Business Watch – Voda’s 0800 charges, BT owed millions, iPhone chip issues


Vodafone hikes 0800 charges

They said it would happen and now it has; Vodafone is hiking its UK call prices from next month, following similar moves by T-Mobile and O2.

The networks have previously warned that such rises would be the hidden cost of increasing regulation. Sure enough, now they are trying to recoup some of the revenues being lost as a result of the imposition of price caps by the watchdogs.

T-Mobile has upped its prepaid minimum call charge from 10p to between 15p and 25p, depending on which tariff the customer is on.

O2, the market leader, has increased its minimum call charge for prepay customers who have not upgraded to a new tariff from 10p to 20p.

Now Vodafone, the number two UK player, has said once a user has bust the bundle of minutes on their monthly contract, their minimum call charges will rise from 10p to 15p.

Prepay punters will see a rise in minimum call charges from 12p to 15p. Not only that, but minimum charges for calls made to 0800 and other non-geographic numbers are also set to increase from 15p to 20p.

In a world where mobile users have become used to rapid price deflation, these rises are going to take some by surprise at a time when consumers are already fighting rising food and energy prices.

For its part Vodafone, which has warned punters of the changes, pointed out it has not increased its charges for about two years. It also said that only part of the reason for the price rises was regulation.

But if you want to know the other main reason, look no further than Vodafone’s revenue warning last month.

The company’s shares fell almost 14 per cent in a day after it admitted the economic downturn was hurting its UK and Spanish businesses.

Vodafone’s new chief executive Vittorio Colao needs to counter slowing UK sales in the face of a slowing economy, which is seeing consumers pull in the purse strings.

Last month Colao spoke of the potential to reduce prices, or at least offer big value propositions for families, but I imagine those plans will emerge over the longer term.

Instead, these rises look like a cute way of clawing back some revenue without upsetting too many high-value contract customers or putting off potential new subscribers. That’s because most of those people don’t exceed their bundles every month.

As John Davies, telecoms analyst at stockbroker Dresdner Kleinwort, pointed out: "It’s one course of action Vodafone can take to stem the tide on the revenue line."

We will have to wait to see what the other courses of action Colao and his team have up their sleeves.


BT wins termination appeal

Meanwhile, the five UK networks will owe BT tens of millions of pounds, according to a ruling last week.

The Competition Appeal Tribunal ruled that networks overcharged BT’s customers to call mobile phones from a fixed-line – the ‘termination rates’ BT pays the mobile networks and then passes onto its customers.

BT chief executive Ian Livingston has been on the war path on termination rates. He says the charges are overly complex and, more to the point, claims consumers are being overcharged by £1 billion per year.

BT Retail director of strategy Jeff Richardson was chuffed with ruling, saying: "BT is very pleased with the result and sees it as an important step on the route to lower and fairer termination mobile rates."

Before Richardson and Livingston leap for joy though, it’s worth pointing out the ruling only covers a brief period two years ago.

But it does set a worrying precedent for the networks, as the tribunal prepares to rule on the much wider issue of termination rates later this year.

If the networks’ worst fears are realised, a negative ruling for them could lead to a massive reduction in the cost of calling a mobile and spell the start of ‘all you can talk’ packages of the type seen in the US.

While we’re on the subject of regulation, Ofcom, the telecoms watchdog, is infamous for issuing dozens of research papers every year that appear to have little point other than to justify its existence.

But its annual Communications Market Report, hot off the press this month, is actually a must read for any follower of the UK mobile phone market.

Many City analysts keep a copy of this 365-page doorstopper tucked under their desk in case of emergency.

And the report’s brief highlights show it’s not all doom and gloom for the industry: 74 million UK mobile connections serving a population of 60 million and seven out of 10 people with a mobile and a landline use their mobile to make calls, even when they’re at home.

Britons sent nearly 60 billion text messages in 2007 – an increase of 36 per cent year-on-year, with the average user sending more than two texts a day.


All’s not rosy at Apple

Finally, Apple seems to be having a little local difficulty with the iPhone 3G, according to reports from across the pond.

While many US users have fallen in love with the handset, some have complained on Apple online forums about difficulties trying to maintain a signal.

Analysts have speculated the iPhone’s Infineon chipset could be at the root of the problems.

"We believe these issues are typical of an immature chipset and radio protocol stack where we are almost certain Infineon is the 3G supplier," wrote Richard Windsor, an analyst at Nomura.

If he’s proved right, Apple may not be able to fix the problem with a simple software update.