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Regulations Will Hurt Mobile Users - Vodafone

9 June 2005

Regulations Will Hurt Mobile Users - Vodafone

Vodafone New Zealand will continue work with the Government to ensure that consumers really benefit if the Commerce Commission’s proposed intervention into mobile termination services is accepted.

Vodafone Finance Director David Sullivan said the company was very disappointed at the Commission’s recommendation to regulate mobile termination rates (MTRs), the fees that fixed line telecommunication operators pay mobile phone companies to terminate calls on their network.

Sullivan believed the Commission, in making its recommendation, had understated the negative impacts on mobile users.

“This unnecessary regulatory interference will add cost to our business and will put pressure on call and handset prices. It can’t be good news for consumers who use mobiles,” Sullivan said. “The Commission itself has acknowledged that regulation of MTRs will lead to “likely upward pressure” on the price of mobile phone services, which is of a huge concern to us.”

The Commission has said that regulation of MTRs is “likely to lead to increased competition and lower prices for fixed to mobile calls.”

However, Sullivan said regulation of Vodafone’s termination prices is totally dependent on Telecom reducing prices for residential callers.

“We note that the Commission has again remained silent on how this will be achieved.”

“It is very disappointing for both Vodafone and consumers that the Commission has not included a requirement for cost reductions to be passed on to consumers. How is the Commission going to guarantee that consumers and businesses will benefit from this intervention?”

“This greatly concerns us, and we will keep talking to officials to ensure that New Zealanders get the best possible deal from this regulation. The last thing we want to see is any price reduction simply being trousered by Telecom.”

Sullivan said Vodafone was concerned at the Commission’s comments about the “relatively high” prices of mobile services in New Zealand compared to other OECD countries.

“We believe the mobile market is competitive - the best indicators are growing customer numbers, shifts in market share, and the wide range of new products and services and price cuts both in the past and into the future,” he said.

“We have been working with the MED to improve the accuracy of the OECD benchmarking report and our analysis illustrates that most of our customers pay prices which are internationally comparable.”

Sullivan said the regulation of MTRs would have a direct impact on Vodafone’s revenue and the business would need to consider where this could be recovered.

He said that Vodafone was, however, pleased that 3G had been excluded from regulation, given the obvious concerns with regulating a service that has not even been launched yet.

“It is ironic that the commission has expressed their concern that regulation will affect investment in emerging technologies such as 3G as by doing so they have in effect admitted that regulation stunts growth and development in telecommunications.”

Vodafone would fully assess its options after it had thoroughly reviewed the Commission’s recommendation. The company will take the opportunity to talk to the Minister and officials about the proposed regulation over the next few weeks.


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