Swings and roundabout in mobile phone price changes

Is this what Oftel meant by 'price reductions'?

Pay as you go pricing plans from Orange and T-Mobile are to change from the start of next month following tough action by regulators earlier this year. Vodafone's similarly-induced changes kicked in on April 1.

Although the regulations are intended to reduce certain mobile charges some people may actually end up paying more after the changes, as we'll see.

In January Oftel ordered operators to cut the cost of termination charges - the fees service providers charge for routing calls from other operators through their networks - by 15 per cent before 25 July 2003. The operators were also told to reduce termination prices by inflation minus 14 per cent (at minimum) for a further three years.

The move follows an investigation from the Competition Commission which concluded that mobile phone companies are overcharging consumers for making phone calls.

Operators dispute these conclusions. Vodafone has described the Competition Commission's report as "fundamentally flawed".

Vodafone's criticism is supported by opposition by other service providers which join it in arguing that regulatory action is unwarranted and will end up hurting customers, contrary to its objective.

Despite these objections, operators are obliged to obey Oftel's ruling.

At the start of this month, Vodafone introduced changes to its pay as you go talk plan that reduce the costs of calling other mobile networks to 35p per minute. Previously such calls could cost either 40p or 50p per minute depending on a customer's talk plan.

A spokesman for Vodafone said that the Oftel ruling was one of the main factors affecting the pricing changes. The ruling will affect Vodafone's customers "across the board" but the first to feel its effects are its pay as you go customers.

Although some call costs are being reduced by a few pence, other costs are being increased. Minimum calls costs are going up, in some instances, a closer inspection of the changes reveals.

Rather than a straightforward price cut its "more like scales - with some charges going up and some down," a Vodafone spokesman told us.

"We've also introduced changed that give more value higher spending customers," he added.

It's a similar picture with Orange's changes to its pay as you go pricing packages, due to kick in at the start of May. Orange customers will pay less for calls to other networks but charges for calls to other Orange phones and landlines will generally rise.

Discounts for top ups of £50 are drastically reduced from 50 per cent to 10 per cent.

An Orange spokeswoman told us the changes were introduced in response to the findings of the Competition Commissioner's report, which among other things calls for a reduction in handset subsidies.

T-Mobile will introduce changes to its pay as you go (prepaid) and monthly packages beginning on May 1. A spokesman said the aim is to "simplify pricing plans", not directly as a result of the Competition Commissioner's report.

Handset subsidies were, however, reduced from the start of this month as a result of the report. T-Mobile is doing this by renegotiating dealer contracts in order to minimise the impact to customers.

For O2 the Competition Commissioner's report means that it will "not be introducing planned price cuts".

"Prices are likely to remain at level they are," a spokesman told us.

He added that the impact of the report has forced it to delay the planned launch of commercial 3G services until the second half of 2004. Like other operators, O2, is looking to reduce its subsidy of handsets. ®

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Oftel acts to reduce charges for calls to mobile phones