Ofcom turns guns on mobile phones sector

Watchdog tells operators to slash their charges to other networks

The communications watchdog has ordered mobile operators to slash their termination rates in an attempt to make calls cheaper for consumers.

The largest operators were shocked by the size of the proposed cuts, which will cost them billions of pounds, and warned that customers would lose out in the longer term.

When a mobile call is received from a landline or mobile on a different network, the operator will charge theirs; a practice that is worth about £2bn a year.

That fee is referred to in the industry as the Mobile Termination Rate, and is currently charged at between 4.3p and 4.6p for every minute of the call.

Ofcom yesterday recommended that wholesale fees be cut to 0.5p over the next four years. "As rates fall and operators adapt, consumers will benefit from cheaper calls and competition in both the UK fixed telecoms and mobile markets," a spokeswoman said.

The largest operators had expected costs to fall no lower than 1.5p. Orange was yesterday celebrating the official completion of its merger with T-Mobile, but the champagne went flat when they saw Ofcom's proposed cuts.

A spokesman for Orange called it "a backward step for Britain" and warned that consumers may not be the winner. He said: "If these proposals come into force, the way our consumers currently buy, use and enjoy their mobiles may be forced to radically change."

Operators could stop subsidising handsets and customers may have to pay to receive calls. The spokesman warned that network investment and the roll-out of services like 4G could be stalled by the move. "Whilst we are both disappointed and shocked at Ofcom, it is clear from their latest proposals that they have largely ignored our concerns," he added.

Vodafone added: "A cut of this magnitude deters future investment, makes it less likely that the UK will continue to lead in mobile communications and is at odds with the Government's vision of a Digital Britain."

One analyst said a consequence of the new rules is that terms for pre-paid customers may change for the worse. Almost two-thirds of mobile users in the UK are on pre-pay and Morten Singleton, an analyst at Collins Stewart, said prices were likely to rise.

"As a receiver of calls the pre-paid customers generated quite decent revenue from the mobile termination rates alone. With these rates finally coming down to a level more commensurate with the costs of providing the service operators will have to reassess the profitability of their prepaid customer base."

Ofcom last set termination rates in 2007, and by March next year costs will be down a quarter. The latest proposals will come into force next year, and come down to 0.5p by 2015.

Yesterday's announcement was hailed as a victory by companies, including Three and BT, who had strongly campaigned to "terminate the rate". The campaign's petition received 135,000 signatures, whie 262 MPs signed the early-day motion. Kevin Russell, Three's chief executive, said: "Low mobile termination rates are great news for the UK consumer. This change is overdue and we call on Ofcom to bring it in as soon as possible."

John Petter, BT Consumer's managing director, agreed as the termination fees currently generate £750m a year in extra cost, saying "customers will see the benefit". However, the telecoms provider was disappointed the lowest charge would not be brought in straight away. Ofcom also said it was to reduce the time needed for consumers to switch their numbers over from one mobile operator to another. It hopes to bring the time down from two days to one.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want it for the fitness tech, or for the style
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own