Phone Operator Study Criticizes EU Roaming Proposals

BRUSSELS -(Dow Jones)- Mobile phone operators published a study Thursday attacking the European Union's proposals to force them to cut the fees customers pay while traveling abroad, so-called roaming fees.

The GSM Association, representing more than 690 mobile phone operators, commissioned the CRA consultants in London to examine the measure's impact. The completed study showed such a move could leave operators providing these roaming services at below cost or forcing them to raise domestic tarrifs.

"The ultimate impact of the Commission's proposal may be that regular travelers would have an incentive to set up two mobile accounts -one with new, higher domestic call charges that will allow them to roam and another with today's lower domestic call charges that will not allow them to roam," said Dr. Mike Walker, a Vice President within CRA's Competition Practice in London.

"Running two mobile accounts with different phone numbers is cumbersome and inconvenient for the consumer, and more costly for the operator," he said.

The European Commission said last month that roaming fees should be cut up to 40% because mobile phone operators are gouging consumers.

The initiative represents one of the more aggressive pieces of legislation proposed by the Commission and comes as wireless operators battle slowing sales growth and intensifying competition in mature European markets.

Analysts estimate that European mobile operators make as much as 10% of total sales from roaming fees, a major money spinner for the likes of Vodafone Group and Deutsche Telekom.

Commission officials will spend a month negotiating details of how to proceed. A European parliamentary hearing is due for May 4 and telecom ministers are scheduled to debate the proposals on June 8.

Under the E.U. proposal, companies must eliminate all roaming charges for consumers who receive a call when traveling abroad. The CRA consultants said this will lead "to customers in higher cost countries purchasing prepay SIM cards from operators in countries with low domestic prices."

The resulting distortions would "create large losses for low price operators and most likely lead to price rises to a common level in absolute terms, despite differences in the underlying cost base between E.U. countries," the report's summary says.

Stiff regulation could create other unintended consequences, the report warns. Operators could be forced to raise prices for monthly subscriptions or data services to compensate. Operators will be discouraged from serving remote areas.

-By William Echikson,Dow Jones Newswires;32-2-741-1480; william.echikson@dowjones.com

(END) Dow Jones Newswires "

Posted to the site on 27th April 2006