Two Related Stories:"Call pricing trend 'puts telecoms groups at risk' " and "Telecoms MOBILES: Call costs set to drop sharply"
======================================
Call pricing trend 'puts telecoms groups at risk'
MONDAY DECEMBER 21 1998 Telecoms
By Alan Cane
Europe's new telecommunications operators face devastation if current call pricing trends continue, a report to be published this week warns.
Carried out by Analysys, a Cambridge-based consultancy with an international reputation for tariffing studies, it says a pricing environment is developing rapidly which will prove highly unfavourable for western European operators. Andrew Entwistle, Analysys principal consultant said: "The European industry cannot survive at the price points for which it is heading." He pointed to the German market, where Deutsche Telekom is cutting long-distance prices by more than 60 per cent in an attempt to regain the 20 per cent or more market share lost to new competitors.
Prices of international and long-distance calls have been falling sharply in most European countries over the past few years. This has been a consequence of liberalisation, which has seen more than 200 new operators authorised to provide voice services in the EU. The collapse of international call prices has forced large global telecoms alliances, including Global One, to review their business plans.
Simon Sherrington and Michael Denmead, authors of the Analysys study*, claim pricing is sliding out of control because of a loss of market discipline in a growing number of markets, especially in the long- distance and international sectors.
They say: "International and long-distance call prices are likely to continue to fall rapidly over the next two to five years until there is only a small cost-orientated premium over local call charges. This is a bleak outlook for any operator requiring a 5- to 10-year return on capital employed." They predict substantial consolidation in the industry with only a few newcomers progressing to the point of a profitable exit from the business.
*New Network Operators in Western Europe; Two vols: £1,250. Electronic version £1,495. Analysys, Suite 2, First Floor, Quayside, Cambridge CB5 8AB. Tel: 01223 341300.
====================================
"Telecoms MOBILES: Call costs set to drop sharply"
WEDNESDAY DECEMBER 16 1998
By Alan Cane
The cost of calls to mobile phones is set to fall by a total of £1bn over the next three years after the Monopolies and Mergers Commission found British Telecommunications, Vodafone and Cellnet guilty of overcharging.
David Edmonds, telecoms watchdog, said he would implement the full MMC recommendations, which will mean a 25 per cent drop in the cost of calls from a BT line to a Vodafone or Cellnet mobile phone.
It will be the first time that prices affecting mobile operators have been regulated.
The MMC's decision had been anticipated by the operators and the market had discounted the news. Hence, shares in BT and mobile stocks moved moderately upwards.
There remains a question whether, under European Union telecoms laws, Oftel has the authority to force operators to cut charges. Vodafone said on Friday it was likely to comply in full, Cellnet said it would look at Oftel's final ruling before making a decision.
Mobile operators charge BT for delivering their calls from its fixed network and the UK's largest operator passes the cost on to its customers.
BT's current daytime rate of 30p a minute should fall to about 22p a minute under the Oftel pro-posals.
In addition, the commission recommended and Oftel accepted:
•An end to charging for unanswered calls switched to recorded messages on Vodafone and Cellnet's networks.
•From April next year, charges for calls to Vodafone and Cellnet mobiles will be capped by the formula of inflation minus nine percentage points for two years (in other words, charges will continue to fall).
•BT's share of the charge must be cut from 5.8p a minute to 3.54p a minute - a fall of 41 per cent. Its share or "retention" will be held to inflation minus seven percentage points for two years.
The MMC was asked to look at the question of the cost of calls to mobiles in March 1998 after operators and Don Cruickshank, previous Oftel director-general, failed to agree on terms. Mr Cruickshank claimed the operators were "ripping off" the public.
Mr Edmonds took a more conciliatory approach saying he was pleased the MMC had accepted Oftel's arguments that the three operators were overcharging customers. "This is excellent news for the consumer."
BT said it expected the changes would cost it £100m in pre-tax profits in a full year. The mobile operators said it was difficult to calculate exactly what it would cost them because lower prices would be offset by higher volumes.
Mr Edmonds said he expected the two smaller, loss-making operators, Orange and One-2-One, to reduce their prices in turn.
================================= |
