THE crowded European mobile market is heading for more consolidation and merged operations as operators already dealing with tight margins come under pressure to reduce costs further.
Vodafone has taken pole position in a move to acquire T-Mobile UK, the fourth largest operator in Britain.
Deutsche Telecom is under pressure to sell, especially after it became the first European telecoms operator to issue a profits warning, back
in April, when chief executive Rene Obermann cited T-Mobile as a problem area. It has appointed J P Morgan to find a buyer.
If the deal is clinched, it would make Vodafone Britain's largest mobile company, though others are circling. France Telecom is said to be considering a joint venture between Orange, its UK subsidiary, and T-Mobile UK. Telefonica, which trades in the UK as O2, is also looking at it. O2 is now Britain's biggest with a 27 per cent share of revenues paid by users.
Elsewhere in the sector, BT has finally killed off speculation, stretching back six months, that it wants to take over Italian operator Tiscali, whose UK division has been sold to Carphone Warehouse.
But as the telecoms giants continue to slog it out in the face of recessionary uncertainties, there is an even larger financial issue at stake. The European Commission followed through with a directive last week aimed at benefiting the consumer but costing mobile phone operators millions.
The plan is based on slashing the cost of wholesale routing charges – known as mobile termination rates (MTRs) – that the telcos impose on each other for connecting mobile-to-mobile calls, plus allied texts and some data transfer charges.
The telecoms companies have in turn complained bitterly that the timing is wrong as they are already suffering from a heightened squeeze in their revenue streams. Gervais Pellisser, France Telecom's finance chief, highlighted recessionary pressures, at a Reuters Global Technology Summit, when he said that rather than outright takeover, it would be far better if companies opted for what he described as a "consolidation in kind" by combining two businesses.
The telecommunications industry is not immune to a tense commercial environment in Europe, especially as the financial markets lack stability at the moment to provide equity and debt funding.
Sharing networks therefore looks likely as it offers the prospect of substantial savings. But as one telecoms source put it: "It all sounds nice and cosy for the big telcos, but what about the consumer?"
Here, the Commission has stepped in by applying what EU telecommunications commissioner Viviane Reding says is a new plan, making it much cheaper to surf the web by mobile while abroad. "The roaming rip-off is now coming to an end," he said.
The new EU rules mean that the cost of making a call is now capped at 43 euro cents a minute, down from 46 cents, while receiving a call is capped at 19 euro cents, down from 22 cents.
The maximum charge for sending a text, previously 28 cents, is now 11 cents. The cost of transferring a megabyte of data is capped at one euro.
It sounds like a breakthrough, although Robert Adie, IT director at Digital IP, a Scottish telecommunications specialist, claims the directive doesn't go far enough.
It remains a big commercial concern that the cost of sending large chunks of data by mobile – to clinch a contract for example – is still excessively expensive and remains a barrier to business dealings abroad.
His colleague at Digital IP Ronnie Bradley, a mobile specialist, says that as the telecoms giants are forced to cut costs, then they will look to recoup that loss elsewhere within the sector.
The full article contains 621 words and appears in Scotland On Sunday newspaper.
