Mobile firms warn on call costs

Orange and mmO2 say customers still pay if competition regulator takes action

By Clayton Hirst
Sunday 26 January 2014 04:17

Mobile phone operators mmO2 and Orange have warned that they will raise their call charges if the Competition Commission delivers an unfavourable ruling in its investigation into the mobile sector.

The Commission will publish its initial findings this month into whether the big four – Vodafone, Orange, mm02 and T-Mobile – hold an unfair advantage over BT.

If it finds the operators are charging BT's customers too much to make calls to mobiles, the Commission will impose stringent price caps.

The investigation has angered the operators, which claim that any intervention would damage the mobile market, which is about to invest billions on the development of third-generation services. They have made it clear the cost of any imposed price caps would be passed on to its own customers.

Peter Erskine, chief executive of mmO2, said: "We can't go bankrupt; my shareholders would be disappointed. If [the Competition Commission] says we have to charge a low rate for fixed-to-mobile calls, then I've got to make a return somehow.

"It is important to make the Government realise that they can't cherry-pick just because fixed-to-mobile seems a bit pricier. It's a bit like saying to BMW or Ford they have to cut the price of the models that make money and leave the prices alone of ones that don't."

Peter Dunn, head of public policy at Orange, said the company had factored a reduction to the so-called "termination charges" into its business plan. But he said that if the Competition Commission forced prices below this level, Orange customers would be affected. "There would have to be a re-balancing of prices. Tariffs earmarked to go down would remain at the same level. Tariffs scheduled to remain unchanged may have to go up. We will have to do this because of the profitability targets we have set for our shareholders."

Mr Dunn highlighted the roll-out of third-generation mobile services, which will offer high-speed internet access, as another area that could be hit.

"It certainly could impact on 3g investment," he said. "The nature of our business is very risky. We have got to get [the 3g money] back somehow."

Mobile operators charge BT between 12p and 14p a minute for incoming calls. BT then passes this cost on to its consumers, with the average cost to a mobile being around 20p a minute.

It is understood that companies such as Orange have factored a reduction in the prices they charge BT by the Retail Price Index (RPI) minus 9 per cent.

But many analysts believe that the Competition Commission could impose charges of around RPI minus 11 per cent.

Last month, the Commission was granted more time to investigate the market. Its final report will be published by the end of the year.

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