Cable & Wireless is considering suing the Japanese government for allowing the country's dominant state telecoms operator, NTT, to hike its call rates.
Britain's second largest fixed-line telecoms company believes that the move is bad for customers and competition, and will decide whether to launch legal action within a fortnight.
Japan's telecoms ministry has given NTT the green light to increase the price it charges other operators to connect calls by between 5 per cent and 12 per cent. But, in an extraordinary move, if NTT experiences a fall in customers, it now has the power to recoup some of the lost revenue from rival operators.
"We are very concerned by this," said Phil Green, chief executive of C&W's Japanese operation, which is the country's fifth largest telecoms provider. "If the dominant company's traffic goes down then it is effectively subsidised by the rest of the industry."
He also argued that NTT, which has a 75 per cent market share, was increasing its so-called interconnection charges at a time when rates were falling in almost every other country.
"If the increases carry on over the next five to 10 years then no one can operate [in this market] because the cost structure is not sustainable. Therefore, we are looking at the possibility of legal action," said Mr Green. C&W believes it has grounds to sue under Japan's new Telecommunication Business Law, which states that charges should be fair and reasonable.
Asked why NTT had been allowed the increase, Mr Green said: "NTT is government owned. And don't forget that the role of the regulator is to protect the incumbent as well as the competition."
C&W's Japanese operation, which turned over £323m last year, was spared the chop in the company's restructure plans unveiled last month.
Last week C&W announced that Lord Robertson, the secretary-general of Nato, will join the company in December as executive deputy chairman. His role will be to foster relations with overseas governments. A meeting with the Japanese administration is likely to be at the top of his agenda.Reuse content