Mobile phone price cuts branded 'inadequate'

A twenty percent reduction in the amount it costs to call a rival mobile network is unlikely to make much of a difference, according to analysts
Written by Graeme Wearden, Contributor

Industry experts today reacted coolly to reports that mobile phone call charges could soon be cut by up to one fifth.

According to the reports, industry regulator Oftel is about to announce the results of a six-month investigation into the price of calls made between rival mobile phone networks. It is expected to force the four mobile network operators to cut these prices -- known as termination charges -- by 20 percent.

Simon Buckingham, analyst at research group Mobile Streams, doesn't think that a 20 percent cut will be enough to make much of a difference for consumers. "Young people, who are more concerned about their mobile bills than businessmen, for example, already know that it's cheaper to use text messaging. You will still save more money if most of your friends are on the same network as you," he said, adding that the "free minutes" that are included with many mobile phone packages only apply to calls on the same network.

Oftel is refusing to comment on speculation over its price investigation, except to say that it will be announcing the findings in the next few weeks. Today, it costs up to 50 pence to make just a short call to a mobile phone from either a rival mobile network or a landline.

Objections from mobile companies to the idea of a 20 percent cut in termination charges are not like to be too strong. "This level of cut won't have any effect on the mobile industry, because it is simply not substantial enough," said Buckingham. With some large firms running their own virtual private networks, and many smaller businesses giving their workers subsidised mobiles, he argues that many of the UK's 40 million phone users simply won't notice such a change.

There is also speculation that the 20 percent cut could be followed by further reductions in subsequent years.

Currently, BT Cellnet and Vodafone are the only mobile operators who are subject to Oftel regulation over certain issues such as the pricing of termination charges. Back in 1998, when the controls were brought in, One2One and Orange were both seen as too small. Oftel is reviewing the situation because the existing controls will expire in March 2002.

BT Cellnet recently agreed that it could be fairer to extend price controls to One2One and Orange.

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