggest phone company, “supports the aim and intent of the draft regulation,” said a spokesman. “At the moment, it is too soon to say if it can work in practice, and if the benefits of the proposal outweigh the costs.”

France Telecom SA is ‘reviewing the proposed structural measures and exploring what solutions can be delivered that remain effective in terms of cost and ease of use for customers,’ spokesman Tom Wright said by phone. Deutsche Telekom AG will “review this proposal regarding the technical implementation and feasibility,” Middel said.

The EU capped fees for making and receiving mobile-phone calls abroad in 2008. The commission said last year that there should be little difference between roaming and domestic fees by 2015. The EU’s proposal requires approval from lawmakers and member states before it takes effect.

-- With assistance from Manuel Baigorri in Madrid, Matthew Campbell in Paris and Jonathan Browning in London. Editors: Robert Valpuesta, Kenneth Wong.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net; Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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