Vodafone threatens to challenge Oftel charges ruling

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The mobile phone operator Vodafone was yesterday threatening to refuse to adopt the new price cuts on mobile phone charges recommended by Oftel, the telecoms watchdog.

The company is understood to be particularly unhappy that Oftel continues to view it as a "significant market power" and that the imposed price cuts failed to take into account the heavy costs that operators face in building third generation, or 3G, mobile phone networks.

Rival operator Orange was also disappointed with the regulator's recommendations, saying it was "concerned" that Oftel felt the need "to attempt to mimic the natural evolution of the market through regulation". It also questioned whether Oftel's decisions were "consistent with the Government's objectives of minimum necessary regulation". The mobile phone operators now enter into a 28-day consultation period with Oftel, during which time they can decide whether to take further action. The regulator yesterday ordered Vodafone, BT Cellnet, Orange and One2One to cut their "termination" charges, the fees that they charge to other operators for connecting calls on their networks, by retail price inflation minus 12 per cent for the next four years.

When Oftel last imposed price cuts on just Vodafone and BT Cellnet in 1999, both companies refused to reduce charges, forcing the regulator to refer the issue to the Monopolies and Mergers Commission. The MMC upheld Oftel's recommendations, which included an immediate 25 per cent cut in termination charges followed by a cut of retail price inflation minus 9 per cent for three years.

The new price controls, which come into force next March, are the result of two major reviews into the mobile phone market. The move, designed to reduce the cost of both landline telephone calls to mobile phones and mobile to mobile phone calls, is expected to save consumers some £800m.