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O2 Move May Spark Price War
Mobile phone users who take their phones abroad are set to benefit from a price war between waged between
Europe’s mobile network operators.
Cost cutting
Phone operator O2 has unveiled new price plans
which are set to cut the cost of using mobiles abroad
– so called roaming charges. Customers prepared
to pay a fee of £5 will no longer have to pay for
incoming calls. Although the move will only apply
initially in Spain – home of O2’s parent company,
Telefonica, and the most popular holiday destination
for O2 customers – the offer will reach 35 other
European countries by 2007. Small and medium
sized businesses can enjoy a
discounted fee of £2.50 a month
if they sign up for a twelve month
contract.
O2 chairman and chief executive,
Peter Erskine, claimed that the
move was a response to customer
concerns over charges incurred
by using phones abroad.
“By starting to scrap the charge
levied by all operators in the past
for receiving calls when abroad,
we hope to begin removing that
barrier,” he said.
of providing the service. The charges, long seen as
a highly profitable source of sales revenue for the
mobile operators, can represent between 10 – 15%
of their profits, according to some analysts.
The European Parliament began considering
the plans in September 2006 and the outcome of
discussions held by the EU Council of Ministers on
the matter are expected in mid-December.
Research by the Commission claims that
approximately 147 million EU citizens are affected
by high roaming charges, 110
million of which are business
customers with the remaining
37 million accounted for by
tourists.
Price War
Some industry analysts are
convinced that O2’s move may
well spark a price war.
The share prices of Vodafone
and other quoted mobile groups
came under pressure following
O2’s announcement, despite
an agreement between many of
EU Pressure
the major companies, including
Orange and T-Mobile, to slash
The European Union (EU) has
roaming charges made earlier
been investigating fees charged
this summer. At the time, the
by mobile operators when
As
the
mobile
phone
market
has
chief executive of T-Mobile
customers use their phones
matured,
operators
are
focusing
on
price
International, Rene Oberman,
abroad since December 2004.
as a way of achieving market share
claimed that the agreement
In June 2006, EU Telecoms
showed that:
Commissioner, Viviane Reding,
announced proposals intended to reduce the “…market forces in the mobile industry function and
“fantasy costs” being charged by certain networks do not need regulatory intervention.”
by the introduction of price caps. According to Ms
A spokesman for Vodafone reacted to O2’s
Reding,
announcement by stating that its customers were
“It is high time that the EU’s internal market “very happy” with the company’s current Passport
delivered substantially lower communication charges scheme, which involves a special tariff aimed at
for customers and business people travelling abroad.” providing low-cost calls from abroad.
In July 2006, the Commission’s President, Jose
Manuel Barrosso, claimed that roaming charges
were up to five times higher than the actual cost
Sources: Guardian Unlimited; Times Online
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