LONDON -(Dow Jones)- Vodafone Group's Director of Public Policy Richard Feasey Tuesday said that the European Union's proposals to force down the price of using a mobile phone abroad could stifle innovation within the European mobile phone sector.
The European Union Commission Tuesday unveiled long-awaited proposals to force wireless operators to cut the fees customers pay while traveling abroad. Proposals include the elimination of charges for consumers receiving a call when traveling internationally and charging consumers at local rates when making calls abroad.
The EU proposal also endorsed limits on wholesale - and, more alarmingly for operators - retail roaming charges, removing an operator's ability to charge what it wants to for such services.
In an interview with Dow Jones Newswires, Feasey said that forcing a uniform structure on mobile phone operators across the E.U. could deter such companies from scaling up and establishing operations outside home markets. He said companies like Vodafone, which has invested in building or acquiring networks across Europe, have a competitive advantage due to the cost benefits of carrying international traffic, benefits which can be passed on to the consumer.
"The European Commission shouldn't discourage that," he said.
Vodafone has 6 million users on its Passport service, a product which offers some of the benefits the E.U. is attempting to force through, like charging users local rates to use their phone while abroad.
Feasey said if the E.U. had the proposed regulations in place, Vodafone couldn't have launched the product.
"If the European Commission sits in the middle prescribing tariffs across different markets with different characteristics, it will inhibit creativity," Feasey said.
Vodafone's Feasey said that mobile prices have been falling over the past year, citing GSM Association data that prices have fallen 8% from 2005. This doesn't tally with the E.U. statement that roaming charges have increased over the past 12 months.
Feasey said he expects that trend to continue. Dresdner Kleinwort Wasserstein said in a note that it assumes roaming rates will fall by 15% to 20% a year, and will be between 30% and 40% lower by the time any regulation will be implemented. The investment bank said that Vodafone's roaming revenue grew last year despite 35%-40% price reductions available to its Passport customers.
Feasey wasn't able to quantify what effect any regulation would have on Vodafone's financial performance as it is a very complex equation given the company's presence in most European markets.
Dresdner calculates that Vodafone generates GBP1.2 billion from retail roaming and a further GBP350 million to GBP400 million from wholesale, where it provides capacity to other users. It the retail segment, Dresdner - which has a buy rating on the stock - posits that Vodafone makes around GBP300 million from its users receiving calls while abroad.
Feasey said any move to regulate the retail prices in the roaming segment would be "ill-judged" and said the only case where it might be applicable is if the market isn't very competitive. "Actually, retail competition in mobile markets is fierce," he said.
He also criticized the E.U.'s data and said that a much stronger foundation will be needed to structure any form of regulation. "The E.U is looking at headline tariffs and has not got a comprehensive view of what customers are actually paying," he said, adding; "Looking at what they're saying, they haven't understood the competitive dynamics of the market."
Asked if Vodafone would consider appealing the decision, Feasey said given the proposals now enter a consultation period, there is no certainty as to what final proposals will emerge.
At 1326 GMT, Vodafone shares were 2.6%, or 3.25 pence, lower at 121 pence.
Company Web site: http://www.vodafone.com
-By Nic Fildes, Dow Jones Newswires; 44-20-7842-9264; firstname.lastname@example.org
(END) Dow Jones Newswires"
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