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June 27, 2008

Mobile operators angered by EU price-cut proposals

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by David Allen

Mobile phone networks across Europe have reacted with anger at European commission proposals to cut cross network call costs by up to 70%.

EU telecoms commissioner Viviane Reding yesterday proposed that termination rates should be cut by 70% to reduce the price consumers pay for calls.

Termination rates are the charges that telecoms companies place upon each other for making cross-network calls.

The proposals were much more severe than expected, and saw Vodafone‘s share price fall by over six pence to 139.8p.

Termination rates account for around 20% of network operators’ revenues.

In the UK, around £2.5 billion of mobile phone companies’ income comes from termination rates.

Companies across Europe have warned that such drastic price cuts would leave them unable to subsidise mobile phone handsets, ending ‘free phone’ deals, and pricing many customers out of the mobile market.

BT, however, welcomed the proposals, saying that termination fees are effectively a ‘subsidy’ given by landline users to mobile phone companies.

Other proposals included reducing the variations in call prices across different European countries.

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