Mobile phone charges cut but some bills may go up

MOBILE phone firms have been ordered to slash charges in a ruling by Ofcom that is expected to make calling from landlines and rival networks cheaper.

The regulator announced that termination charges - the amount companies bill their rivals for handling calls to their networks - will fall by 80 per cent over the next four years, starting from 1 April.

While the news was welcomed by campaigners, there were warnings that companies may push up the cost of calls and other services, particularly for pay-as-you-go customers, as they look to recoup the revenues they lose from the reduced charges.

The big three mobile phone operators - O2, Vodafone and Everything Everywhere, which includes Orange and T-Mobile - will reduce the amount they charge to connect calls from other phone companies, gradually between now and April 2014, following instructions from the watchdog. Ofcom expects landline operators to pass on the cost savings to customers and that mobile operators will offer more choice of packages.

BT said it intended to pass on the savings to customers as soon as possible, while TalkTalk is to launch a new deal for customers who want to call mobiles.

But Vodafone warned that some of its pay-as-you-go customers who make few calls may no longer be economically viable, and it could not rule out increasing the cost of calls.

Vodafone UK chief executive Guy Laurence said: "We are really disappointed that Ofcom has ignored the evidence that termination rate cuts will mean higher costs for pre-pay customers, especially at a time when money is tight for many families."

Ernest Doku, a technology expert at uSwitch.com, said: "This is a clear victory against the bully boys.

"In theory, mobile bills should also come down - but, in reality, the networks may look to introduce charges elsewhere to make up for the loss in income."

A spokesman for the Terminate the Rate campaign, which called for charges to be reduced to less than 1p, welcomed yesterday's decision but said the government should have brought rates down faster, in line with recommendations from the European Commission.

He said: "Ofcom has acknowledged that lower mobile termination rates are better for consumers and committed to reducing them to less than a penny, which raises the question: why can't those benefits be realised sooner?"

The campaign was supported by 161,000 people who signed a petition, 260 MPs who signed an Early Day Motion and 65 partners, including mobile phone provider 3 UK, BT, MoneySupermarket.com, the Federation of Small Businesses, the Post Office and trade union Unite.

Termination rates have already declined by 35 per cent since 2007, when Ofcom last imposed caps.

The regulator said mobile phone companies could afford the reductions, as more customers used data services, such as text messaging and accessing the internet from their mobile phones.

Data traffic has more than doubled in the past year and now accounts for the majority of traffic over mobile phone networks, according to Ofcom.Moreton Singleton, an analyst at investment company Investec, said Ofcom's ruling would come as some relief to the UK mobile sector, as harsher rate cuts have been imposed in other European countries.

HOW LEVY WILL TUMBLE

THE amount mobile phone companies charge to connect calls to other networks is to be cut to a sixth of the current figure.

The big three - O2, Vodafone and Everything Everywhere, which includes Orange and T-Mobile - now charge 4.18 per minute.

That will be reduced by a third to 2.66 next month. It will further fall to 1.70 in 2012-13, and to 1.08 in 2013-14. By April 2014, it will have been cut to just 69p.

Ofcom believes the changes will benefit customers and boost competition, while firms will continue to thrive from the public's appetite for data services, smartphones and mobile broadband.