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EU regulation: slashing roaming costs

EU regulation: slashing roaming costs

12.9.2013 9:30

Today, European Commissioner Neelie Kroes will present a reform package aimed at spurring investments in Europe’s communications networks and which is part of an effort to help Europe catch up with Asia and North America in mobile and fast-speed network infrastructure.

There are +100 mobile operators across the EU, whereas there are only four in the US and three in China. Competition and regulation has caused a fall in revenues which has meant that investment in next-gen networks has suffered, with telco operators in Europe investing € 3.5bn less in 2012 than in 2008 even as demand across networks has more than quadrupled.

As the package flows through the legislative process, it is bound to change somewhat, as both the region's 28 countries and the European Parliament must sign off before becomes law. Besides a net neutrality clause, coordinated spectrum assignments across the EU and a single authorization system for operating in all 28 member states, the centre piece of the reform package is the slashing of roaming rates.

Incoming call charges while travelling in the EU would be banned from 1 July 2014. Operators would have the choice of 1) offer phone plans that apply everywhere in the EU ("roam like at home"), the price of which will be driven by domestic competition, or 2) allow their customers to “decouple”, that is: opt for a separate roaming provider who offers cheaper rates (without having to buy a new SIM card). This builds on the 2012 Roaming Regulation which subjects operators to wholesale price cuts of 67% for data in July 2014. According to German magazine Focus quoting a senior source from Kroes’ cabinet, the plan is to eliminate all roaming costs for phone calls within the EU by 2016.

Our view & conclusion:
Currently, roaming represents ~10% of mobile service revenues. Recognizing the high-margin derived from these revenue streams, it is clear that this is in no way good news for Belgian telecom operators. However, this cracking down on roaming does not come as a surprise and is, according to us, a step back from the original plans of slashing roaming rates altogether. We expect the proposals to be waved through by MEPs, who see scrapping roaming charges as a popular consumer cause.

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