Caps on roaming charges to cost €4bn in profits

Mobile operators in Europe will lose up to €4 billion in profits when a European Commission plan to put strict limits on the cost of using a mobile phone abroad is adopted, a senior official at the Commission's telecom regulator said.

The Commission's proposal, announced on Wednesday, would reduce roaming charges in the 25 European Union member states by as much as 70 per cent.

Vodafone, the world's largest mobile phone company, branded the move as illegal and threatened to consider legal action if the plans are not watered down, according to media reports.

Roaming generates €8.5 billion a year in turnover for mobile operators, of which up to €5.7 billion is profit, said Pearse O'Donohue, assistant to the director-general at the Commission's Information Society and Media, speaking in Dublin yesterday.

Even with caps on roaming charges, operators will still be left with between €1.5 billion and €1.7 billion in earnings.

"A growing number of Irish people are able to travel abroad several times a year but are being hit with unjustifiably high mobile charges when they do so," Mr O'Donohue said. "If someone goes to Spain for a week, thanks to low-cost airlines, they often find when they come home that their mobile bill for the week was higher than their air fare."

Irish mobile customers, for instance, pay as much as €1.50 a minute in Spain when calling a friend back home. Under the new regulations, the most they will pay is 59 cent a minute, according to an example Mr O'Donohue presented yesterday.

Receiving a call will cost about 20 cent a minute, compared with up to €1.59 now.

The Commission "is trying to encourage greater mobility and, while EU countries are benefiting hugely from tourism revenues, consumers travelling to these countries are spending their hard-earned cash on roaming charges", the senior official said.

Mobile operators will likely recoup lost revenues from high roaming charges as consumers begin to use their phones more often when travelling abroad, Mr O'Donohue said. Half of the mobile users who bring their phones with them when travelling around the EU don't even make any calls, he said.

"Once roaming charges fall, people will relax and start using their phones more. Operators will gain more revenue from increasing roaming but they will not recoup the super profits they are earning now."