Vodafone and Telecom have welcomed the Commerce Commission's recommendation to avoid regulation and allow the two companies to reduce mobile termination prices on their own, but Vodafone says it stands to lose a big proportion of its annual revenue through the changes.

After a 15-month investigation, the commission yesterday rejected regulation as a way of reducing the termination prices Telecom and Vodafone charged.

Instead, the commission recommended Communications and Information Technology Minister Steven Joyce accept Vodafone and Telecom's undertakings to reduce the charges on their own accord.

Under the 2001 Telecommunications Act providers can submit undertakings as an alternative to regulation.

However, a split has appeared in the commission, with one of the commissioners involved in the report, Anita Mazzoleni, disagreeing with the recommendation given to the Government.

"The barrier arising from the prices in the final undertakings continues to ensure an uneven playing field, and this will impede the benefits competition will otherwise deliver to New Zealand consumers," she said.

Vodafone New Zealand's general manager of corporate affairs, Tom Chignell, said although the commercial solution recommended by the commission was favourable to regulation, the damage had already been done in terms of future revenue.

Reducing call termination rates by two thirds, and text messages to zero, would cost the company $80 million annually.

Chignell said that from a total revenue of around $1.5 billion it was a big proportion.

"In the current climate, where the mobile industry in New Zealand is flattening out ... it's been going backwards for the past year ... that's a real challenge for business, and will challenge our ability to continue to invest for our customers," he said.

Bill McCabe, chief commercial officer for mobile newcomer 2degrees, has hit out at the commission's recommendation, calling it disappointing.

"The commission's recommendation to leave the decision on access pricing up to the incumbents, Vodafone and Telecom, will mean this burden on New Zealanders continues for the foreseeable future."

TERMINATION RATES

Mobile termination charges are the fees mobile phone companies charge each other to receive calls and texts from competitors' networks.