EU Gets Roaming Charges Boost; Telefónica Drops Charges for Calls Received Abroad

Telefónica's mobile units—O2 and Movistar—have thrown down the gauntlet in the rapidly-emerging rush to bring down roaming charges across Europe. O2's new "high roamer" service is aimed at frequent travellers and is part of O2's "My Europe" package. For a monthly fee of £5 (US$9.34), O2 UK customers will be able to receive calls free and make calls at £0.25 per minute. As an incentive to lure business, O2 is offering small and medium enterprises (SMEs) a monthly fee of £2.50. The service will, however, only be available in Spain as from this month, although O2 has said that it will extend it to other European countries by 2007. Meanwhile, O2's counterpart in Spain—Movistar—is rolling out a similar service for its customers at the cost of 10 euro (US$12.55) per month; this service will be immediately available across 33 European countries. O2 highlighted that the service is open to all its customers regardless of which network the received call is coming on.

Outlook and Implications

First of its Kind: By becoming the first telecoms operator in the world to offer such a service, Telefónica has kicked off a trend that is bound to reverberate across the industry. Although charging customers for receiving calls while in their home country evokes resentment wherever it is still practised, customers have hardly complained about charges for receiving calls while abroad. In fact, customers have bought into the idea that connecting them while abroad involves significantly larger costs which mobile operators are supposed to recoup. However, as mobile operators become more multinational, that argument is no longer sacrosanct. Expectedly, the new offer from O2 and Movistar is bound to raise eyebrows in an industry worried about declining voice revenues. A raft of price reductions followed Vodafone and T-Mobile's May 2006 reduction of roaming charges. If such trend is replicated, Telefónica may have, whether intentionally or inadvertently, triggered a revolution in the industry (see Europe: 2 June 2006: European Mobile Operators Pledge to Slash Roaming Charges, Europe:15 May 2006: TeliaSonera, Swisscom to Slash Roaming Charges, Europe:12 May 2006: O2, Telefónica Móviles Scrap Roaming Charges for Received Calls and Europe:8 May 2006: Vodafone, T-Mobile Slash Roaming Charges).

Victory for the EU: The new pricing structure is a tacit victory for the European Union Commission, which recommended that charges for incoming calls while abroad should be scrapped. In an attempt to alleviate the concerns of the mobile operator lobby, the EU Commission had, in July 2006, dropped its earlier demand that these charges should be discarded. That proposal was initially made in February 2006 when the Commission launched a wide-ranging review aimed at cutting the overall cost of using a mobile phone while roaming in the European Union (EU). Despite the concessions, the industry has remained resolute in its opposition to the EU's intervention. Unfortunately for mobile operators, while the EU set the ball rolling, the companies have fanned the flames in their quest for market share (see Europe: 13 July 2006: No Reprieve for EU's Revised Plan to Slash Mobile Roaming Fees, Europe: 29 March 2006 EU Forces Down Mobile Roaming Charges, Europe: 6 February 2006: EU Seeks Reduction in International Roaming Charges, Europe: 12 July 2005: EU to Highlight High Roaming Costs and World: 18 April 2005: Mobile Roaming Charges Under the Spotlight).