The UK's largest mobile phone operator is introducing a new roaming scheme for voice calls in Europe, whereby incoming calls — currently costing 35p per minute — will be free in exchange for a monthly supplement.
Starting immediately with UK customers roaming in Spain, the new tariff is planned to extend to 35 European territories by mid-2007. The supplement will cost £5 per month for individual customers, with small businesses having the option of buying 12 months at £2.50 per month. Outgoing calls, also currently at 35p a minute, will cost 25p per minute.
There is no word on whether data-roaming tariffs will also be cut.
Simon Gordon, O2 spokesman, said that O2's recent takeover by Spanish telecoms giant Telefonica was a key factor behind the move.
"What's changed is that working with Telefonica, we can get better scale, pull together better resources. In terms of making money, it's too early to say. We don't intend to lose money, but it's primarily a retention tool," explained Gordon, who indicated that the new tariff could be rolled out internationally.
"We're not adverse to the EC challenging wholesale prices. We'll look at other major markets such as the US afterwards, but we're doing Europe first," Gordon said.
This move is roughly in line with planned moves by the European Commission to force mobile roaming charges down across the EU. The Commission has been investigating roaming since 1999, and recently complained that despite every effort it had made, operators were still charging users up to 10 times the wholesale cost of a call.
Proposed regulation would reduce that to a maximum of 49 (euro) cents (32p) per minute for calls between European states, 33 cents (22p) within states and 16.5 cents (11p) for received calls. This, the Commission says, would result in an overall 70 percent reduction in charges. The regulation is due to come into force sometime next year.
One of O2's rivals was quick to claim the move showed that the mobile industry didn't need to be forced to operate fair roaming charges.
Robyn Durie, regulatory council for T-Mobile UK, said the change "made a mockery" of the Commission's proposal to regulate how much operators could charge for roaming services.
"The market has clearly demonstrated that there is no need for retail control of prices," said Durie, speaking at a Westminster eForum debate on telecoms regulation.
But Giles Chichester MEP, chairman of the Industry, External Trade, Research and Energy committee of the European Parliament, insisted that Europe's intervention had been crucial.
"The reaction [from industry] has been minimal, until we started having hearings in the European Parliament and encouraged the Commission to make these proposals," said Chichester.