Vodafone predicts mobile exodus with new EU charges

 

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By Stuart Turton

Posted on 1 Sep 2008 at 13:20

Mobile telecoms reforms proposed by the EU would result in 40 million Europeans ditching their mobile phones, according to Vodafone.

European Commissioner for Information Society and Media, Vivianne Reding, has provoked an angry backlash from mobile phone operators with her plans to slash the prices they can charge each other for connecting calls to their networks.

These termination fees are currently around 8 cents per minute, but the European Commissioner would like to cut them down to 2 cents by 2012.

Lowering these fees would reduce overall call costs according to Reding, as under the present system these termination fees are passed on to the customer.

To offset these cuts, Reding wants to adopt a US-style system whereby customers pay to receive calls. However, in its response to the proposals, leaked to the Financial Times, Vodafone argues that the changes would hit its pay-as-you-go customers particularly hard, as they tend to receive a lot of calls, but don't actually make that many, traditionally due to lower incomes.

It argues for a reduction of between 5 and 6 cents per minute by 2012, or face a situation whereby operators have no choice but to raise call prices or "risk bankruptcy".

To back up its argument the company commissioned market research firm, Taylor Nelson Sofres, to survey 9,000 customers on their response to higher charges and the possibility of paying to receive calls.

Extrapolating from these results, Vodafone argues 10% of Europe's mobile phone users would decide they could live without their phones if prices were to rise.