Hutchison battles Ofcom over threat of price cuts

Hutchison Whampoa's "3" mobile phone business is fighting to protect its UK revenues from being hit by price controls imposed by Ofcom, the industry regulator.

Hutchison Whampoa's "3" mobile phone business is fighting to protect its UK revenues from being hit by price controls imposed by Ofcom, the industry regulator.

Hutchison will bring its case before the Competition Appeals Tribunal on Monday where it intends to object to Ofcom's decision last summer to designate it as having "significant market power" in the area of termination rates. These are the fees that mobile operators receive from rivals for carrying incoming calls on their networks.

In September, Ofcom ordered cuts of 30 per cent in these charges, which have hit mobile companies' revenues but have produced cheaper calls for customers.

So far "3" has been exempt from Ofcom's price controls. However, if Ofcom's decision is upheld the regulator would have the power to force "3" to lower its termination rates. This would hit the company's revenues and could impact on its ability to offer the deep subsidies on handsets and tariffs that saw its customer base boom last year.

Hutchison believes that as a new entrant into the market, having invested heavily in a new 3G network, it should continue to enjoy its exemption. Its market share of customers is about 5 per cent compared with the large incumbents such as O2 and Vodafone, which have market shares of 20 to 25 per cent market.