Oftel hails cheaper mobile connections

Up to £1bn could be lopped off UK phone bills over the next three years as the price of calling mobiles tumbles.

That's according to telecoms watchdog, Oftel, which yesterday released the main findings of a Monopolies and Mergers Commission (MMC) investigation into the price of calls from BT fixed lines to mobiles.

The MMC ruled that BT and the UK's two largest mobile network operators - Cellnet and Vodafone - charge too much, and now Oftel will oversee a 25 per cent cut in call charges from April next year.

David Edmonds, director general of Oftel, welcomed the MMC findings. "The inquiry totally vindicated the work Oftel did for a full year beforehand," he said. "We hope the future relationship is about [the operators] understanding that Oftel's role is to enhance competition, and Oftel encouraging capital investment by operators."

Mobile operators will also be prevented from charging users for messages explaining a network connection cannot be made.

The full 1,800 page version of the MMC report will be made available in a month, but Oftel said it wanted to give the mobile operators and BT as long as possible to plan price reductions. It also claimed it was acting in response to "significant interest".

Despite opposing Oftel's efforts to regulate fixed-to-mobile call costs, Vodafone and BT - which is the 60 per cent majority owner of Cellnet - both said they are happy with the outcome of the inquiry.

One2One - which along with Orange, was not placed under the regulatory microscope - said Oftel should be tougher on BT. It condemned the giant telco for earning three times as much connecting fixed and mobile networks, compared with interconnecting with another fixed network.

Elaine Axby, senior analyst at telecoms consultancy, Schema, said: "This result is a good deal for users and a potentially significant one for the mobile phone operators."

Axby said the companies that have been investigated are unlikely to try to recoup lost revenues by bumping up other charges, and attributed the outcome of the inquiry to the spread of mobiles in the consumer marketplace, and general competition within the industry.

"Until the non-business market took off, the mobile market was not seen as a particularly price-sensitive one, but that has changed now," she said. "Also, more people are questioning mobile costs when it can be cheaper to call the US than a mobile phone 50 yards down the road."