European legislation likely to proceed on mobile roaming despite Telefonica deal

by Guy J Kewney | posted on 19 October 2006

British mobile network O2 and its Spanish parent appear to be trying to head off EC plans to control roaming charges, by creating a new "flat rate" roaming scheme for frequent travellers.

Telefonica and O2 have created a five pounds per month charge, which means that no other roaming expenses will arise - as long as you're roaming onto a Telefonica network - that is, in Spain and the UK. But that's just phase one.

The next phase will extend this across Europe, including other  networks. It follows other PR gestures by mobile networks, such as the Vodafone initiative last May when the giant group promised a 40% reduction in roaming charges by mid 2007. All are a response to a determined campaign by European commissioner Vivianne Redding, who has declared war on roaming rip-off charges.

The move, says one analysis, marks the end of Starmap. Nick Fildes at the Independent points out that Starmap was set up to compete with FreeMove, and that both appear to have outlived their usefulness.

Other comments focus on the "threat to Vodafone" whose shares took a hit with the news. "Vodafone, the struggling mobile operator, was dealt a fresh blow yesterday as O2, its rival, paved the way for a new price war by abandoning charges for receiving calls while abroad," wrote the Times today.

That perception is almost certainly not a serious analysis, given that Vodafone has already laid out its plans to cut roaming charges. In addition, the deal announced so far seems to refer solely to the cost of receiving out-of-area calls while roaming, and a premium may still be charged for making long distance calls.

EC plans to "fine" mobile operators who overcharge were revealed two weeks ago but Bloomberg's analysis suggested that the fines would not be big enough to cause anxiety in mobile network boardrooms. Matthew Newman wrote on October 5th: "Staff for the European Commission, the EU's antitrust regulator, have written a draft ruling that may also lead to fines against Vodafone's German unit, the U.K.'s O2 Plc and Deutsche Telekom AG's T-Mobile International, according to four people who declined to be identified because the draft isn't public."

But he quoted analyst Bradley McMaster, at ABN Amro Holding NV in London as saying: "It's a small loss.'

Most networks have written off these losses anyway, and by the time any European legislation is in place, schemes will have been set up to minimise the real impact. Most mobile users get hit by roaming very rarely - probably only on their annual holiday - and if they can be persuaded to pay five pounds a month instead, the network profits may even rise.

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