Vodafone slams price regulation proposal

Vodafone says a Commerce Commission proposal to regulate the price of land-to-mobile phone calls will not save the public money.

In his final determination yesterday, Telecoms Commissioner Douglas Webb suggested that "termination rates", or the the price the public pays for land-line to mobile phone calls, was too high.

Mobile phone network providers had told the commission such calls cost them 27c a minute.

The commission, comparing the rate to other OECD countries, estimated it should be about 15c and the price paid by customers should fall accordingly.

Vodafone finance director David Sullivan said that the cost of other types of calls could rise to offset lost revenue from the recommen-dation.

"We're disappointed with the outcome from the regulator," he said.

"By regulating mobile termination rates, there will be no benefit to the end customer."

He said revenue at Vodafone, which has 55 per cent of New Zealand's mobile market, would be hit.

"Clearly, it's an important revenue stream for us and, by the regulator coming in, it's going to impact on the revenue we receive for mobile termination rates.

"There's not one component that we would look to change, but clearly when we lose a significant revenue stream through regulation you have to look at your overall pricing."

Sullivan said the only beneficiaries of regulation would be the fixed-line providers - Telecom and TelstraClear - who would have the option of making more on calls to mobile phones.

"He's effectively asking Vodafone to subsidise to Telecom the price of calling with a belief that by doing that, Telecom out of the goodness of their heart will reduce prices to their customers.

"That's something that they could do right now."

The commission has tabled the recommendation to Telecommunications Minister David Cunliffe, who will make a decision after he returns from Tuvalu to New Zealand today. 

Observers expect Cunliffe to pass the recommendation, whereupon the commission will come up with a final rate based on comparison with OECD prices.

Telecom also expressed its displeasure at the commission's recommendation as it too will lose revenue on termination charges.

Spokesman John Goulter said the company was still digesting the commission's report, however.

"Telecom in this space is a buyer and a seller ... this singles out one aspect of the market and that's a bit of an artificial way of looking at it," he said.

Goulter said it was too early to determine what impact the commission's recommendation would have on his company, as "we don't even know what the regulated prices will be".

Analysts said the impact to Telecom would be negligible, since the company would balance out by paying less in termination fees.

Telecom shares fell 4c yesterday to close at $6.05.