Oftel orders mobile tariff cuts

Oftel has ordered Orange, O (BT Cellnet), Vodafone and One2One to slash the price of cross-network calls to mobiles by 12 per cent less than inflation annually for four years.

But the controls won't apply to calls made using third-generation (3G) services and are softer than those the telecoms watchdog imposed in 1999, which would have cut prices by around £1bn if they had not been superseded by the new measures.

Operators will also be pleased that Oftel hasn't ordered a one-off price cut, like the 25 per cent reduction it ordered following its last review in 1999.

Oftel said it expected today's decision to reduce operator revenues by only £600m, as more calls would be made thanks to cheaper prices. It also said that, although competition in the market had increased, it was not yet a truly competitive space and that it still regarded Vodafone and O as having significant market power.

David Edmonds, director general at Oftel, also said he wants to make it easier for customers to change networks and to reduce the cost of making calls using overseas networks.

"I have today written to all four of the mobile operators asking them to join in immediate discussions to end the practice of locking handsets to the originally purchased Sim cards," he said, adding that he would help the European Commission's investigation into the cost of using overseas networks when abroad.

Analysts said the ruling would have a minimal impact on the operators, and shares of the four telcos remained largely unchanged. Some commentators believe that Oftel has been told to go easy on the companies, which face huge bills to license and build 3G networks.